B2B LEADER OPINION: ROI is essential to justify future marketing investments

B2B Marketing have given me a sneak preview of their upcoming ‘2013 B2B Leaders Report’ which will be fully revealed at their B2B Leaders Forum in London on 19th September 2013. You can also hear me speak there on ‘Mobile and social – surfing the wave of the B2B digital revolution’.

One early, unpublished result they sent me is: ‘79% of leaders agree that not being able to measure ROI would make it hard to justify future investments in marketing .’

The only surprise with this result is why only 79% – and not 100%.

Come on, I wonder what the remaining 21% feel? Maybe they long for the days of the 1997-2001 dot.com boom/bust where increasing stock prices, copious venture capital funding and illogical expectations that the dot-coms would quickly realise profits created a market in which many investors were willing to overlook traditional investment and financial metrics in favour of confidence in technological advancements.

In the current economic climate, marketers and indeed all ‘business folk’ must juggle a number of priorities: understand fast-evolving customer needs, deliver an engaging and consistent customer experience, focus on the ‘so what’ of all marketing and business building activity to ensure profitable brand and business growth.

This ‘so what’ must flow from clearly defined objectives that resonate with the Board and are measurable; be it in terms of hard, quantifiable data or ROI or sentiment that positively impacts the market, investors and share price (if the organisation in question is listed).

A history lesson

I can recall starting my career in marketing in 1994. Yes these were pre-digital days: the Internet was pretty much unheard of (15 million users worldwide compared with 2.5 billion today); there was no broadband, only 7 per cent of the UK had a mobile phone; Google was a very long number… and a certain Mark Zuckerberg had only just passed his 11th birthday. Whilst there has been much technological change, a couple of things that remain the same are the absolute need for marketers to be more financially literate and ensure strong measures are in place to evaluate activity.

I was in Brand Management at Procter & Gamble back then leading the Hugo Boss fragrance brands in the UK, having to deal with B2B (retailers) and B2C markets. We had managed to secure the world exclusive for a new fragrance launch in UK (Hugo by Hugo Boss), a first for any global P&G designer fragrance at the time.

All cost, expense and revenue factors (such as awareness, trial, purchase, marketing spend, exchange rates) were modelled with percentage likelihood to hit, miss, exceed targets (visualised as a complex tree diagram or mindmap) so performance could be tracked. And financial modelling using ‘@risk’ (yes, we have significantly more advanced computer programs today but this still works) calculated the typical measures of payback, IRR (Internal Rate of Return) and NPV (net present value) weighted according to the probabilities we had both assumed and calculated.

We must have done something right back then, as the rigourous analysis showed that we only had a 55% chance of a positive NPV. In addition, the Financial Times had stated that most new designer fragrance brands had a shelf life of less than three years. Well, it’s more than seventeen years on and Hugo remains P&G’s most successful fragrance launch and is still a top seller in the UK and globally. Payback, IRR and NPV more than achieved.

Back to 2013

Ok, so it is now 2013; we have learnt our lesson and the need for financial rigour in all marketing and business decisions is crucial. It is cliché to say marketing is a cost centre, and the digital, always-connected, always-sharing world has bought marketing to the fore from realising real-time customer and investor insights through to generating profitable growth from these new digital channels.

Despite this, we regularly hear about the failings of senior marketers/CMOs to measure the effectiveness of their activity or generate the impact at a board level especially amongst their CFO or COO colleagues. At a recent conference, I heard that 75% of CEOs want marketers to be 100% ROI focused but only 33% are. Of course, marketers need the tools and only 21% of marketers feel they have the tools to measure ROI. This should not be an excuse, marketers need to show more rigour and discipline; always asking ‘so what,’ linking objectives, action and metrics, and, so define what results/success looks like and how they are evaluated before starting any activity.

Furthermore, this may impact the progression of senior marketers. In the UK, many marketing directors or CMOs only have responsibility for brand, awareness and sales support – and a lack of hands-on finance and operations experience. Coupled with this, if they do not ensure a rigorous focus on measuring ROI and generating impact, they are likely to lose out in top jobs and not reach CEO level, whereas their CFO and COO colleagues are more likely to succeed.

However, if we take the Procter & Gamble definition of a brand as ‘a promise delivered’ and their typical responsibilities for brand management and marketing, then a marketer (with gravitas and impact) should have responsibility for brand equity, the P&L (top line revenue and profitability), strategy (long-term planning), product (development and management) and customer experience. Increasingly, digital finds a comfortable and appropriate home and ‘champion’ here in marketing – that can ‘e-enable’ a whole organisation and let organisational capability develop.

This all may help explain the sobering fact for marketers that in the UK the majority of CEOs have come from finance and operations backgrounds, whilst in other countries (such as USA) the majority of CEOs have come from marketing and sales.

Food for thought.  See you on the 19th September 2013 at the ICA, London.
 

About the author:
Dowshan Humzah has delivered profitable business growth via product development, brand innovation and digital channel expansion for blue-chip companies across Financial Services, Internet, Telecoms, Media and FMCG. He has operated at Board level in many organisations and is an entrepreneur with two digital ventures (in the UK and India).

He is Director of Digital Development & Consultancy for The Worst Kept Secret – and shows how organisations can benefit from applying a digital lens across their core business objectives to generate customer and financial value. He started his career at Procter & Gamble in brand management, before working at Orange, Virgin Media and The RSA Insurance Group as well as a number of start-ups.

Dowshan graduated in Accounting & Finance from LSE and has Executive Education from LBS.

LinkedIn Profile: http://uk.linkedin.com/in/dowshan

About The Worst Kept Secret:
The Worst Kept Secret (TWKS) is a digital and social media agency that builds capability for organisations by providing bespoke training and strategy consultancy and delivers online community management. TWKS applies a digital and social media lens across it clients’ organisations (be they in the private, public or not-for-profit sector) to enhance existing working methods and results. In schools, TWKS works to bridge the gap between study and real life – assisting teachers with digital and social media tools to make lessons more engaging. TWKS also developed and launched the UK’s first social media course to be assessed at GCSE.

Website: www.theworstkeptsecret.com

Twitter: @worstkeptsecret  

Facebook: www.facebook.com/theworstkeptsecret

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