Marketers who appease finance directors and chief executives instead of taking them on and showing that marketing works are letting down the profession, according to research carried out last month among marketers and non-marketers by London Business School in conjunction with Marketing.
Companies desperately need better marketing leadership, but marketers aren't equipping themselves for board-level appointments and marketing directors aren't fighting their corner. In a word, marketing directors are wimps.
Market orientation correlates directly to profit performance: total shareholder return is 5.3% greater where chief executives have marketing experience.
Yet research from PA Consulting and the Marketing Forum shows that of the 50% of senior UK marketers who expect to reach the main board, 90% won't make it.
The paucity of marketing influence at board level isn't because it's unimportant - it supplies the cash flow - but because, as one person put it, boards 'lack a really experienced marketing director who understands the fundamentals of marketing'.
Laurie Young, marketing partner at PricewaterhouseCoopers, claims headhunters find it difficult to recruit for board-level marketing slots because marketers haven't developed enough breadth, particularly in the areas of financial language and commercial understanding.
'Marketers don't develop financial acumen early enough in their careers,' agrees Lesley Exley, director of executive search firm Exley Hervey. 'Understanding what contribution and profit means is far more important than executing expenditure.'
Marketers aren't managing the four Ps – price, promotion, place and product
As Professor Philip Kotler notes, they're lucky if they have full control of one P. Senior marketers claim to be bored after only a year in their roles and are motivated by the size of their spending budgets, not by their profit contribution. According to PA Consulting, only 14% focus on improving economic profit. That partly explains why budget cuts are so disagreeable. Rather than fight for what is right for the firm, marketers move on to bigger budgets elsewhere.
Even if marketers don't wish to develop broad business skills, surely they should hire people who already have them? Business schools struggle to find marketing jobs for their most talented MBAs. Few marketing departments have any at all. Ninety per cent of those MBAs at London Business School who want marketing jobs have to settle for something else.
Marketers claim that marketing has primary responsibility for innovation, whereas their colleagues are sceptical. Similarly, non-marketers don't see marketing having anywhere near the influence on strategy that the marketers think it has. Marketers are sure the board should give more attention to the market, but their peers are neutral. The marketer view is supported by research, but doesn't seem to be convincing anyone else.
Marketing paranoia?
Both sides mostly agree that marketing budgets are likely to be cut first, and that marketing has less influence than other functions such as finance and HR, but marketing is gaining ground. However, marketers' angst that they're first to walk the plank is far greater than their peers recognise.
If they're so involved in strategy and if marketing is gaining influence, why are marketers so paranoid about budget cuts? The London Business School/Marketing survey focused on external marketing. Shouldn't any modern firm at least be deploying its marketers' skills with its internal customers, its own staff? The marketers, by a majority of more than ten to one, said 'not so'.
Perhaps the most important, and encouraging, finding is the shared view that marketing is gaining influence in the business. This is particularly driven by the heightened interest in customers, as indicated by CRM and customer satisfaction measures. Yet call centres are rarely seen as part of marketing.
Marketing budgets being first for the chop is probably a fact of life
The long term isn't very interesting if the firm isn't going to make it through the short term. Furthermore, cuts in most other areas involve people. Redundancy costs will outweigh savings this year and valuable people will be lost forever. An advertising budget can be restored next year.
Five things can mitigate this effect. First, data from marketers showed that those companies where marketing influence was growing were much less likely to cut budgets. Similarly, where marketing was principally involved in strategy, budgets were much less likely to be cut.
Second, those firms that measured their main marketing asset (brand equity or corporate reputation) and used both financial and non-financial metrics to assess performance were less likely to cut budgets.
Third, those marketers who can align their agendas with the corporate goals are under less threat. It may not be possible scientifically to show the payback on every item of the marketing mix, but at least the marketing plan should be taken to the bottom line, be that cash flow, profit contribution or shareholder value. Marketers need to be able to make their case in the language of the boardroom.
This isn't to say that shareholders or shareholder value have become more important than consumers. Quite the reverse: boards are taking more interest in customers. At the same time, cash flow has to be tracked from consumers through to the ultimate measures that interest the board.
Fourth, marketers have to show more loyalty to their firms - and their non-marketing colleagues - than to marketing itself. Top marketers move companies more than their peers do. This may be influenced by the difficulty of performance assessment.
Fifth is marketing orientation. The more marketing is appreciated by top management in its widest sense, the less the budget is at risk. If marketing is just seen as a cost like any other, expect the scissors, if not the axe. As advertising and promotion become even more competitive, the payback will be further questioned. And it's not just the board - marketing needs to be understood across the company.
This all boils down to the importance of marketing marketing internally.
Marketing leaders have two choices: they can either manage as best they can within the established culture or seek to change it. Budgets can be negotiated and difficult issues avoided, but that strategy leads to a death of a thousand cuts.
Going on the offensive has risks, but every business needs better marketing.
Marketers aren't doing their colleagues any favours if they fail to promote what they can contribute. Furthermore, the London Business School has found that marketing is influential in companies where top management understands what it is.
Compared with shareholder value or the balanced scorecard, there's no marketing banner for others to follow. Marketers need to be crystal clear what 'marketing' means in the context of their company and how it relates to the business model. The positioning of 'marketing', like any other brand, is crucial.
Measured performance
Marketers must also identify what success looks like and the milestones on the path to get there. Identify the metrics by which marketing performance can be judged. Much as the board may wish to limit those metrics to the financial, the hard truth is that non-financial indicators matter too.
Indeed, non-financial indicators precede and drive the financial. Consumers and direct (trade) customers only do what they have in mind to do. Awareness, customer satisfaction, intention to purchase or perceived quality are no more 'soft' measures than sales or market share are 'hard'. It's far better to report important and reliable metrics approximately than irrelevant measures precisely.
Luckily, this isn't the tough sell it used to be. Marketers are now much closer to financial colleagues and most accountants are genuinely interested in marketing. Business plans are including non-financial measures to an ever-greater extent.
Finally, marketers must do what it says on the tin. Talking big and then fiddling with packaging doesn't impress. As marketing generates cash for the whole company, marketers need to discuss with colleagues how they can help them in their areas. They should also listen and learn from their colleagues.
Take HR, for example. There is a huge opportunity for internal marketing, and for HR and marketing to learn from one another. The evidence of the value of energising the workforce is well-documented: this isn't a matter of improving one-way communications but of the complete internal marketing mix.
Too many marketers are driven by the increasing complexity of today's market. We rush from meeting to meeting, keeping the plates spinning.
If some fall off, we have too many plates. We need to be masters of destiny, not victims of it. Most of all, we need to be able to explain, in the language of the boardroom, what really matters and what doesn't.
