We’re five years into the “Era of Accountability” and what do we have to show for it?  Is marketing any closer to demonstrating to CEOs and CFOs what they’re getting for their money? Are we marketers more comfortable in our own skins, confident of our ability to measure and improve the effectiveness of our strategies and programs? Unfortunately, the answers to all of these questions are not what we’d expect given that accountability has been at the top of the vast majority of marketers’ to-do lists for as long as it has.

According to a recent study from Marketing Management Analytics and Financial Executives International, barely 7% of financial execs feel satisfied with their company’s ability to measure marketing ROI.  According to two studies released at the recent Association of National Advertiser’s (ANA) Marketing Accountability Conference, the majority of financial executives just don’t believe the ROI numbers or forecasts coming from marketing:

• Nine of 10 said they don’t use ROI metrics to set marketing budgets in the annual budgeting cycle
• Seven in 10 said their companies don’t use marketing inputs and forecasts in financial guidance to Wall Street or public disclosures
• Six in 10 believe their companies’ marketing departments have an inadequate understanding of financial controls
• A surprising four in 10 believe that marketing forecasts made inside their company can't pass the muster of a standard corporate audit

Finance isn’t the only department skeptical of marketing’s accountability efforts.  According to the 2008 Marketing ROI & Measurement Study from the Lenskold Group and MarketingProfs, we don’t believe our numbers either!  A scant 17% of marketers believe their company’s ability to measure the financial return generated from marketing investments is “a source of real leadership” and “as good as it needs to be.”  More fuel to the fire, the ANA studies mentioned earlier found:

• Only one in 10 marketing executives said they could forecast the effect of a 10% cut in spending
• Fewer than two in 10 said senior management had confidence in their firm’s marketing forecasts

Here we are five years in and nary a quarter of marketers saying they use ROI or similar financial measures to assess marketing effectiveness.  What is taking so long?! 

One gigantic drag on marketing accountability efforts has got to be the fact that finance and marketing remain estranged—only 33% reported “full cooperation and an open dialogue” with finance.  In most firms, marketing is developing metrics, investing in tracking systems, and ultimately delivering information to finance without ever once asking finance for input into the process or an endorsement of their accountability efforts.  Should we really be all that surprised [or incensed] then that finance thinks the numbers are bubkus?

A recession is not a time to mess with finance.  Marketers need to immediately cease and desist the business-as-usual approach of measuring marketing effectiveness in a vacuum.  Here’s a short-list of ideas for engaging finance folks in and, at the same time, jump-starting our own marketing accountability efforts.

#1. Offer a penny for their thoughts. 
“How many CMOs are partnering with their CFOs to create comprehensive and regular reporting on customer profitability?” writes Larry Selden and Geoffrey Colvin in a recent Harvard Business Review piece.  They admit, however, that try as they may, they can find few that calculate profitability for each customer based on total revenue and expenses, including capital costs.  Talk about an opportunity!  Can you imagine being able to demonstrate each quarter marketing’s contribution to improved and enhanced customer profitability?  Now that’s a number finance could believe in. 

Bear in mind there’s nothing particularly mysterious or proprietary about measuring customer profitability.  Copernicus does it in many of our strategic studies and ROI evaluations.  Marketers could start by calculating, for example, the lifetime value of current customers.  There are revenue measures such as current spending in the category and current share for your brand today as well.  You probably have a good handle on the costs to reach and influence different customers with the sales force and/or media, in addition to how much it costs to deliver and serve them.  Ask finance for its two cents on costs—remember they think we don’t understand financial controls so we need to demonstrate otherwise. 

Also ask finance for input on what financial measures would work well with their reporting, that could be shared with investors or in public disclosures, or that they’d like to see generally.  Whether they’d like to see how marketing impacted loyalty, satisfaction, sales, spending, share of wallet among the most profitable customer groups, marketers need to build metrics around what’s going to make finance happy if we want them to take the ROI information we give them seriously.

#2.  Explain How You’ll Get Your Story Straight.
ROI and other financial measures are nice numbers if you can get them—and really there’s no reason you can’t.  Absolute numbers, however, are just one part of the accountability story.  If operations folks came to finance and said here’s our productivity level, here’s our yield, it was up or it was down, end of discussion, they’d be laughed out of the room [or worse].  Finance needs to know why something worked or didn’t and what a functional area plans to do about it.  If nothing else, it gives them confidence that the people running said functional area know what they’re going to do to fix problems and stick to profit and growth objectives.  Marketing needs to get its story straight.

The first step is to think about customer profitability and financial measures of success, the second step is to figure out what is working, why, why not, and what to do about it.  These do not need to be entirely separate exercises.  While you’re running econometric analysis to ferret out the ROI or regular tracking efforts to gauge performance, consider some hierarchy of effects analysis.  If you’re not familiar with the term, think of the chain of events that occurs after buyers are exposed to marketing programs.  In a perfect world, buyers become aware of a program (e.g., a TV ad, a sponsorship, a direct mail piece); buyers remember the brand message communicated; and the message positively affects buyers’ perceptions and attitudes.  Their preferences for the brand and intentions to purchase improve.  But it’s not a perfect world and most of the time there are missing links in the chain. 

Say you find the awareness of the campaign is off the charts, but sales are going nowhere.  By pinpointing where the breakdowns in communication are—was it awareness of the message, the message itself wasn’t compelling, or what—marketers can make adjustments mid-campaign and get a better understanding of what they may need to do with other marketing programs to improve performance. 

The means you are using to build your story for finance needs to be completely transparent to them.  Show finance that just as operations monitors productivity in a way that quickly diagnoses and fixes bottlenecks to keep in line with goals and objectives, marketing can do it too.  Get their buy-in to the process early and it will save you further headaches later.

#3. Ground the Marketing Budget in Reality.
When it comes to the marketing budget, the ANA research pretty much confirmed what we already know.  Finance doesn’t pay much attention to information that marketing hands them as far as setting the marketing budget is concerned.  At the same time, if finance asks marketing a question such as, “we need to cut spending, what would happen if we cut the marketing budget by 15%?” most marketers don’t have a answer.  They lack any hard and fast numbers they can present that demonstrate the ramifications for sales, profits, brand equity, and more in defense of their budget.  To say this is a major impediment to marketing accountability efforts is an understatement.  No matter how great the metrics are, marketing ends up more or less chasing windmills if the budget finance hands down isn’t grounded in reality.

Let’s face it, finance pretty much ignores anything that goes into or supposedly will come out of the marketing plan.  It’s a nice document, to be sure, but in most cases there’s nothing to fill anyone—finance folks AND marketers included—with great optimism that what goes in to it (i.e., GRPs) will produce what marketing believes will come out (i.e., sales increases, profit rises, etc.).  Do a little reconnaissance with finance about what a marketing plan or forecast might need to look like or do to withstand Wall Street and/or audit scrutiny, or at the very least give them more confidence in the predictive abilities of our forecasts. 

Also do some education.  Talk to finance about the modeling tools marketers can use to scientifically connect different inputs and desirable outputs.  Demonstrate how, with modeling tools, you can experiment with different budget levels to show the anticipated impact—be it positive or negative—and/or what outputs to expect given a particular budget amount with which to work. If finance folks know our plans aren’t held together by hopes and prayers then they are much more likely to feel inspired to use our guidance in setting (or signing off on) a marketing budget rather than pulling it from thin air.  Remember, CFOs and financial executives everywhere are on edge.  They’re looking for ways to save money and they need evidence that whatever budget they’re authorizing is going to produce a good return for the firm.  We’ve got to show them we can deliver the goods.

New products fail all the time because marketers got customer input and feedback AFTER it’s out in the market.  Why should we expect accountability efforts to succeed in delivering information finance can use and believe in if we don’t talk to them until AFTER we’ve put them together?  Marketers have got to stop guessing at what will satisfy finance.  We’ve got to get in their face and prove we want them to hold our feet to the fire with hard measures, fact-based stories, and rigorously designed plans.  It’s the only way to win them over and convert accountability from a “to-do” to a “done.”

More and more non-profits are recognizing the importance of branding.  Whether we’re talking about a huge international charity, big regional association, or local community group, having a strong brand offers very important advantages to an organization.  If nothing else, a strong non-profit brands makes it infinitely easier to capture and sustain the loyalty of the constituents an organization services AND secure financial support from the current and prospective donors who are under siege from the 1.5 million other non-profits in the U.S. making simultaneous requests. 

Unfortunately, many of the non-profits that have embraced the idea of building a strong brand are running into the same problems as many for-profit companies—their branding efforts are not helping them to differentiate their brand and their marketing programs are not resonating with current and prospective donors.  As a result, the significant resources put behind marketing campaigns and promotional efforts are producing disappointing returns on investment.

We turned to Copernicus’ resident non-profit marketing expert, Sohel Karim for his thoughts and perspectives on the unique challenges and critical steps for non-profits as they develop and launch a brand strategy.  Sohel is a senior vice president at Copernicus.  He joined the firm over a decade ago after a stints at Harvard Business School and Unilever India. He has published several cases and papers on brand strategy, non-profit marketing issues, and social marketing in prestigious journals, such as the Harvard Business Review.

Here’s what he had to say:

Mzine: Why are non-profits getting into the branding act now?

Sohel: Senior leadership at non-profit organizations have seen the impact strong branding can have in the “for-profit” world and are looking to see how they can use branding to strengthen their non-profit organization. Of course branding can have a huge impact in the non-profit world. Some people, however, equate branding with an advertising campaign to build awareness/recognition. That is a mistake. While advertising may have a role, the essence of branding is identifying what the product, service or organization should “stand for” and making sure this is consistently delivered and communicated to all who come in contact with it.

Mzine:  Do you ever hear concerns from non-profits that developing a brand and launching a marketing strategy might conflict or detract from the mission-orientation of the organization?  Has anyone ever said, “This isn’t a business?”  What’s your response?

Sohel: It is clear that a non-profit organization is not a business and we cannot simply “import” business principles without regard to how these might apply in the non-profit world. That said, a lot of business principles/ideas do help non-profits become more successful at realizing their mission. Focusing on the brand and a powerful marketing strategy does not have to detract from the mission of the organization. In fact, quite the opposite is true. A well-developed and implemented marketing strategy will go a long way in helping non-profits realize their mission.

Mzine: Are there any key considerations to make and steps to take that are unique to non-profits when an organization begins to develop and launch a marketing strategy? 

Sohel: In the for-profit world the focus of the brand—whether it is a product or a service—is on the “customer.” Identifying the most profitable market segment/s and applying a focused marketing effort is the path to success. There is more complexity in the non-profit world because the customer (or beneficiary of a non-profit’s efforts) is just one of the many stakeholders who are crucial to realizing the mission. One could argue that the definition of a customer for the senior leadership at a non-profit is very broad and includes the board, donors, employees, volunteers, and the people who the non-profit helps. In the non-profit world, all of these stakeholders are very important and must be considered when developing and launching a marketing strategy.

Mzine: Can you give us an example of some non-profits—be it a foundation, charitable organization, university, or social change effort—that have done a good job of developing their brand? 

Sohel: A non-profit does not have to be a very well-known name in order to be a strong brand. What matters most is that the people it works with and seeks to influence have a strong positive perception of the organization. I can think of four well-known organizations that have done a very good job of developing their brand—Habitat for Humanity, Red Cross, World Wildlife Fund, and St. Jude. All four of these organizations have very strong brands which have made it easier for them to realize their mission.

Mzine: Corporate involvement in social marketing efforts and active support of non-profit organizations is surging.  Some say buyers respond to these cause-related efforts, others wonder whether the majority of people could really match a brand to the cause or social issue it supports. What is this surge doing for non-profits?  Obviously it can bring notoriety and money in, but is there a right way (and a wrong way) to leverage it for brand building efforts?   And what about the organizations that are not as well-known as the Komen Foundation or the American Heart Association —two corporate favorites—do they need to be concerned about getting corporate attention?

Sohel: Correctly planned and implemented, cause-related marketing can help both a non-profit organization and the corporate sponsor contributing to the cause. Research clearly shows that the vast majority of Americans report that corporate support of causes can help win their trust in the company sponsoring the cause. Many consumers want to buy brands that resonate with their values and cause-related marketing is another opportunity for companies to differentiate themselves from competitors.

It is crucial, however, to do this right. Simply finding any corporate sponsor will not be in the best interests of a non-profit organization. The best partnerships have alignment between the corporate sponsor’s product/service and the non-profit organization’s mission. Clearly, corporate executives are going to be more interested in sponsoring a better known non-profit. After all, the other half of cause-related marketing is the goodwill created for a corporate sponsor and stronger non-profit brands such as the American Heart Foundation have an advantage.

This doesn’t mean that less well-known organizations cannot succeed at building a mutually-beneficial partnership with a corporate sponsor.  Not at all.  Smaller non-profits are usually small because their scope is small. Within what they do, however, they often have a very dedicated group of supporters. If these non-profits show corporate sponsors how a joint cause-related marketing effort can have a positive impact for the sponsoring company, they can still make a case.    

Mzine:  If you had the ear of every executive director and board chair at non-profit organizations and foundations around the world for five minutes, what would you say to them about marketing?

Sohel: The first thing I would do is thank them and their organizations for the tremendous work they’re doing at making our world a better place. Non-profit organizations play a vital role in our society; kudos to the dedicated people who work and volunteer for these organizations.

I would also say that every one of them is “marketing” their organizations—either deliberately or inadvertently. In either case, a focused approach to marketing can have a huge impact in helping the organization realize its mission.

Marketing is not just another function in the organization. It must become central to how the entire organization operates. After all, the role of marketing for non-profits is to find and keep donors.  Without donors there is no organization.  People who come into contact with the organization have experiences and form perceptions which can either help or hinder the organization in realizing its mission. Good marketing is knowing what needs to be delivered/communicated and doing this consistently throughout the organization. True, this is easy to say, but often difficult to achieve. Yet with the right leadership and vision, along with a structured approach to integrating marketing within the organization non-profits will find that they can build strong brands that help them realize their mission.       

Sohel Karim can be reached at sohel.karim@copernicusmarketing.com.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

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Your Gut Is Still Not Smarter Than Your Head
By Kevin Clancy and Peter Krieg (Wiley, April 2007)

Your Gut Is Still Not Smarter Than Your Head paves the way for anyone in business—Fortune 500 CMO, mid-cap company CEO, or small business owner alike—to make better, more profitable marketing decisions. Intuition and creativity certainly have their place in marketing—as they do in any other business decision area. But programs that return 20% or more on investment come from a careful balance of intuition and fact.

Look for more on Your Gut Is Still Not Smarter Than Your Head on www.useyourheadnow.com or visit Amazon.com, barnesandnoble.com, 800CEORead.com for order information.

Check out Kevin Clancy's discussion of the book during his recent interview on Marketing News Radio.

Obsessive Branding Disorder: The Illusion of Business and the Business of Illusion
By Lucas Conely (PublicAffairs June 2, 2008)

We’ve heard Lucas Conley out on the media circuit touting his new book, Obsessive Branding Disorder, and the ramifications of the extreme efforts that companies go to these days to get messages about their brands in front of consumers.   Some of the major points he hits on in the interviews we’ve heard/read is that companies are using advertising to fill the void of real product innovation; there's more style to brands than substance these days; that marketers have (we'd say unjustifiably) bought hook, line, and sinker into the notion "emotion works faster than logic" when it comes to increasing sales for a brand; that every touchpoint is now treated as a branding opportunity—oh the horrors!—in an effort to own and control the message. 

Though we’re not sure we completely buy into the “insidious” nature of these unprecedented marketing efforts (see our blog post on The Marketing Fray) that Conley talks about, it’s an interesting overview of branding efforts from a journalist’s perspective.

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Copernicus’ own Kevin J. Clancy, Ph. D., chairman of Copernicus Marketing Consulting, joined the prestigious ranks of the Market Research Council’s storied Market Research Hall of Fame.  The author of Your Gut Is Still Not Smarter Than Your Head (Wiley 2007) and advisor to some of the world’s most well-known brands has been pushing the envelope of marketing research for more than three decades, developing state-of-the-science tools and technologies which have advanced the practice of marketing.

“Whatever innovations in marketing research I’ve developed,” explained Clancy, “I’ve always maintained that, to quote Isaac Newton, ‘if I’ve seen further, it’s because I have stood on the shoulders of giants.’  To be inducted into the Market Research Hall of Fame is, for me, a chance to walk among the giants.” 

The Market Research Council has recognized outstanding members of the marketing research profession for over 30 years.  Past inductees include George Gallup, Arthur Nielsen, Sr., Elmo Roper, David Ogilvy, and Daniel Yankelovich. 

Click here to read more about Kevin’s background and current research interests.

Conferences! Conferences! Conferences!

American Marketing Association Marketing Research Conference
September 14-17, 2008
Boston, MA
Speaker: Steve Tipps, Senior Vice President
Topic: How to Get Marketers to Eat Their Spinach—Bridging the Gap Between Research and Marketing
Register by August 14 to catch early bird pricing!

Brand ManageCamp
October 6-7, 2008
Las Vegas, NV
Speaker: Peter Krieg, CEO
Topic: Eat Your Spinach! Bridging the Great Divide Between Marketing and Research
Use promotional code promotional code bmc08coper8412 to receive a 20% discount!

DTC in the Era of Consumer Choice
October 29-30
Livingston, NJ
Speaker: Kevin Clancy, Chairman, and Eric Paquette, Senior Vice President
Topic: Using Profit-Focused Market Segmentation and Targeting To Move The ROI Needle
A must attend for anyone in DTC pharmaceutical marketing!

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