Jun 11, 2009
Our article in the Jun ’09 edition of ESOMAR’s Research World. Grab your copy here.
Professor Robert Shaw is Honorary Professor of Marketing Metrics at Cass Business School and the author of ten books including Marketing Payback, We talk to him about the current state of marketing effectiveness and his new initiative designed to improve it.
Q. What is your opinion on the effectiveness of marketing today?
A. Marketing is crucially important to all developed economies. Without marketing, price would be the main differentiator of products and services. The diversity of products and services in today’s economy owes its existence to marketing.
In the current recession, marketing is under extreme pressure, as cost cutting sweeps business. Luckily marketers have plenty of opportunity to improve their effectiveness, since in the boom years they had become very inefficient, and money was routinely wasted on marketing activities that did not deliver, and mistakes were ignored and often repeated.
Q. What remains to be solved?
A. Plenty. Efficiency needs to be the focus for the next few years – here’s a dozen for starters.
1. Making the marketing budget work harder
2. Writing budget approval cases that win every time
3. Maintaining media effectiveness and reducing costs
4. Eliminating production cost-wastage and the causes
5. Making marketing assets and collateral work harder
6. Avoiding surprises in budget commitments
7. Getting Agencies to do a better job in less time
8. Holding Agencies rigorously to account for results
9. Wasting less time on budgetary bureaucracy
10. Penetrating partial and confusing data
11. Faster approvals with fewer errors
12. Forecasting more accurately
Q. What mistakes do companies typically make?
A. Marketing seldom has a meaningful discussion with finance, and vice versa. They ask different questions and speak different languages.
Finance talk about Budgets, Budgets, Budgets. Marketers talk about Brands, Brands, Brands.
Finance and marketing sometimes have disjointed working relationships. They often ask different questions and they answer them in different languages. During training we often use this example: assume sales revenues for the latest period of Company X have been flat, marketing budgets have been flat, and sales volumes are down, then what’s happening to profits? The correct answer is that profits are up, but most people get it wrong because they ‘wing it’.
Questions that finance ask focus too much on budgets and too little on performance; and marketing focus too much on brand awareness and image and too little on sales and profit performance. Everyone retreats into their own technical jargon, each bewildering the other and wasting lots of time pursuing irrelevant questions. Ultimately any attempt at finance-marketing dialogue gets derailed.
Q. Could you elaborate on the Return On Ideas reports and your Infinity model for marketing effectiveness?
A. An important new report “Return on Ideas” was launched on 27 April. The subject? How any organisation that has to market itself can be more efficient, effective and value adding. This is a frustrating business challenge and what we’ve delivered isn’t theoretical or waffle. The report is packed with practical suggestions, checklists and case studies, solidly based on candid research on over 100 organisations, large and small and across industries. When we shared it in draft with a sample of Chartered Institute of Marketing and DMA members they gave it their unanimous thumbs up.
The infinity model is a framework designed to put the marketing-finance dialogue back on the rails. It contains a unique collection of practical self-help exercises and checklists and illustrative case studies, all wrapped round the core model.
IMAGINE – PREDICT – DEMONSTRATE
What we found is the best organisations have a positive creative tension between financial rigour and the marketing imagination. More specifically this involves:
harnessing the marketing imagination to create value adding ideas (e.g. Heinz created the popular upside down bottle after consumers complained of sauce retention)
predicting how much financial value these ideas will contribute (i.e. explicitly calculating the financial case for an idea before committing budgets)
delivering and demonstrating that value really was created (e.g. there are questions over whether the Cadbury’s Gorilla campaign was ultimately a financial success)
establishing learning that will improve future ideas, predictions and results (i.e. making learning an essential part of every campaign plan)
Q. What can companies do to put the report into practice?
A. A lot of progress can be made in just one day, through holding a workshop with finance and marketing. By discussing the questions listed in the report, participants can find out how they can do a better job of making marketing more efficient, effective and value adding. In the process they will start to speak a common language that focuses on performance as well as conformance.
Having a follow-up session with the managing director, or business unit heads, can be helpful too. The report sets out departmental specific questions to be answered by the key players. A common issue that such discussions can resolve occurs when business units hold the marketing purse strings, and they use the marketing department as an internal service function. All too often such expenditure is squandered on vanity projects, whose sole effect is inflation of managerial egos, without sound commercial justification.
Quick wins from these workshops can be put into practice with immediate benefits. A longer-term programme of change may be identified too, and the report contains a road map to plan out this more strategic approach.
Q. What would be your key recommendations to marketers for measuring and assessing RoI?
A. You need to get better at planning ahead. Often measurement and assessment is an after-thought, and by the time marketers remember they ought to be measuring the effectiveness of a campaign it’s too late. We came across so many examples of companies that spent a fortune on this marketing activity or that, but which hadn’t collected the data before the campaign that would enable them to measure its effectiveness.
An example of good practice is Diageo who introduced a marketing activity evaluator. It was a tool that anyone spending any serious money on marketing activity had to use before proceeding. They had to set out the business case and put aside money to demonstrate the effectiveness of the activity. Diageo used this tool to build up a databank on what did and did not work. This is one of the most elegant cases I’ve come across.
Another example is BT. When Duncan Lewis joined BT as business development director, he discovered around 3000 mini-campaigns running at the time. He decided to shut them all down and insist on getting a proper business case for each. This forced the internal marketers to become much more disciplined and resulted in the emergence of some of the most successful advertising campaigns.
Q. Could you elaborate on this quote (from your paper): “Market research was obtained by almost all the organisations researched. There was a widespread expectation that market research should have a pivotal role in generating ideas, predictions and demonstrations, yet this expectation was seldom met.”
A. At first, the finding came as a surprise to me. I kept meeting marketing directors who grumbled a lot about the “lack of insights” from their research, and it became a recurrent theme. In particular they seemed to be seeking novelties that could be incorporated into their advertising and product development. To me it seemed an odd expectation – there really aren’t going to be enough novelties to go around all the firms in the marketplace. It didn’t seem the job of research to discover novelties, I felt that was the job of the creative agencies.
At the same time, many marketers seemed to be making very limited use of the potential of research as a predictive tool. Several boasted in a macho way about NOT TESTING. It seemed that many had had poor experiences with testing, but when it came to specifics it seemed that their experiences were with poorly designed tests, not with testing in general, but these marketers had drawn general conclusions from their particular experiences.
Agencies too seemed to encourage clients to act in a cavalier way, and are eager to manipulate research findings to suit their own Agency agenda. It often surprises me just how naïve marketing directors can be in allowing Agencies to set the research agenda and effectively trust the Agencies to mark their own homework.
Q. Could you elaborate on this quote (from you): “IT can be a powerful aid to market research, but it also has enormous power to damage customer relations…”
A. Yes. I was talking about the many roles that Information Technology plays in the world of marketing, and whether it is a force for good or bad. On the negative side, IT has been a powerful enabler of cost-cutting, and as we’ve seen with the automation of customer service, what’s good for the cost accountants isn’t always good for customers. Cutbacks in customer service have been rampant in recent years, and I’d predict that the recession will make matters worse for customers. In the world of market research, cost-cutting has also been a driving force, and the migration of research onto the internet has not been wholly satisfactory. The quality of the insights have often degraded as a result of this cost cutting, and too much of the research agenda is dominated by costs rather than quality of insights.
Q. What would be your key recommendations to market researchers for measuring and assessing RoI?
A. Market researchers need to get closer to their counterparts in management accounting if they are to become part of a true ROI measurement. Too many think that awareness and attitude tracking is good enough, but it really isn’t equivalent. ROI is a financial measure, and although market research can be useful to supply EVIDENCE, the PROOF comes about from linking together the evidence, not from the raw data itself. So teamwork and shared understanding are key, and that last point – shared understanding – will distinguish the winners from the losers.
Professor Robert Shaw is the founder of Demand Chain Partners (www.demand-chain.com) and director of the Value Based Marketing Forum.