Tough economic times always put even more pressure on the marketing function to PROVE it produces results  — profits.  But, that’s hard.  First, it’s not clear to lots of people exactly what marketing is.  Then comes the difficulty figuring out how to measure what marketing does to determine whether marketing efforts contributed to making a profit.  And, part of that problem is figuring out whether the marketing effort was done right or wrong — was it the marketing strategy or it’s execution.  Finally, I would argue, part of the problem is folks working in marketing don’t understand enough about marketing to prove marketing produces results.

And, until we fix these problems firms will struggle to find profitability.

Marketing and Profit

pakorn / FreeDigitalPhotos.net

What IS Marketing?

An earlier post defined marketing in its various forms and discussed why it’s important.  Unfortunately, most people still think of marketing as advertising and selling.  That’s like saying building is cutting and hammering.  Sure, that’s part of building, but it also involves knowledge of building codes, usability, and other skills such as electrical and plumbing.  By defining marketing as advertising and selling, it means that doing marketing involves only these 2 elements.  Even when I teach marketing to marketing majors, I find they try to solve every marketing situation by doing advertising or pressuring the sales force to produce more.

But, marketing is MUCH more than advertising and sales, just like building is more than cutting and hammering.

According the a study done in England, marketing involves 8 functions. They are:

  1. provide marketing intelligence and customer insight
  2. provide strategic marketing directions for the organization
  3. develop the customer proposition
  4. manage and provide marketing communications
  5. use and develop marketing and customer information
  6. lead marketing operations and programs
  7. work with other business functions and third parties
  8. manage and develop teams and individuals

What Do You Need to Do These Functions?

You need the right people

Since marketing is more than advertising and selling, you need more than advertising people (agencies or internal folks trained in advertising or writing) or sales people.  You need analysts who can gather information about consumers and translate this into actionable strategies. You need marketing people who understand consumer behavior — kind of consumer psychologists.

Marketers also have to be great managers, not only of marketing folks but in cross-functional teams.  This means they need an understanding (not proficiency) in engineering and science, computers and websites, design, math and statistics, and finance.

Marketers also work with other organizations, so they need skills in negotiation and conflict resolution.

You need to measure what counts

In many other functions in an organization it’s easy to see what to measure.  If you’re in operations, measure output or cost/ unit.  If you’re in finance measure liquidity or track your bond rates.  But if you’re in marketing, it’s not so clear-cut.  Sure, you can measure sales, but that doesn’t give you a clear picture of what’s going on in marketing.

Marketing is always lagged.  For instance, what you do today will likely take weeks or months to effect sales unless you’re doing a coupon or advertising campaign.  A change in brand strategy may takes months to effect sales.  The same with a new product.  You won’t see the results until the product reaches commercialization.

And, firms have a tendency to avoid investing in things they can’t readily measure.  That’s why they’re more interested in investing in advertising for a bad product than investing in developing a better product.  But, continuing to invest more money to maximize the meager profits offered by a mediocre product pales as a strategy when compared with investing in a new product that might hit the ball out of the ballpark.  Look at Apple. or Google. or Intel.  These companies constantly hit the ball out of the ballpark.

Or look at how hard it is to measure the return from improved customer service. Yet firms like Virgin and Southwest continue to prove that investments in superior service ring the cash register.

Figure out what to measure

You need to measure what counts — so measuring trivialities such as number of followers (in social media) or even more basic numbers like reach and frequency don’t mean much.  You need to figure out what things create profit.  And this is why I say too many marketing folks don’t really know marketing.  And part of it is because most academics write in obscure outlets in a language marketers don’t understand.

If marketers read (or could read) the academic literature, figuring out what to measure is easier.  For instance, research indicates which things contribute to improved profitability.  In one of my own studies, I show just how much a social relationship contributes to satisfaction, recommendations, and intentions to stay with a service provider.  That means firms could track social relationships and implements strategies to improve these social relationships as a way to increase profits (recommendations mean new customers and intentions to stay mean keeping existing customers which equal increased profits).  They can reward employees for improving their social relationships with customers because they know these relationships translate to profits.

And, that’s just one study.  There are thousands of studies showing how factors are linked to profits and firms can develop measures for each of these intermediaries that contribute to profitability.