Bullish On Books

This guest blog was written by Michael Dunn is Chairman and CEO of Prophet and author of, "The Marketing Accountability Imperative: Driving Superior Returns on Marketing Investments."

With the continued tailspin in the economy, the pressure on marketing is mounting. In the absence of a better understanding of how marketing investment drives short-term and long-term business performance, marketing budgets are again being cut sharply and in a haphazard manner, to no one’s benefit.

If anything, this current crisis once again brings the marketing accountability gap into sharp relief.

For decades, business leaders have wanted to understand the relationship between current marketing investments and the measurable business results that these investments help to drive now and in the future. But the marketing profession has repeatedly struggled to crack the code on this problem, for some good and some not so good reasons. CEO and CFO frustration levels are at an all time high.

Just like I always counsel my 4-year old, however, it probably makes sense to pause and take a couple of deep breaths before letting the frustration take over completely, resulting in a series of rash and ultimately regrettable decisions.

A variety of studies of past recessions have found that companies which maintained or increased marketing spending during tough economic times generally lost limited share to “value” competitors during the recession and then averaged significantly higher revenue growth for another 3 to 5 years after the recession ended.

These findings are intriguing and should make any veteran leader take pause. Before you indiscriminately trim your marketing budget, invest some time and resources to figure out what is working and what is not.

It doesn’t have to be complex, but it does take commitment. Advances in customer information, data management, and marketing science techniques, along with continued innovation in marketing tactics, have put a highly accountable marketing capability within reach.

You just have to have to want it bad enough and have the discipline to see it through.

The first and most important step is to figure out where you stand. Using existing data and analysis, how much do you and your team believe you understand about the financial performance of your marketing investments? What percentage of my investment has proven financial returns? What percentage of my investments can be proven to have a negative financial return? Can any of that poor performance get improved by better execution or better creative?

Marketing spending can get so calcified inside an organization or hidden in so many nooks and crannies, that just using some straightforward analytic techniques can yield no-risk savings opportunities of 15 to 35 percent.

You must be willing to take on political fights to capture those savings, as well as begin to create a common language and understanding across the organizational silos of finance, sales, operations, and marketing.

Doing so gives you the flexibility to redeploy those “savings” into (1) attractive programs with proven financial returns, (2) an “experimentation” budget to qualify new activities, or (3) permanent expense reductions that drop directly to the bottom line.

Then, you must champion a two-pronged agenda of analytics and thoughtful experimentation to close the most material knowledge gaps around your high potential, high-risk spending programs. A variety of changes in the marketing landscape over the past decade should allow you to make meaningful headway against most of these questions in a quarter or two, although some questions may take longer to answer. It’s also important to make sure that the insights derived from this agenda are systematically included in your strategy, planning, and creative processes.

Finally, make a concerted commitment to truly understand the levers which drive compelling marketing investment performance. Demand that your marketers clearly explain why proposed strategic and creative choices will deliver what the customer is expecting and can withstand a direct competitive assault. Have them explain and articulate a clear path to value between marketing intent and specific customer behaviors that can be financially modeled and forecasted through the P&L. Make them build the case that the recommended set of vehicles at the recommended investment levels can be executed efficiently and effectively over time. In this way everyone on the executive team will develop a sharper eye for marketing and can make better choices in terms of which kinds of capabilities and processes to invest in over time.

It is totally appropriate for the CEO to ask marketing to make cuts when times get tough. But when everyone commits to a marketing accountability agenda, the risks and potential consequences of those decisions are much better understood. It ultimately leads to better decision making for the company, its customers, and its shareholders. Who knows, maybe you will build a case for increasing your marketing investment and position your company for break-away growth in the years ahead.

It never hurts to think big.

__________________________________

Michael Dunn

Michael Dunn is Chairman and CEO of Prophet (www.prophet.com), a global consultancy that helps senior management more effectively use branding, marketing, design, and innovation to drive profitable growth. This article is based his new book, The Marketing Accountability Imperative: Driving Superior Returns on Marketing Investments.
He can be reached at

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