5 Clues Marketing Needs More Commercial Focus

Why do some marketing organisations seem to have it all? How come, they actively help drive their company’s strategy? Why do Sales and Business Development depend on them? And, oh by the way, why do they get the marketing budgets they ask for – or at least, get close enough to it?

Well, these marketing organisations “have it all” because they are driven by a commercial focus. They are committed to constantly maximising their company’s commercial effectiveness. Consequently, they are one with the commercial process. Equal partners amongst their commercial peers such as sales, account management, business development, et cetera.

The problem is: most, if not all, marketing organisations will claim a commercial focus. After all, marketing works closely with the earlier mentioned commercial departments. So, okay, I will agree that pretty much all marketing organisations have a commercial focus. But some more than others. Ultimately, the marketing organisations that have been able to successfully transform commercial involvement into commercial drive will be amongst those that “have it all”. Here are five clues indicating that marketing needs more commercial focus:

Clue 1: Marketing is seen as a supplier of sales support
When marketing is expected to follow the commercial direction, rather than to steer or influence it. When marketing is always involved at the end of the commercial process, during the execution of a marketing campaign or during the launch of a new product. When marketing looks at their commercial stakeholders as internal customers. In those cases, marketing needs more commercial focus.

The essence of marketing in a commercial process should be crystal clear:

a. shorten the sales cycle times
b. reduce the cost per sales
c. generate incremental profits

Clue 2: “Half the money I spend on [marketing] is wasted; the trouble is I don’t know which half”
A classic quote from Mr. John Wanamaker (1838 – 1922), an American retail pioneer. For a long time, marketers could get away with this quote. But believe me, since the late 90s, this cop-out has rapidly gone out of style. Try saying this to your CEO today: ‘I need my marketing budget because I know it will be good for the company. Just don’t ask me to prove it.”

Perhaps this sounds a bit dramatic, but the likelihood for marketing to survive as a business discipline, depends on its ability to prove it’s worth. Not just any worth – its commercial worth! Metrics like awareness, conversion, customer satisfaction, et cetera are only meaningful when they can be linked to the company’s profits. As difficult as this may sound, marketing has to know how much profit they contribute to the company’s commercial results. Conversely, marketing should know how much less profits the company will make without it.

Clue 3: Lots of Data, Little Intelligence
When proving marketing’s commercial worth, it is crucial to avoid this pitfall. It is too tempting to wow stakeholders by showing them all sorts of cool looking graphs that show status, trends, and KPI’s. With the invention of Pivot tables there is no end to the different types of graphs and analyses you can show.

It is important to keep in mind that none of these charts mean anything if you don’t explain how the trends and KPI’s impact the company and, more specifically, its profitability. If the charts can’t be summarised into key conclusions and recommendations, the reporting exercise has missed its purpose – to provide actionable intelligence.

Better to impress with concisely presented intelligence, than with a plethora of data that makes it more difficult for your stakeholders to get to-the-point of your analyses.

Clue 4: Focus on Revenue Targets (as opposed to Profit Targets)
It is important to have a good understanding of all the variables that influence the company’s profitability. This is because it can help avoid the following pitfall: to assume that any generated revenue has the same profit margin. Based on this premise, many companies measure their marketing performance in terms of incremental revenue.

Why is focus on profits preferable over focus on revenue? Consider these examples:

• A marketing campaign aims a new target group that requires more call centre support
• A recently launched new product requires higher back office costs
• Inceasing customer satisfaction generates more customer revenue, but at the same time increases the retention costs exponentially

 In all these cases, revenues may increase. Very likely, though at lower profit margins which should be incorporated in marketing’s ROI calculation.

Clue 5: Project Prioritisation on a First-Come-First-Served  Basis (as opposed to Potential Profit Projections)
Without the right metrics, methods and mindset, marketing organisations will have a hard time determining how to prioritise the many incoming project requests.

How do you prioritise between a futile project (such as e.g. printing logos on golf balls, designing branded parking signs for the company parking space, or worse) and for instance the development & execution of a targeted dm campaign? Okay, maybe not that hard. But how do you prioritise two targeted dm campaigns? Quite simple, actually: compare their business cases and give a higher priority to the one that yields the highest returns…profit returns, that is.

All marketing organisations should get into the habit of only initiating marketing projects that can answer at least these questions:

• Does the project have clear and measurable commercial targets that you and/or your commercial partner can commit to?
• Will the (profit) benefits of this project outweigh the efforts it takes to develop & implement it?
• When will this project reach it break-even point?

The obvious benefit of this approach is that you maximise the return on marketing investment. After all, you can focus on those projects that yield the highest returns. There is also another practical benefit: In many cases, marketing gets more requests for projects than they have capacity for. This project initiation process makes it easier for marketing to explain to their commercial partners why some projects get a higher priority and some don’t.

In the coming issues, I will expand on each of the five topics mentioned above. For more information, visit http://www.calibrero.com/.