Welcome
Sara Shipton
Innovation & Development
CIMA
Return on ideas : Better results from finance and marketing working together
About Me
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Production/Distribution of Beer (Allied Breweries plc)
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Operational audit (Scottish & Newcastle plc)
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Breakdowns/Recoveries (RAC)
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Leisure – Hotels/Leisure group – FC for SME
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Pub Retailing (Allied Domecq)
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Pub Wholesaling/Leased Model (Punch Taverns)
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Consultancy Business – incl Freelance work for CIMA
Return on ideas : Better results from finance and marketing working together
Agenda
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Why now?
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Case for change – the relationship between finance and marketing
- measuring marketing’s return
- marketing’s influence in business
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The Infinity Model.
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Checklist 1 – Good practice guidelines, do we know what we have to do?
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Checklist 2 – Key Players, do we know who should do what, and do they
know how?
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Checklist 3 – Conditions for success
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Steps to implementation
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Summary and close
Return on ideas : Better results from finance and marketing working together
Why important now?
Economic Downturn
Value of Marketing to the Bottom Line
Ideas
Marketer
Numbers
Management Accountant
“Marketing looks like the easiest and most logical [budget] to cut because companies don’t know how to
measure its productivity.” Sharan Jagpal, Professor of Marketing Rutgers Business School, New Jersey
Return on ideas : Better results from finance and marketing working together
Return On Ideas – Case for change
“Half the money I spend on marketing is wasted. The
trouble is I don’t know which half” Lord Leverhulme, founder
Lever Bros, first president CIMA, former President of CIM
“ There is growing pressure from shareholders to make marketing more
accountable. Investors are becoming more active in analysing and questioning
marketing expenditures.”
Sir Dominic Cadbury
Chairman Cadbury-Schweppes , May 2000
“Many traditional marketing models employed by CMOs today are being severely
challenged and they foresee the day when these rules of thumb will no longer work.
A more rigorous and pragmatic approach – treating marketing expenditures as
investments – is warranted. The pressure, therefore, to demonstrate tangible ROI
on your marketing and branding strategies, has never been more intense.”
Stuart Green, Managing Director, Interbrand Singapore
Malaysian Marketing and Strategy Forum, Kuala Lumpur 2006
Return on ideas : Better results from finance and marketing working together
The Evolving Management Accountant
“The common stereotype of
the accountant –portrayed as
male, introverted, cautious,
methodical, systematic, antisocial and above all boring “
(Bougen, 1994; Cory 1992)
“..the historical development of
accounting - viewed primarily as a
technical and instrumental activity
carried out by a functionary whose role
was to control and thereby, indirectly
to oppress”
Fisher and Murphy (1995)
“The role of the ‘beancounter’ is
being replaced by the demands
for accountants to add value in
terms of competency in
financial analysis and strategic
decision-making skills
Numbers
(Parker, 2000).
“Balancing the tyranny of Accountants”
“ Financial Management has failed to bridge the marketing-finance interface..”
(Doyle , Value Based Marketing, 2000)
Return on ideas : Better results from finance and marketing working together
The Management Accountant – of the Marketer
“Finance thinks marketers spend like drunken sailors.”
“ Finance asks for ROI; marketers give them “brand value” and “unaided
awareness””
“Marketing’s spend forecasts are never right”
Pat Murray, Marketing Management Analytics
“Management accountants were naturally cautious and
untrusting of predictions from marketing; citing marketing’s
tendency to adopt implausible assumptions and ignore
evidence in order to support favoured ideas”
Return on Ideas, Robert Shaw
“..many marketing professionals lack the financial know-how to
read and understand balance sheets and P&L statements, and
so struggle to understand how their work affects the
company’s financial performance.”
Herbert Ortner, CMO and interim CFO, Palfinger, an Austrian crane manufacturer
Return on ideas : Better results from finance and marketing working together
Finance v Marketing
“Whilst both marketing and financial professionals
believe marketing is delivering ROI, they can’t
show it. Without being able to demonstrate it, it’s
an uphill struggle to argue the case for increasing
the marketing budget – and perhaps help to fund
more measurement.”
Peter Romaine, Director and General Manager, Xerox
Global Services, Xerox UK.
Return on ideas : Better results from finance and marketing working together
When the Management Accountant met
the Marketer
The Management Accountant Comfort Zone
Cautious and methodical
Loves History, and the past
Relishes indisputable solid fact
Happy to provide the post completion critique
Like the safe position of told you so, rather than risky business of forecasting
The Marketers Virtual Reality
Full of ideas
Impulsive and un-disciplined
Excited by the future and the unknown
Un-willing to recognise risk and potential of failure
Rather not measure if it might not look good…
Like to be in a position to be selective about what results to present
Reluctant to be set targets, preferring the ‘freedom’ to find out along the way
Return on ideas : Better results from finance and marketing working together
Marketing’s Lost Influence – Doyle’s Paradox*
• Marketing is important for 3 reasons
- Companies need to understand and adapt to rapidly changing
markets.
- It is marketing rather than production skills which have
long proven the key to competitive advantage
- Marketing performance is the root source of shareholder value
However….
• Study** found, just 12 of chief execs in top 100 companies had experience
in a marketing role.
• Only 57% of larger companies have marketing represented on the board
• Whilst all boards will discuss profit, only a third consider customer attitudes
and brands as part of the agenda.
Why?
Return on ideas : Better results from finance and marketing working together
** Source Stephen Callender 1999
* Source Doyle. P. (2000) Value-Based Marketing, John Wiley & Sons Ltd
Marketing ‘marginalised’ in many board rooms*
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Failure to incorporate the concept of shareholder value
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No clear view of what success looks like
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No use of current strategic valuation techniques.
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No framework for engaging in the strategic debate.
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Professional education not highly regarded.
“The main problem seems to be measurement – and
communicating the right marketing knowledge to the Board –
CMOs simply don’t have the right tools to do the job well…this is
making it increasingly difficult to justify expenditure.”
Ian Parkes, Coleman Parkes Research Marketing Success Survey 2008
Return on ideas : Better results from finance and marketing working together
* Source Doyle. P. (2000) Value-Based Marketing, John Wiley & Sons Ltd
Marketing success – are accountants helping?*
• Maximising profits does not always lead to maximising shareholder
value
• Financial management steers many boards away from examining
marketing strategy.
• Financial reporting focuses top management on company accounts
which show the historical value of assets, where internally developed
brands, and other intangibles are often omitted.
“With increasing pressure from management and shareholders to
deliver results, marketers often resort to short-term sales tactics
over long-term brand building because they are quantifiable.”
Ms Shauna Li Roolvink, MD, BrandHub. (Singapore) May 2007
Return on ideas : Better results from finance and marketing working together
* Source Doyle. P. (2000) Value-Based Marketing, John Wiley & Sons Ltd
The Evolving Management Accountant
‘Financial management is evolving from an
uninspiring, albeit necessary, function of doing
business to one of the most promising levers of
business transformation. In fact, without support
from the finance function in improving strategy
and operations, companies face an uphill and
often losing battle in transforming their business’
(Deloitte Study, “Finance Masters: How Finance is Quietly
Emerging as a Key to Business Transformation, Deloitte, 2008)
“Finance business partnering is not so much a new role as an extension
Numbersor rebalancing
of the finance function’s traditional responsibilities so that finance is not just an overhead
but helps to create value.
This requires a change in culture whereby the finance professional’s objectives and the
business manager’s objectives are seen to be aligned, and finance’s contribution to
management decision making is expected and valued. “
(Toby Wilson, FD, Microsoft UK)*
Return on ideas : Better results from finance and marketing working together
* Source: Improving decision making in organisations – The opportunity to reinvent business partners. CIMA 2009
Summary so far…
• Marketing spends ££££££s
• Done well it creates sales, profit, and real share holder return
• Done badly it is incredibly wasteful.
• Poor or even just arms length relationship between the marketer
and finance is a mandate for this.
• With better engagement, and common goals, and applying
Numbers
the findings of this new CIMA report, this needn’t be the case
Return on ideas : Better results from finance and marketing working together
The relationship MUST be more productive
Numbers
Return on ideas : Better results from finance and marketing working together
Return On Ideas
This report is the product of a partnership between
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CIMA, the Chartered Institute of Management Accountants
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The Direct Marketing Association (DMA)
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The Chartered Institute of Marketing (CIM)
Return on ideas : Better results from finance and marketing working together
Professor Robert Shaw
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Honorary Professor of Marketing at Cass Business School and Director
of the Value Based marketing Forum
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Veteran observer of marketing and finance, with over 25 years of
experience.
Return on ideas : Better results from finance and marketing working together
Background
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An Investigative research programme from 1997 to 2007
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100 Companies Surveyed
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Shared working practices, internal meetings, plan, budget, models and tools
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Review of published case study papers
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Examined academic literature
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Demonstrating marketing’s contribution to the organisation;
how to predict it;
and how to find ideas to improve it.
New
FRAMEWORK
Return on ideas : Better results from finance and marketing working together
Included in the Document…
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Key questions for discussion
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Checklists dealing with:
The fundamental requirements for affordable
marketing
Departmental good practices
The right conditions to ensure success
Case Study examples
Return on ideas : Better results from finance and marketing working together
New
FRAMEWORK
Good Practice Guidelines
Worst Case Marketing Practices
The infinity model of marketing
value creation
Return on ideas : Better results from finance and marketing working together
Checklist One: Good Practice Guidelines
1. IMAGINATION
• Can we really afford NEW STUFF?
• Are we hunting for AFFORDABLE
ALTERNATIVES?
• Are we doing TOO MANY marketing
activities or TOO FEW?
• Do we have the right MIX of affordable
marketing activities and ideas?
• Are we PAYING TOO MUCH for Ideas
and have we sought cheaper sources?
Return on ideas : Better results from finance and marketing working together
Checklist One: Good Practice Guidelines
2. PREDICTION
• Do we insist on rigorous predictions of
the financial contributions of all new
marketing ideas?
• When we predict, do we do enough:
Historical analysis
Testing and experimenting?
Observing customers?
Searching for analogies with
existing situations to provide
clues about how the future will
unfold?
Return on ideas : Better results from finance and marketing working together
Checklist One: Good Practice Guidelines
3. DEMONSTRATION
• Do we insist on post-implementation
reviews of every marketing prediction?
• Are we using good practice analysis
methods to link marketing activity to
customer activity?
• Do we have financial models linking
customer activity to sales and profit
figures?
• Do we investigate cost-efficiency and
drive down waste, scrap and re-work?
Return on ideas : Better results from finance and marketing working together
Good Practice Guidelines - Imagining Value
 Creation of New Ideas, requires a certain obsession !
 Can be a lonely ‘exposed’ place,
 But – can create opportunity for building team spirit
 Imagination is used at three levels:
1. Strategic Portfolio
2. Value Proposition
3. Marketing Mix
Return on ideas : Better results from finance and marketing working together
Good Practice Guidelines - Imagining Value
- Strategic Portfolio
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Classify and categorise marketing ideas .
Invest cash where it will generate maximum cash inflow.
Do not allocate budget based on current level of sales
Assess ideas using cost-benefit predictions and apply
consistent risk-reward criteria.
Case Study: IBM CEO, Lou Gerstner in the 90s repositioned
the business alongside being provider of hardware
and software, as a group of service businesses.
Return on ideas : Better results from finance and marketing working together
Good Practice Guidelines - Imagining Value
- Value Propositions
 Use market research.
 Address both negative comments, and, exploit positive
ones imaginatively.
 Keep appeal by stream of additional practical ideas
 Monitor from emergence through prediction and post-launch.
 Use predictive tests and demonstrate post launch sustainable value.
 Implement a shared plan and schedule activities.
Case Study: Heinz – 2003 invested in a massive research programme
into customer attitudes, discovering their dissatisfaction with the
plastic bottle. The Top-Down Bottle was born.
Return on ideas : Better results from finance and marketing working together
Good Practice Guidelines - Imagining Value
- Marketing Mix
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Review evidence of mix effectiveness.
Rethink, based on reviews.
Switch budgets on a rolling monthly basis where appropriate
Base future marketing activities on ideas translated from the mix.
Monitor mix ideas from emergence through prediction and post-launch.
Subject ideas to predictive tests before launch, and demonstrate value
add, after launch.
 Guard against proliferation of un-scrutinised ideas.
 Plan and schedule mix activities.
Innocent Drinks used many innovative mix ideas, including eye catching
promotions; woolly hats for Innocent bottles, distribution
of excess stock to the homeless, a health tips book, Fruitstock festivals, free events
for retail staff. From 2002 to 2007 turnover grew from £6.5m to £100m.
Return on ideas : Better results from finance and marketing working together
Good Practice Guidelines - Predicting Value
 Analogies, substitutes and scenarios
 Customer Insight and foresight
 Tests and experiments
 Extrapolations from the past
Return on ideas : Better results from finance and marketing working together
Good Practice Guidelines - Demonstrating Value
 It is important to pre-plan how you are going to demonstrate the
effect of every new marketing idea when put into action.
 Look for a chain of evidence that links marketing activity and expenditure
to its financial benefits.
Return on ideas : Better results from finance and marketing working together
The Key Players – Checklist Two
“ Increasingly information-age
Companies are shifting from vertical
hierarchies to horizontal
cross-functional teams……responsible
for key processes that add value for
customer NOT for functional inputs.”
Peter Doyle: Value Based Marketing
Return on ideas : Better results from finance and marketing working together
Conditions for Success
Return on ideas : Better results from finance and marketing working together
Conditions for Success: points to consider
– Checklist three
Return on ideas : Better results from finance and marketing working together
Steps to implementation
Return on ideas : Better results from finance and marketing working together
Steps to implementation – in practice
• ONE DAY
• Workshop
• ONE WEEK
• Detailed review
• ONE MONTH
• Data collection
• Model development
• Tool implementation
Return on ideas : Better results from finance and marketing working together
Summary of key points
• Finance and marketing have a disjointed relationship.
• Finance focuses too much on budget and not enough on performance,
whereas marketing concentrates of brand awareness/image but not
on sales or profit.
• The best organisations strike a balance between financial rigour
and marketing imagination.
• Progress can be made by holding marketing/finance workshops
and ensuring both sides ask the right questions.
“Engaging with the CEO, Finance and IT departments..understanding
the CFO’s expectations from marketers…meeting and exceeding CEO’s
marketing objectives… boosts competitive advantage in the market.”
Ramesh Natarajan, Deputy Country Manager, DHL Express, Malaysia, CMO Conference KL 2006
Return on ideas : Better results from finance and marketing working together
10 benefits to your organisation
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Making the marketing budget work harder.
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Holding agencies rigorously to account for results.
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Eliminating production wastage and its causes.
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Making marketing assets and collateral (images, video, text) work harder.
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Maintaining media effectiveness while reducing costs.
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Getting agencies to do a better job in less time.
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Avoiding surprises in budget commitments.
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Wasting less time on budgetary bureaucracy.
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Faster marketing approvals with fewer errors.
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Forecasting more accurately.
Return on ideas : Better results from finance and marketing working together
Return on Ideas
Questions?
“The quest to create more
money from marketing is a
team effort.”
Professor Robert Shaw
Finance and Marketing working better together www.cimaglobal.com/ideas
Return on ideas : Better results from finance and marketing working together