Dear Sir
Laura Mazur writes that City analysts are becoming increasingly interested in marketing expenditure as a measure of future share performance (Marketing, April 11).
Though this is a crude measure, it is encouraging to see this happening. For over ten years companies have been embracing shareholder value principles, which in essence consider a company's value on the basis of its ability to generate more cash over time. It is high time that marketing becomes widely acknowledged as a key driver behind this ability.
Mazur also mentions that information on marketing expenditure is seldom published by firms. In reality, things are even worse. When marketing data is published, there is a woeful lack of consistency; marketing spend can cover ads, discounts, promotions and myriad other items.
This leads to confusion and therefore to an intuitive tendency to look at ad spend as a direct proxy for brand investment and performance.
What matters most is effectiveness and efficiency. Marketers should be asking where they are going to get best returns.
Consistency and focus are the key to optimising marketing performance. By using consistent financial measures, such as Return on Marketing Investment, now adopted by BT as a standard for decision-making, it is possible to identify those customers, brands and marketing activities that will generate the increase in future cashflows that investors seek, giving marketing its rightful place at the heart of shareholder value creation.
Yours faithfully,
Gaspar Weiss
Consultant, PA Consulting Group
123 Buckingham Palace Road, London SW1W 9SR
