In June the Marketing Forum and PA Consulting Group conducted research among more than 100 senior UK marketers to assess marketing's role in driving business performance. They compared their findings with a survey run last year, and with a similar study carried out among 270 leading US marketers earlier this year.
The results of this research, 'How effectively does marketing drive business success?', will be unveiled at the opening session of this year's Marketing Forum, which takes place on board the Aurora from September 17 to 20.
The findings provide important insights into how marketers must raise their game to drive further value for customers and shareholders.
Marketing in its broadest sense delivers more shareholder value than other business activities, but the research shows that marketers' influence is largely limited to 'traditional' marketing areas.
Marketers face three key challenges if they are to improve their contribution to their business's performance: focus as closely on shareholders as they do customers; deliver marketing accountability; and demonstrate ambition in driving the business agenda.
Those companies where marketers have risen to these challenges deliver an additional 2.6% total shareholder return (TSR) compared with their peers. But the majority of UK marketers clearly have their work cut out.
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1. FOCUS ON SHAREHOLDERS
While driving short-term sales was important, survey respondents said their key goal was to drive long-term business success through developing their brands for the long-term, developing their strategy and innovation, and developing their people and capabilities.
Yet most respondents work to short-term, top-line performance goals, such as market share, revenue and growth. Only 40% of marketers have profitability targets, and even fewer - 14% - are judged by more accurate measures of profitability, such as economic profit (EP) - post-tax profits less a charge for equity tied up in the business - or economic value added (EVA).
This misalignment could encourage skills and behaviours that reduce marketers' potential to deliver value. The analysis shows that companies that measure their marketers against more value-focused objectives, such as EP, deliver significantly more total shareholder return than other companies.
Predictably, survey respondents judged their biggest challenges to be customer-related, with 62% measured against customer satisfaction targets.
However, to create long-term shareholder value, marketers must balance customers' needs with commercial imperatives.
One way they can do this is by broadening their skill set to become as commercial as they are creative, but only one-third of survey respondents believed they had strong financial skills. Working closely with finance colleagues could help close this skills gap ,but less than 10% of marketers judged their functions' working relationship with finance to be 'extremely effective'.
This apparent lack of commerciality is reinforced by the findings on marketers' influence over key business decisions. While they are heavily involved in some decisions such as promotions, communications and research, only 40% influence pricing.
So while marketers might be generating exceptional value for customers, many appear unable to translate this into enhanced profits or greater value creation.
2. DEMONSTRATE RESULTS
UK marketers recognise that increasing marketing accountability is critical to building marketing's - and marketers' - impact, with more than 75% of survey respondents rating this as 'extremely' or 'very' significant.
But while they acknowledged this in general, when it came to the particular, just 7% judged improving marketing accountability to be their own most significant challenge, preferring instead to focus on 'traditional' marketing areas of customers and communications.
But given that marketing-related expenditure tends to be one of the most significant line items in the budget, typically accounting for 8% to 15% of revenue, marketers are likely to come under growing pressure from the rest of the business to justify it.
At the moment, less than one-quarter of marketers think the rest of the business understands the impact of their activity.
Marketers say lack of time, combined with inadequate management systems and information, hampers their efforts to measure their impact. More than one-third of respondents said they don't spend enough time on analysis, while more than 85% can't allocate costs fairly, and more than 90% lack robust data sources. Just 41% have fast and easy access to the marketing information they need. They also believe that planning and control cycles often make poor use of management time.
Marketing might improve the accuracy of its planning by using systems to simulate marketing plans and predict potential results. But while marketers in companies that use predictive tools delivered 2% greater TSR than the rest of the sample, overall marketers felt particularly weak in this area, with more than one-quarter believing they would gain no benefit from such tools.
Resource focus was the one area where responses from US and UK marketers significantly differed. While UK marketers can identify their most profitable products and customers, fewer than half act on this information, and even fewer - less than one-third - actively manage their portfolio, taking action against value-destroying customers or products. By contrast, most US marketers claimed to focus on their most profitable products and customers.
This discrepancy may be explained by UK marketers' pure growth focus, which incentivises them to increase market share, customer satisfaction and revenue. This sort of growth can be achieved by increasing the size of the customer pool, rather than developing a true understanding of the value-creating and destroying elements of the portfolio.
If marketers are to be able to demonstrate fully the impact of marketing activities on business performance, they must be supported by the management information systems and processes that let them do this. In addition, marketers should develop the breadth of commercial skills required to fully interpret the results.
MARKETERS WHO HAVE MADE IT TO THE TOP
This year's PA and Marketing Forum research found that one way marketers can have a greater impact on overall business success is to get a seat on the board. Although half the survey respondents claimed to be aiming for a board-level position within the next five years, the precedents are not strong.
Some 67% of respondents thought the next chief executive in their business was likely to be chosen from the finance function, and as Marketing went to press, there were just five FTSE 100 companies with a board-level marketer.
Tim Mason (46) was appointed marketing director of Tesco in 1995. Responsible for advertising, national promotions - including Clubcard - local marketing, market research, customer service and property acquisitions and services, he is also chairman of Tesco.com and the Tesco Charity Trust, and a director of Tesco Personal Finance and Tesco Mobile. Mason started out as a Unilever management trainee, and has held a variety of positions in Tesco in the past 20 years.
His tip for marketers aiming for the board? "Make sure you work for a company that genuinely places serving customers at the centre of all that it does, or you'll have a dog's life." Kent Thexton (39), who has been chief data and marketing officer of mmO2 since July 2001, and was responsible for its rebranding after the demerger from BT, was promoted to the board in April 2003.
With an MBA and a degree in electrical engineering from The University of Western Ontario, Thexton spent eight years in the Canadian mobile industry before becoming sales and marketing director of BT Cellnet in 1998. Between 2000 and 2001 he was president of global web and WAP portal Genie.
Thexton advises: "Really understand your customers and then be customer-focused and customer-driven in everything you do."
Jack Sinclair (42) was appointed group marketing and trading director of Safeway in 2002. He joined the company in 1990 with responsibility for frozen food, subsequently adding dairy and bakery, and was appointed to the operations board in 1999 as commercial director for ambient. There he was responsible for buying all Safeway's grocery, bakery, non-food commodities and personal care products. In 2000 he was made trading director, becoming managing director of operations a year later, with direct responsibility for trading, marketing and retail operations. An economics and marketing graduate, Sinclair worked for Tesco and Fine Fare before joining Safeway.
He advises: "Listen and learn from everyone, be yourself and put your customer at the heart of all decisions."
John Manzoni (43) joined the BP board as chief executive of refining and marketing in 2002, and became a managing director of BP in February this year. He has degrees in civil and petroleum engineering (Imperial College) and business management (from Stanford University), and joined BP in 1983. He has worked in a variety of senior roles, including executive assistant to chief executive John Browne, head of investor relations, vice-president of BP's operations at Prudhoe Bay in Alaska, regional president for the Eastern United States and BP head of merger integration between BP and Amoco.
Angus Porter (45), formerly managing director of BT's consumer division, was appointed to the board of Abbey National in July as customer propositions director, a role that encompasses advertising, marketing and brand activities, as well as improving the company's understanding of its customers.
Porter joined BT in 1999 as UK marketing director, and before that spent 14 years at Mars, where his roles included general manager, Europe: sugar, confection, and UK marketing director. A scientist by training, he began his career as principal research scientist at Plessey Research.
3. AIM HIGH
In addition to making marketing more accountable, marketers also saw an increased presence at senior level, specifically the board, as a key driver behind marketing impact.
The survey respondents certainly seemed up for the challenge, with more than half aiming for a board-level position within the next five years. Yet, for many UK marketers, this could prove unattainable.
Research carried out by The Chartered Institute of Marketing in May 2003 indicated that only eight FTSE 100 companies had a board-level marketing position.
Since then, that number has reduced to just five (see box), as one of the companies no longer has a board-level marketing director, one marketer was suspended, and two moved out of marketing roles, leaving just four of the original CIM list. A further marketer, Angus Porter, took on a FTSE 100 board-level marketing position after the CIM's research was compiled.
Survey respondents believe finance professionals are much more likely to reach the board than members of any other business function, although marketing comes joint second with operations and sales - well ahead of purchasing, distribution and human resources.
Take the initiative
If their skills are to be recognised, marketers need to both educate their colleagues and augment their creative skills with the commercial rigour that is so prized at board level.
And the onus lies with them: according to the research, few companies actively seek to develop the marketing expertise of their future CEOs or business unit heads. About three-quarters of respondents claimed marketing experience was a prerequisite for neither chief executives nor business unit heads in their companies.
Of course, the acid test is whether this makes any difference to value generation. The research indicates that it can have a significant impact, with companies whose chief executives are versed in marketing delivering about 5.3% more TSR than those who aren't.
But marketers themselves are too comfortable within marketing and need to broaden their own business experience. They tend to build their best relationships with functions closest to marketing, such as sales and corporate communications, while paying less attention to the functions that offer them the greatest learning opportunities, such as finance, IT, operations and logistics.
What's more, only 8% of survey respondents saw themselves in a non-marketing role in five years' time. Many marketers feel they are in the most exciting part of the business and don't want to sacrifice this for more 'mundane' functional experience.
Unless they break out of this silo, they will fail either to develop their skills or prove to other functions their potential to generate value.