Should I approve this expenditure?

“The aim of marketing is to contribute to maximising shareholder value, and marketing strategies must be evaluated in terms of how much value they create for investors.” — Peter Doyle (2008)

Recently the new CEO of a small, but well-established company showed me his firm’s marketing budget and asked if he should approve it. His background is finance and ICT, and his sales and marketing manager, who was new to the company, had no formal marketing training. But he had achieved some measure of success in his previous job.

What he presented was a list of proposed activities and a request for financing of these activities. There wasn’t even a hint of either marketing strategy or a return on investment, but to be fair, he did have some good tactical ideas. However, what he presented was a request for expenditure approval at a time when his company was experiencing a cash crunch. What should the young CEO do?

Marketing and Value Creation

Marketers should remember that marketing is a process of value creation and delivery to customers that transcends traditional departmental boundaries. So when a CFO or CEO does not approve the marketing budget, or worse, slashes their budget, marketers should turn the search light on themselves, because it is not about an internal battle. Astute marketers must always remember that their first constituency is the internal customer, and unless the internal customer, at whatever the organisational level, is satisfied that there will be real value creation, how can they expect to have satisfied paying customers?

Three critical steps

So here are the three things that I recommend that marketers do to get their budgets approved on time, every time:

1. Start with the CEO. What is his/her dream?

• What should our brand footprint be in 3 – 5 years’ time?

• How about the internal marketing and productivity gains to make it happen?

• What would make our shareholders very happy?

2. Your next discussion is with the CFO. What would make him/her look good?

• What would they like the balance sheet to look like 3-5 years from now?

• What would they like the income statement to be 3-5 years from now?

• What efficiency and profitability ratios would put the organisation ahead of industry standards?

• What return do you want on your investment in marketing for the year ahead, and how does that compare with your other investment options?

3. Armed with the above, the next step is to create a marketing plan that is a clear, unambiguous road map for giving the CEO and CFO what they want, and your target customers more than they had expected. Now that’s serious hard work.

The Marketer’s Secret

Since you are ready for the hard work ahead, I’ll share the marketer’s secret with you; but be sure to keep it strictly confidential. Our big secret is that people, impressed by the creative output, think that creativity is the secret of the successful marketer. But they are wrong. Remember Sony’s Walkman, and Apple’s iPod? Our success really lies in achieving that delicate balance between the science of marketing strategy and the art of reshaping a market. And so, working in a world where customers often don’t really know what they want until they see it, our fun begins with the marketing thinking and planning. This thinking and planning must result in the creation of strategic and tactical plans that are an investment that the CEO and CFO will find attractive.

Getting our marketing plans accepted is thrilling. But our real joy lies in watching customers lining up to buy whatever it is that we have on offer, at full price. Remember the first iPhone?

Slick? Not really, for while it is intellectually simple to understand, in practice creating a strategic marketing plan is the most difficult of all marketing tasks.

So back to the case of my young CEO. You were smart enough to seek advice early in the process. But there’s one final question. Necessity being the mother of invention (or is it now innovation?), should they attempt to create their marketing plan on their own, given their limitations, but with no additional expenditure? Or should they seek professional assistance which comes at a cost? What’s your take?

— Herman Alvaranga is a Fellow of the Chartered Institute of Marketing (FCIM) and president of the Caribbean School of Sales & Marketing (CSSM). For more insights on sales and marketing please go to his blog at www.cssm.edu.jm.