Marketing: Underrated, Undervalued, and Unimportant?
Dynamic Outfits Inc. spent $10 million to build a new plant. Now operational, the plant is churning out widgets by the thousands. But once the widgets leave the plant's shipping dock, no one in the company knows exactly what happens to them. Anecdotal evidence suggests that customers actually buy some, but such sales are not firmly documented. The company continues to allocate money to operate the plant year after year on faith that the plant is necessary and the widgets it produces are contributing to the company's bottom line.
A ridiculous scenario? Absolutely. No company spends money on a plant without documenting the need for the facility and return on its investment. Yet strangely, this is the way many companies fund and run their marketing functions. While most executives contend that they need marketing, few are able to articulate why they need it and many have no way of knowing what kind of value the function generates for the company overall. In some respects, one could say that executives view marketing as a necessary evil.
This situation presents a difficult dilemma for heads of marketing: How do they measure the economic contributions of activities long considered immeasurable, and do so within the context of the company's existing organization structure. It is a stiff challenge, but one that some leading corporations have overcome by (1) adopting a new approach to marketing based on discipline, rigor, and customer insight; and (2) using a number of emerging human resource and training practices to ensure that the marketing workforce has the ability, motivation, and business context necessary to successfully implement the new approach.
The Executive View of Marketing
Marketing leaders today face many challenges: building brand equity, keeping up with the changing tastes and interests of fickle customers, and generating demand for the company's products and services, to name a few. But according to a recent Accenture study, marketing leaders' biggest challenge is often found inside the company.1This study, based on a survey of 200 executives, found that marketing is not held in high regard by a large majority of executives at organizations worldwide.
When asked to rate each of 11 principal corporate functions in terms of their value contribution to the overall company (where 1=no contribution and 5=very significant contribution), executives gave marketing an average rating of 3.7. By comparison, executives gave an average rating of 4.4 for sales and 4.1 for customer service, making these the top-ranked functions. Even more telling: Just 23 percent of executives said that marketing makes a very significant value contribution, compared with 61 percent for sales and 43 percent for customer service.
Furthermore, when asked to indicate which of the 11 corporate functions they considered their most, second-most, and third-most important, an overwhelming majority of executives chose sales or customer service. Just 21 percent said that marketing is one of their three most important functions.
Finally, of those who indicated that marketing is one of their three most important functions, just 28 percent said that the marketing function in their company performs better than the marketing functions at other companies in their industry. That means approximately 20 percent of executives believe their marketing function actually performs worse than their competitors', while 43 percent think their function operates at parity within the industry.
What Is the Problem?
Clearly, there is something amiss when it comes to marketing. But what? Why is marketing getting so little respect or support from top executives around the world? We believe that two principal factors are at the root of the issue.
The first factor, quite simply, is that many senior executives do not fully understand the role and purpose of marketing within their company - in part because senior executives tend to have finance or operations, not marketing, backgrounds. According to Chief Executive magazine, just 12 percent of Fortune 700 CEOs have worked in marketing at some point in their careers.2 Complicating matters is the fact that marketing has always had a highly creative element that - intentionally or not - often obscures the function's tangible activities and makes marketing processes seem more like art than science. For executives with a background in "hard numbers," such a right-brain approach to business is difficult to grasp.
A second cause of marketing's lack of respect among executives is organizational. Traditionally, marketing is dependent on other functions to do its job. It relies largely on the IT department to manage and manipulate customer data, and on the sales and customer service functions to provide feedback on how well a particular program worked. A simple example is direct mail, which is a major marketing activity. Marketing can handle the campaign strategy and creative aspects of the mailing piece on its own. But, it must rely on the IT department, under marketing's direction, to generate the lists of customers and prospects who will receive the mailing. And it must depend on sales and customer service to relate how the mailing translated into customer inquiries and, subsequently, actual sales. As a result, marketing often finds that while it can indicate how much a particular campaign costs, it cannot accurately account for the revenue generated by the campaign - which makes determining the effectiveness and ROI of the campaign virtually impossible. So, when a CEO looks at sales and customer service he gets a complete picture of both revenue and expenses, but when he evaluates marketing all he tends to see is money going out the door.
Given these factors, it is not surprising that executives often lump marketing into the general category of "overhead" - along with human resources, finance, and legal - instead of viewing it as a function that plays a key role in stimulating demand and generating revenue. It also is not surprising that marketing leaders find themselves in an unenviable position of defending their viability and importance to the organization without the cold, hard facts to support their contention.
A New Approach to Marketing
Marketing certainly is in a difficult position these days. However, our research and experience indicate that it does not have to remain this way. Mindful of executive opinions of their function, increasing demand from the executive suite for better ROI from all corporate expenditures, and the potential impact of marketing on the company's economic value added (EVA), some pioneering companies have adopted a new approach to marketing. This approach is characterized by three elements.
The first element is a willingness to "demystify" the marketing process and instill discipline, science, and rigor in the function that enables marketing leaders to systematically and accurately measure the return on their portfolio of marketing activities. Marketing will always have a creative element that does not lend itself easily to objective measurements. However, leading companies are beginning to realize that creativity is really a much smaller aspect of marketing than most people think, and that a more disciplined, scientific approach to marketing is not only possible, but preferable. Companies embracing this new approach to marketing are applying objective metrics to the many noncreative marketing activities that can be tracked and measured. In doing so, they are effectively creating a "marketing learning environment" that enables the department to more precisely understand what works and what does not and to use that insight to improve future campaigns.
The second element of this new approach is an understanding that marketing is responsible for developing insights into customer behavior and needs - insights that can make sales and customer service more effective. Leading companies have recognized that marketing - not sales, service, or IT - is best suited to deeply understanding what customers and prospects really want, and creating appropriate campaigns and offers that address those desires. These companies are using high-powered mathematical predictive models to understand to whom they should send specific campaigns - unlike other organizations, which are still following the mass-market, one-size-fits-all model. For instance, by segmenting customer behavioral data, online broker E-Trade was able to develop highly focused campaigns for very discrete customer segments. Similarly, a global electronics manufacturer, recognizing that it no longer could compete solely on technology leadership, shifted to a marketing model that enabled the company to create tailored service offerings for its business customers. Importantly, these companies excel not only in developing customer insights, but also in "operationalizing" them. For instance, they are able not only to create an excellent segmentation of their customer base, but also to use that segmentation to differentiate the way the customer service function treats highly profitable customers versus those who buy only occasionally. Similarly, their sales representatives can, with the click of a mouse, see which marketing promotions prospects have received in a given timeframe and subsequently have more meaningful and relevant conversations with them.
The third element is an acknowledgement that the marketing organization, not sales or service, is the "owner" of the company's customer data, and that the marketing leader's role is broader and has potentially greater impact than ever before. This is arguably the most critical element, not to mention the most difficult to address. It is critical because it is not enough for marketing to simply have metrics for various activities. The function also must be held accountable for achieving specific measures, and that kind of accountability begins with ownership. It is grossly unfair for a company to measure and evaluate marketing on campaign ROI, for instance, but refuse to allow the marketing function to control the areas that influence the performance of those campaigns. And it is difficult because, in most organizations, customer data typically is spread among various areas within the company. Business units, customer service, sales, and IT all may claim ownership of the data, making the issue a political hot potato not easily addressed. Yet, it must get addressed because it is impossible to garner any compelling, accurate insights about customers unless all relevant data is centralized under and managed by a single function - in this case, marketing.
The Workforce Is Key
Not surprisingly, such sweeping changes to how the marketing organization operates and interacts with other corporate functions give rise to many challenges - the foremost of which is workforce-related. More specifically, companies that are shifting to an insight-driven marketing approach are finding that attending to employee requirements can spell the difference between success and failure of the initiative. In Accenture's experience, marketing organizations can greatly improve their chances of successfully adopting an insight-driven approach - and, subsequently, boost their value contributions to the overall company - by ensuring that the marketing workforce is upgraded along with the function's technologies and processes. Upgrading the workforce is best accomplished by first developing a new set of key performance objectives for marketing personnel that create a direct link between their specific day-to-day actions and the financial and operational performance of the overall business. We've identified the following seven key performance objectives that any business-oriented marketing organization should have:
Maximize the return on marketing investment. Use integrated marketing and customer and financial data to develop, implement, and monitor marketing resource allocation strategies to maximize shareholder value.
Increase brand value. Ensure that the company and product brands hold the most value for customers and, consequently, generate greater value for the company at large.
Increase the acquisition and retention of profitable customers. Maximize the profitability of customer relationships.
Optimize the development and launch of new products. Ensure that the right new products are developed and launched to maximize customer relationship value and market share.
Win the war for marketing talent. Attract, develop, and retain the best people within the marketing function.
Organize the marketing function for efficiency and effectiveness. Maximize the time during which employees and activities are adding value to the organization.
Reduce the time to learn required competencies. Reduce the elapsed time from the day-one introduction date to the time it takes for a marketing employee to meet the targeted performance level. This reduction may include the time to performance for a new hire or for an existing marketing employee with a new job responsibility, technology to use, or product or service to support.
7. Reduce the time to learn required competencies. Reduce the elapsed time from the day-one introduction date to the time it takes for a marketing employee to meet the targeted performance level. This reduction may include the time to performance for a new hire or for an existing marketing employee with a new job responsibility, technology to use, or product or service to support.
To achieve these objectives, employees must exhibit a set of critical, specific corresponding behaviors. For instance, if employees are asked to help the company increase the acquisition and retention of profitable customers, they should be doing things that enable them to more effectively identify the most profitable customers and those customers most likely to grow profitably - such as analyzing a host of customer transaction and financial data, as well as market and competitor information, and continually monitoring customer rates of cross-sell, complaint/problems, and retention information. If the marketing organization is expected to increase brand value, the marketing workforce should use relevant customer, market, and competitive insight to craft meaningful customer messages and determine the right mix of channels to maximize reach, consistency, and alignment of the brand image. And if a goal is to maximize the return on marketing investment, marketing personnel must use behavioral and transactional analysis and/or primary research to target the most profitable customer segments; allocate marketing mix elements across brands and customers based on analytical assessment; and manage externam marketing resources for low cost and high impact.
The point is that goals are not achieved by accident. If companies or departments change their overall direction or emphasis, relevant employees need to know specifically what they are expected to accomplish and how.
HR and Training Implications
However, having employees understand their goals and desired behaviors is only half the battle. To ensure that people actually take the actions they need to, a company must implement specific training and human resource programs that address the three primary drivers of behavior: ability, motivation, and context.
Ability
Improving marketing professionals' abilities means not only enhancing employees' knowledge, but also their skills. While some may think of these as somewhat interchangeable, they are quite distinct from one another and require different types of training or human resource support.
Knowledge is familiarity with a subject gained through study or experience. In a business setting, there are three types of crucial knowledge: offerings-related (do employees have an in-depth understanding of the companys products or services?); job-related (do they know what is involved in carrying out a specific role in the company?); and customer-related (do they know who the company is or should be selling to, what those individuals or businesses need, and how the companys products and services meet those needs?). If one of the goals of the marketing function is to optimize the development and launch of new products, the company could help employees achieve this goal by implementing a knowledge management application that packages and organizes relevant information on all the companys products and how each product meets the needs of various customer segments.
A skill is defined as proficiency or dexterity that is acquired or developed. Public speaking, effective writing, and interacting with customers are skills that are important for marketing employees. So is making the connection between the results of customer data analysis and relevant product or service offerings. In the case of a person moving into a new role as a database marketer, he or she may have the technical knowledge to "slice and dice" customer data, but may lack the skills necessary to interpret the output of that analysis in the context of the business. Training individuals to learn new or enhance existing skills generally is best done in a way that approximates real-life situations as closely as possible. Role playing and performance simulation, for example, have proven especially effective in honing employee skills, while comparatively static methods such as computer-based training are least desired for such situations.
Motivation
Motivation is the second critical aspect of transforming the marketing workforce - and in many ways the most difficult. An individual can possess the requisite knowledge and skills, yet still fail to make a positive contribution due to a lack of motivation. There are four key elements of motivation that a company must address:
- Goals. (Do people know what is expected of them?) Adopting a new marketing model will not be successful unless the goals of individual employees reflect and support the new goals of the function. It is up to the head of marketing to set the new strategic direction and ensure that new corresponding goals or key performance objectives for each employee are developed and communicated accordingly (whether automatically by using a sophisticated performance management software tool or simply in person or via a memo). For instance, if a marketing executive communicates to her employees to retain customers at any cost, she should prepare for some brand erosion, as unprofitable deals are struck in the name of retaining the customer relationship. Instead of emphasizing only customer retention, the marketing executive should emphasize the goal of balancing customer "delight" requirements with company profit objectives.
- Metrics. (How is performance measured?) In addition to knowing what is expected of them, employees must know how their progress toward those goals is evaluated. Importantly, these metrics must be easy to understand so that employees can tell how they are measured, and they must elicit the behaviors necessary to achieve the new goals set for each individual. If the marketing organization overall is measured on bottom-line monetary contribution, a direct-mail team should not be evaluated on the number of inquiries a particular campaign generates. Instead, it is best assessed based on a combination of the program's cost and the sales it actually generated.
- Feedback. (Are people advised of how they are doing?) One of the biggest workforce-related mistakes companies make is to reserve employee performance feedback for the typical annual review. Instead, managers should provide continuous feedback so that employees always know if they are doing the things necessary to achieve their goals. If they are not, regular feedback will help them correct their behavior and get back on track before their performance emerges as an ugly issue. And again, feedback must be relevant to the function's new goals. For example, in the past, marketing departments have marked successes by framing and hanging in the hallways each new advertisement it produced. That is a nice gesture, but it is not effective if the function wants to demonstrate business impact. Instead, the department should post with each ad an accompanying chart showing what the ad generated (updated daily, weekly, or monthly as appropriate). That way, the marketing team can, at a glance, know whether their efforts are paying off for the company.
- Reward. (How are people compensated?) Although corporate executives may like to believe otherwise, most employees work to get rewarded in some way. That is why compensation - whether it is an annual salary, a monetary bonus, a nonmonetary reward, or some combination of the three - is a key element of motivation. It also is why it is critical to tie the appropriate rewards to the achievement of the new goals laid out for the marketing organization. For instance, in the past, marketing teams typically were rewarded for successfully launching a new campaign. But if the marketing function is now evaluated on return on investment, rewarding for a successful launch is only an interim (and smaller) recognition. The real (and more significant) reward is something in line with the function's new goals - for example, when the campaign generates the business results expected (improved market share, increased revenue, enhanced customer retention) three months after the launch. Often, marketing contends that its rewards should not rely on business results because the sales function plays a major role in the success or failure of the marketing campaign, to which we say that the company should integrate marketing and sales to attain mutually defined rewards and ensure that marketing efforts "hit the streets" as intended.
Context
The context in which marketing employees do their jobs also has a high degree of influence on the effectiveness of the overall workforce. By context, we mean the tangible and intangible aspects of the company that facilitate (or hinder) employees' interaction with each other and the flow of work across the marketing function.
One of these aspects is the function's business processes. There's no doubt that, in a shift from a traditional marketing model to an insight-driven, ROI-based model, some processes will have to be redesigned. Most notably, marketing processes will have to be able to collect, process, and act on data in as close to real time as possible. Being insight-driven means little if one's insights are based on month-old market data. A simple example is getting feedback from the salesforce during a product launch daily instead of weekly so that necessary changes can be made while there's still time to affect the success of the launch.
Another aspect of context is information technology, which plays a major role in facilitating the implementation of new business processes. For instance, for a marketing organization to have - and measure - business impact, its people must work much more closely with their counterparts in sales and customer service. Web-based collaboration tools have proven very effective in connecting marketing, sales, and service employees in disparate locations around the world. Tools that support real-time interaction (such as Web conferencing) - as well as dynamic content repositories that provide access to crucial and up-to-date documents such as templates, status reports, and work products - are key. These technologies enhance employees' ability to develop constructive relationships with one another, reduce the time needed to make critical decisions, and facilitate the exchange of important information.
Other aspects of context that require attention include the marketing department's culture, organizational structure, job descriptions, and physical environment. It is likely that reporting relationships and job duties must change - some extensively - to accommodate new ways of doing business. To a lesser extent, a company may determine that its new marketing model may give rise to a different culture or require new workspaces to enhance employee performance.
Conclusion
There's no question that successful companies need viable marketing organizations. Yet, it is also true that few corporate executives today can either articulate precisely why they need marketing or understand the value marketing contributes to their company overall. As companies demand more value and return on investment from all their departments, such a situation is unacceptable. More than ever, marketing leaders must not only implement the operational and workforce changes necessary to increase the function's bottom-line impact; they must also adopt the metrics to effectively assess and quantify this impact.
We've seen a number of leading companies do just that and, in the process, realize five significant tangible, measurable benefits:
- More effective new-customer acquisition. With deeper insights into customer needs, a company can tailor its offers to specific customer or prospect groups and deliver the offers via the method the individuals prefer (for example, regular mail, email, or telephone) - thus dramatically boosting the chance that the target audience will respond favorably.
- More effective customer development. Deeper customer insights enable sales and service professionals to more effectively cross-sell and up-sell to customers and, thus, drive more profitable revenue from the organization's existing customer base.
- Increased customer retention. Having a better understanding of what customers need, as well as learning about customer concerns before they become serious problems, enables companies to retain those customers they worked so hard and spent so much money to attract.
- Better risk management. This is particularly true in the telecommunications and financial services industries, in which some firms are using insights about customers to not only enhance their ability to initially qualify individuals for credit (more accurately identifying potential trouble spots in an individual's credit history), but also to more efficiently deal with customers who have defaulted on their obligations (determining which default cases are worth pursuing so the company does not spend $100 to collect on a $50 debt).
- Increased speed to market. With a better understanding of the profiles of unique customer segments, companies can create and launch new products and services that meet specific needs and, thus, beat their competition to market. As companies have adopted this new approach to marketing, they also have seen marketing take its rightful place beside sales and customer service as one of a company's most important functions.
