Transcript Presentation in PowerPoint format

Presented to
MRIA Prairie Chapter
By:
March 9, 2005
From Adversaries To Allies:
How Market Research
Can Improve The Relationship
Between Finance and Marketing
Cal Harrison, MBA
Deschenes Regnier
Thank You and Welcome
Our company is Deschenes Regnier.
We are a brand consulting firm in Winnipeg and
Calgary.
We’re here to explore how market research can
improve the relationship between Finance and
Marketing.
Understanding The Relationship
A Tale of Two Cities
The city of Finance.
The city of Marketing.
Different Cultures - Finance
Finance is about controls and reporting.
There are stiff legal penalties for improper reporting
(Enron, Worldcom, Martha).
There are securities commissions and legislation to
regulate financial reporting.
Finance people are “certified” and can have that
“certification” removed.
Finance people often have mandatory professional
development requirements throughout their career.
They protect the integrity of GAAP.
Different Cultures - Marketing
Marketing is about visibility and communicating.
There are few meaningful penalties for improper
marketing (excluding outright fraud).
There are few resources to regulate marketing.
There is no true marketing designation.
There is no mandatory professional development
requirements throughout a marketing career.
There are few standard rules.
In Short...
Finance controls the money.
Marketing spends the money.
Is Finance Just Uninformed?
What Do CFO’s Know About Marketing?
Interviewed four “New” CFO’s and one business analyst
• Revenues in tens - hundreds of millions
• Two were prior successful business owners
• All around 40 years of age (“New”)
• Used questions about “branding” to judge marketing
understanding
First - Some Background Info On Branding
A brief history of branding...
1. The Logo Phase
Ex: Coke logo
1960 the AMA definition of a brand:
• “A name, term, sign, symbol, or design, or a
combination of them, intended to identify the goods
or services of one seller or group of sellers and to
differentiate them from those of competitors.”
2. The Feature Phase
Ex: Coke logo and packaging, taste
By 1988 P.D. Bennett presented this updated version in
the AMA’s Dictionary of Marketing Terms:
• “A brand is a name, term, design, symbol or any
other feature that identifies one seller’s good or
service as distinct from those of other sellers”
3. The Holistic Phase
Ex: Coke Distribution channels, price, service,
uniforms, corporate philanthropy
By 2000 Lisa Wood of Sheffield Hallam University,
Sheffield UK summarized the most modern definitions:
• “A mechanism for achieving competitive advantage
for firms, through differentiation.”
What Does A CFO Think A Brand Is?
Asked them:
•
What is a brand?
•
How do you measure the value of your brand?
•
How do you measure/represent it on the financial
statements?
•
Any advice for the marketing community?
They Surprised Me...
I thought they would start by slandering “marketing
people”…
They Surprised Me...
I thought they would start by slandering “marketing
people”…
…slander them some more...
They Surprised Me...
I thought they would start by slandering “marketing
people”…
…slander them some more…
…curse them...
They Surprised Me...
I thought they would start by slandering “marketing
people”…
…slander them some more…
…curse them...
…and then start talking about logos.
They Focused On Holistic Definitions
“A set of attributes our name means to people.”
“Attributes relating to products that allow our products to
stand out and above similar products.”
“Recognition of an idea by the general public.”
“Not just a logo - a customer experience.”
“An instant recognition of what it means.”
“A promise.”
They Connected “Brand” With Economic
Value
“We recently valued our brand at the time of a transaction
as price above NPV of future cash flows and assets.”
“We compare sales of our ‘premium’ product to sales of
‘generics’ and calculate value from there.”
“We take the NPV of revenue premium over the course of
several years.”
“The ability to influence partners in the industry.”
“A good brand = good sales.”
“Our brand equity was instrumental is assisting us to open
new distribution channels.”
They Were Also Realistic
Each one recognized that measurement of branding
efforts can be very difficult.
“It’s easier to measure it qualitatively rather than
quantitatively.”
CFO’s Want Accountability
If a CFO can discuss brand equity in the context of
economic value they definitely expect marketing
departments do so as well.
CFO’s want a more scientific process.
And hopefully a more scientific answer.
The Art Of Measurement
You Don’t Necessarily Need Numbers
“Brand equity is the ability to maintain a price premium
and a sales advantage.”
- David Ogilvy
But Numbers Always Help
“Use historical transactional data to build predictive
models.”
- Cal Harrison
Who Invited Finance To The Marketing Party?
When And Why Did CFO’s Get Involved?
Market collapse forced CEO’s to investigate cost cutting.
They assigned CFO’s to lead this.
Revenge Time: CFO’s had a greater lever to demand
marketing prove ROI.
CFO’s Brought In Hired Guns
“75% of US ad agency searches now involve
procurement people.”
• “Procurement, the 4th Party?”
AdForum Worldwide Summit, New York City,
October 2003
The Credibility Factor
How Credible Are Marketing People
to CFO’s?
I quote…
How Credible Are Marketing People
to CFO’s?
I quote…
“Not.”
How Credible Are Marketing People
to CFO’s?
I quote…
“Not.”
“It depends.”
How Credible Are Marketing People
to CFO’s?
I quote…
“Not.”
“It depends.”
“They are a necessary evil and have a very unscientific
approach.”
Credibility Issues
“Marketing usually speaks in qualitative terms.”
“Investment is never linked to ROI.”
“Not enough definitive goals.”
“Won’t give me a correlation between spending and return.”
“Accountability must be accepted.”
“Marketing manages expenses.”
“Need a clear plan on how a brand will make life better.”
What Did CFO’s Ask Me?
“The last time I saw a sophisticated marketing model was
in my Consumer Behaviour class in first year commerce.
Why isn’t anybody using these?”
What Did CFO’s Ask Me?
“The last time I saw a sophisticated marketing model was
in my Consumer Behaviour class in first year commerce.
Why isn’t anybody using these?”
“Why do marketing budgets not forecast revenues?”
What Did CFO’s Ask Me?
“The last time I saw a sophisticated marketing model was
in my Consumer Behaviour class in first year commerce.
Why isn’t anybody using these?”
“Why do marketing budgets not forecast revenues?”
“Why won’t they just tell me the truth?”
“Why won’t they identify how marketing cost relates to a
return to the corporation?”
Research Will Build Allies From Adversaries
Common Interests Already Exist
Finance’s concern is not with the concept of marketing
but with the lack of sophisticated processes around it.
The “New” CFO’s understanding of Brand Equity is
accurate and deep.
CFO’s responded well to marketing expenditure
explained in the context of sales using qualitative or
quantitative models.
CFO’s actively measure brand equity and marketing
effectiveness.
Market Research Can Build Bridges
Market researchers are an “involved and relevant third
party”.
You are the key to bringing credibility to the marketing
department.
You must interpret marketing results in the manner
dictated by marketing AND by finance.
Ask to include financial executives in meetings on
marketing projects.
Where possible, link research activity and measurement
of outcomes to long term corporate strategy vs. just short
term marketing strategy - ideally to both.
Be brilliant.