Balancing the knowledge of cost and value

Marketers typically proclaim that procurement knows the cost of everything and the value of nothing. Finance and procurement typically proclaim that marketing has their head in the clouds. Managing directors often have to choose the most convincing arguments between marketing and finance when it comes time to sign off on budget approval.

With deep respect for the role of finance helping ensure companies use fact based forecasting methods, a paradox is observed when considering how seldom finance departments introduce marketing mix modeling, econometrics, neural networks or ad tracking as a tool. I am not sure why finance has not entered this domain but I would have to guess it has something to do with the grey area between marketing and finance.

In the same manner, marketing has made tremendous changes over the last 5 years; in particular, getting involved with fact based marketing measurement methods. Less and less decisions are being made by gut (which is never smarter than your head!) Though best practice is on the right track, I believe however that among the majority of business to consumer companies today, there is a lack of people who understand both the cost and value of marketing. Here enters the concept of marketing intelligence. Understanding both the cost and value should be improved and if the concept of forming a marketing intelligence department should catch on, to whom should these people report too?

Marketing, Finance or direct to the CEO?

Consider this scenario: A person with strong marketing intelligence skills who has the capability to determine return on marketing investment by scientific methods reports to a marketing director. The latest campaign results are not turning out better than the previous campaign. (Neither did the campaign before that) The marketing director must report to finance and the managing director on performance. What does the marketing director do?
We can use our imagination here – pause – reflect – hmmmm.

How would a marketing intelligence person fit into a finance department? Would they feel comfortable? Would they miss the buzz and excitement of the marketing process and become auditors/controllers? (This is not meant to sound like a bad thing but for some people I know it would be a turn off ;-) I wonder if auditors and controllers also have a deep passion for marketing and get a kick out of taking calculated, intelligent risks?

Can the concept of marketing intelligence survive reporting to a marketing director where it is obvious that at some point information about the effect and efficiency of marketing activities will not appear flattering in some given quarter?

Marketing Departments apply 80/20 principle backwards with Media Management

The 80/20 principle is a formula that can be applied to most areas of business with much success. The formula can be used in various ways by marketing departments; typically the core 20% of brands or services generate 80% of the profit, or 80% of your attention should be given to the most important 20% of your business. More often than not, this rule is applicable to most situations. Why then do many marketers reverse this rule in relation to Advertising and Media focus?

Take for example a very fortunate company that may have 10 million euro as a total marketing budget. Let's say 1-2 million is used to create and produce good advertising (20% is a reasonable amount)
To be sure this campaign will be a success, many marketers will make a strong effort to gather brand insight, engage in focus groups, and engage the ad agency over and over again using countless hours of scrutiny of every detail. Important considerations of background environment, the size of the logo, the manner and tone in the voice, color and shapes portrayed all fall under a microscope. The CEO may get involved and ask for his opinions to be considered - a new tone is considered - text adjusted, story boards altered - again many hours are used in this process. Does this story sound familiar?

Now....compare this above scenario to the process that takes place to develop a media plan. Hmmm. Let's not forget this part ...considering it is where 80% of the marketing budget is visible to the consumer!
Time was most certainly taken to create a fantastic media brief ;-)
The media agency had ample time to create the strategy and also had access to all the latest brand research ;-)
The media agency had the ability to recommend the media before the ad agency went into production with whatever was considered most relevant ;-)
Hopefully the point is clear. Often a minority of engagement is made with the media agency responsibilities. Most disturbing is the lack of engagement of marketing departments to dive deep into post evaluation of campaign performance. Here are the hidden gems. Post evalutions can unlock improvement potential of upwards of 35% based on my past experience. (Plenty of case histories available..just ask)

Between Advertising and Media, it is fair to say that Marketing spends at least 80% of its time on Advertising. It is reasonable to assume that B2C advertisers allocate 80% of their Marketing budgets to Media. If these assumptions are true, it would be fair to conclude that use of time may be somewhat out of balance.

Internal media management within companies should be improved. Though it may be neither possible to imagine nor appropriate for a Marketing Department to spend 80% of its time focused on media, it should be reasonable to expect an active engagement with the processes surrounding media planning, implementation and post evaluation.

Media management advisors have an important role with growing responsibility. For the good of the future, companies should look more to drive this development by asking better questions and posing better challenges. This will only happen if engagement in media, facts and figures is demonstrated. Some may feel numbers are not sexy...but I do. (Guess that's why I like doing what I do :-)

Post evaluating marketing performance

Managing and Marketing Directors are all conerned about how campaigns perform। Often post evaluations of marketing campaigns are summarized by how many units more or less were sold. This is a shame because there is significant insight that can lead to 10%, 20%, 30% or more improved return on marketing investment by deep diving into the data that exists within the post evaluation of every marketing campaign.

Agencies and consultants typically take the lead in post evaluating media buying performance। Most companies do not feel comfortable about what to ask for in a post evaluation and thereby receive a presentation of all the things the agency feels is most important. This process can and should improve.

Agencies need good sparring partners in order to excel. Good sparring partners create challenges that foster learning. Without the challenges, agencies can become complacent and far too often "ask" what they should do next. If companies do not make an effort to understand how media works, often the best ideas that come from agencies are misunderstood or are not recognized.

There is big money at play - media investment represents >70% of most B2C marketing budgets। Deeper evaluations that go beyond sales should be performed। Awareness, Trial, Use and Loyalty should all be measured on a continual basis. The ratio of working vs. non-working media investments must be monitored and kept in check. The contribution of each marketing channel, online and offline should be understood. All of these factors are measureable today which leaves companies with few if any excuse why proper evalutions of marketing performance are not being performed. If your company does excercise best marketing practice...you are obviously enjoying the success and wondering what the heck this blog is about!