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Questioning the spend

AUTHOR: Peter Burdon   DATE: 14.12.06   ISSUE 2, 2006

Marketing is a waste of money and the sooner somebody is brave enough to say it, the better! This is a view held by many non-marketing executives and even a few who work in the function. It is not my own view but I have sympathy for the opinion, as I have seen many millions wasted in the name of marketing.

So what led to this dirty little secret of short-sighted management know-how? Three things, I believe. First, marketing is about creating and communicating something that people want to buy or interact with. It’s about people’s beliefs, needs and behaviour and how to influence them. To most people, that sounds like something that we all know about. The widely held view is that “Marketing: it’s just common sense, isn’t it?”

The first question should not be about how to spend the marketing budget or how to measure its effect. The crucial question is "why should we spend the money?"

Illustration: Gregory Baldwin

Second, investment in marketing in many organisations is rarely subject to the rigors of financial reviews or cold, hard analysis, despite the spend on marketing activities amounting to 5-10 percent of sales. Millions can be spent onan advertising campaign with no quantifiable benefits, yet the manufacturing director has to justify (and beg for) $10,000 on an enhancement to a machine with a clearly defined payback.

The curse of budgetary momentum, that is, ‘last year’s amount plus a bit’, can often determine the spend on advertising and promotions. Alternatively, the logic can be: “we want to grow sales by X percent, therefore, advertising will have to increase by X percent” or “to match our competitor’s share of market, we will have to match their share of voice”.

Third, marketing has attracted some of the brightest and best but, frankly, it has also been a safe harbour for over-confident individuals with very little real consumer empathy, creativity or analytical ability. Thankfully, they’re a small minority but it’s skewed the view of the profession.

In good consumer organisations, marketing investment is subject to financial rigor.

These factors have contributed to the marketing function having a less than exalted status in many organisations.

In successful consumer companies though, marketing is the driving force of the organisation and is highly respected by the other functions. Their success comes from having a ‘well oiled’ marketing function and from people in other functions thinking like marketeers.

Marketing is more than common sense. Creating a successful product or service requires a combination of analysis, creativity and, yes, plain common sense. Common sense can play a part in how an opportunity is analysed or researched.

As Henry Ford once said, ”If I’d asked the public about their transport needs, they would have told me to invent a faster horse”.

When Honda developed a new version of one of its models in the 1980s and was considering how to design the boot of the car, it didn’t ask car owners what they wanted, but opted instead to observe people loading and unloading items into their cars in the Disneyland carpark.

Knowing how to blend information and insights of how to influence people’s behaviour is a skill that is built up through years of training and, more importantly, working with good marketeers.

In good consumer organisations, marketing investment is subject to financial rigor. Promotions are sanctioned and reviewed on the incremental profit (not sales) they create. In doing so, the impact on the products being promoted is not only analysed but it’s recognised that other products’ sales may be affected. The smart bit is in understanding what to include in the analysis and acting rationally on the information.

The web has brought a new level of science to marketing as the costs of acquiring and retaining customers can be much more rigorously analysed. An email shot can be sent with different content, the responses analysed and the ‘good content’ emails sent again to further potential customers.

AGSM alumnus Peter Burdon was the Chief Executive Officer of UK-based Thorntons PLC, a manufacturer, retailer, and distributor of high quality confectionary.

Photo: Peter Burdon

This rationality can sometimes lead to one class of marketing investment being cut or changed wrongly: print, radio and television advertising. But this is not the key point.

The first question should not be how we should spend the marketing budget or how to measure its effect. The crucial question is ‘why should we spend the money?’ This can only be answered by understanding the issues that the brand or the products face. These issues may not be solved by further investment in advertising and promotions. Good marketeers will first seek to understand the ways the product, packaging and how it is sold affect awareness, preference and loyalty.

In the early 1990s, the leading beer brand in the UK was losing sales as the heavy drinkers (over 15 litres a week) in its heartland became fewer in number in line with social trends. The smooth taste of the beer was believed to be, in part, due to extra yeast or ‘bottoms’ being left in the barrel. To keep sales momentum as the brand lost its heavy consumers, the company sought wider distribution for the beer, which was initially successful.

However, the extra bottoms in the barrels meant that the beer had a shorter shelf life than other beers and the taste deteriorated faster. This had never been an issue in the high throughput pubs in its heartland. The company’s solution was to spend more on advertising extolling the beer’s smooth taste. The reality for consumers outside of the heartland was somewhat different and sales continued to decline.

Marketing is a powerful function for a successful organisation.

The best solution would have been to centrifuge the beer at the end of the brewing process to remove the bottoms, not spend more on a doomed-to-fail campaign.

Today the brand is not even in the top five brands and the beer whose brewers took the centrifuge route is now the UK’s leading bitter brand.

Finally, the calibre of people who enter marketing needs to change. Consumer companies can often be drawn to candidates who love advertising and would relish the opportunity to ‘swan around’ with the agency.

The best marketeers tend to be comfortable with numbers, obsessively interested in how consumers view their brand and products, have a degree of creativity and can network well across the organisation. A director in McKinsey’s London office once said that the best people to work with retailer clients were bright, friendly and liked shopping.

Marketing is a powerful function for a successful organisation, but its image has been tarnished and scepticism is endemic. To reassert its critical role, marketing professionals must bring insights beyond just common sense, they must submit to more rigorous assessment of investments and they must attract a different calibre of people to the profession.

Emperor’s clothes? Not in my view.