Marketing and Business Results

Marketing is the biggest driver of business results, reveals PA Consulting Group in new research underpinning the October 2002 Marketing Effectiveness campaign run by The Chartered Institute of Marketing (CIM).

Generated from a sample of 6,000 companies, the research results, endorsed by CIM, conclude that effective marketing typically generates three times more shareholder value than any other operations function in a business. The results challenge the view that marketing budgets should be cut in times of crisis and show that if businesses make the right connection between marketing activity and increased margins, they can use marketing to boost corporate value and drive business success.

'Focusing on shareholder value requires marketing professionals who are demonstrably capable of winning board and investor confidence,' says Mike Johnston, CIM's International Chairman.

PA Consulting Group recommends the simplest way for marketers to think about creating shareholder value is to imagine a pipe of cash stretching from today into the future. The bigger the future cash pipe the greater the shareholder value. To make the cash pipe fatter, marketers should focus on competitive differentiation, improving pricing and driving sales of value-creating products. To make the cash pipe longer, marketers should drive market and product innovation, develop positions in emerging markets, strengthen customer relationships and brands and thereby reduce risk and future volatility. To make the cash flow faster marketers should accelerate new products to market, focus on the time to penetrate markets rather than to reach them, activate relationships and cross-sell, locking into existing market networks.

'The benefits can be huge and quick. Microsoft found that such connections across their sales and marketing activity delivers over $1 billion benefit in the first year,' says Peter Fisk of PA Consulting Group.

The research also found that improving marketing's effectiveness by enabling marketers to deliver their full potential for value creation could add 25% to a company's share price. The survey results show that marketers unlock more of their value if they shift their focus to improving long-term economic profitability, rather than short-term volume and growth. The research also reveals several significant barriers to marketing success - marketing talent is patchy and systems and information often fall wide of the mark. Closing the gaps to achieve high performance marketing and a focus on long-term economic profitability is what is needed to ensure marketers live up to their full potential for customer and shareholder value delivery.

High performance marketers are those that spread their focus onto profitability in the long term, and concentrate their efforts on their most valuable customers and products. Marketers are very good at creating customer value, the report finds, but less good at combining this with shareholder value and still lack business influence. The report also highlights a frequent lack of communication between finance and marketing departments. If marketing is to become more accountable, this rift needs to be addressed. Marketers need to gain more impact outside of the marketing function, the report suggests, and the aim should be to raise customer and market issues to the top of the CEO's agenda, where they can be more effectively addressed in order to drive business and marketing success.

The full report is available at www.cim.co.uk/mediastore/PAcranfieldresearch.pdf

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.