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Finance and marketing must engage more deeply and communicate more often so that marketing campaigns are tracked and measured against bottom line results and finance understand more about the marketing drivers of growth.
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THE FINANCE MARKETING DIVIDEWho holds the power?
TIM GACSAL
The Finance Marketing Divide
MARKETING FINANCEThe divide
• In the same boat
• Rowing in different directions
Page 2
Image source: freakingnews.com
Consumer Shareholder
Marketing Finance
The Finance Marketing Divide
WHY IS THIS IMPORTANT?Big numbers!
Page 3
Internet advertising is
the fastest growing segment
FY11 $328m vs.
FY12 $363m.FY13 $450m
expected
Within that…social media is the
fastest growing!
$2.3b ($200m/mth)
spent on media in NZ
in 2012
What is a Facebook
“like” worth?
Source: Advertising Standards Authority
The Finance Marketing Divide
WHY IS THIS IMPORTANT?Biggest Spenders
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• Travel and Accommodation providers are the biggest spenders
• Followed by Government Departments and then finance and banking industries
Source: IAB/PwC New Zealand: Interactive Advertising Spend Q2, 2013
The Finance Marketing Divide
WHY IS THIS IMPORTANT?New Zealand facts
Page 5
• 76% of broadband access now wireless
• 54% own a smartphone – expected to reach 74% in 2014
• 19% tablet penetration – expected to grow a further 60% in 2014
• 1.66m watch video content online in a typical week
• Average time spent watching video content online in a typical week is 96 mins
Source: IAB/PwC New Zealand: Interactive Advertising Spend Q2, 2013 Nielsen CMI Q1-Q4 2012
The Finance Marketing Divide
KEY CONCEPTUAL DIFFERENCESMarketing vs Finance
Page 6
• Creating value for the customer vs. shareholder
• Building marketing assets vs. managing costs
• Long-term market vs. short term profit
• Increasing customer utility for the price paid vs. increasing income for the costs incurred
The Finance Marketing Divide
TRADITIONAL APPROACHCo-exist but without true synergy
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• They both operate in silos
• Try to align with each other, retrospectively
The Finance Marketing Divide
TRADITIONAL APPROACHTypical result
• A truce!
• Contradictions at the operational level- Marketing campaigns not always evaluated or connected to financial
results
- Marketers afraid of the results if they were evaluated
- Marketing budget seen as a cost to manage rather than core driver of growth
Page 8
The Finance Marketing Divide
MARKETING’S UPHILL BATTLEA decline in influence
• Tougher trading conditions place emphasis on short-term pressure from financial markets
• Million’s spent on marketing but its impact is often hard to measure
• There’s no clear idea of what marketing is
• Two of the four P’s (products and pricing) are often controlled by the CFO
Source: The Chief Marketing Officer is Dead, Dominique Turpin (President, IMD University)
Page 9
The Finance Marketing Divide
WHAT’S NEEDED?Integrate Finance and Marketing
• Marketing and finance collaborate more than superficially
• Change of focus to dual objectives: - Short-term AND long term
- Increase utility for customers AND create wealth for shareholders
• Reorienting both functions towards the interdependencies of their objectives
Page 10
The Finance Marketing Divide
THE FOUR KEY INTERDEPENDENCIES
Reinforcing interdependencies means drawing a tangible link between:
And, between
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Customer
ValueShareholder Value
Marketing efforts
Bottom-line/ Cash-flows/Busin
ess Objectives
The Finance Marketing Divide
PROPOSED APPROACHSimply put….
• Increasing Accountability of Marketing by:- Using financial metrics to quantify the effects of marketing
- Integrating financial goals and making them an explicit part of marketing goals
• Expanding the scope of finance by:- Softening the rigid financial focus to accommodate important but difficult to
quantify intangibles
- Viewing financial figures in the context of more holistic objectives
Page 12
The Finance Marketing Divide
ISN’T THAT ALREADY HAPPENING?
• Companies may like to believe so, but it’s more like:- fire-fighting effort, or
- A forced retro-fit to keep all parties happy
A recent report in the Harvard Business Review quoted a UK study that reported 72% of CEOs are tired of being asked for money from marketing departments without an explanation of how it will increase business.
Furthermore, in the same survey, 77% of CEOs have had enough of talk about ‘brand equity’ that can’t be linked to any real equity.
Page 13
The Finance Marketing Divide
METHODS TO MEASURE MARKETING’S IMPACTThe big picture
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• Brand Equity Valuation
• Intangible Valuation (Including Brands) = Market value – Tangible Asset Value
The Finance Marketing Divide
METHODS TO MEASURE MARKETING IMPACTBrand equity valuation• Income Approach
- Price premium
- Royalty relief
• Market Approach- Comparison of similar assets recently sold
• Cost Approach- Amount invested or required to be invested to re-create the brand
• PE Multiples- Incremental earnings associated with the brand * PE Multiple
Page 15
The Finance Marketing Divide
MONITORING CAMPAIGN SUCCESSCampaign ROI (CROI)
• Pre-Campaign Measurement Evaluation Model:- Develop campaign scope and work plan
- Estimate time to complete the work
- Assign a salary to each person working on the campaign
- Apply an overhead rate for the marketing division
- Estimate expected Media/Agency costs
- Estimate expected incremental cash flows from sales resulting from the campaign (+ other intangibles benefits such as market share increases, customer awareness increases\loyalty etc.)
- Discount expected cash flow margins at the firms required rate of return
• Why do this? - Create alignment between the organisation goals and actual marketing
spend
Page 16
The Finance Marketing Divide
MONITORING CAMPAIGN SUCCESSCampaign ROI (CROI) Evaluation
• Do returns meet investment benchmark hurdles?
• Would alternative campaign strategy’s produce better returns? choose strategy with highest returns.
• How do actual results compare with expected results?
• How can learning's be factored into future campaigns?
• What risk parameters should be set that enable allocation changes in the marketing mix but limit total shift in any given year (i.e. max % spend on unproven channels and limits on spend reductions in some channels and increases in others)
Page 17
The Finance Marketing Divide
KEY BENEFITS
Page 18
• Marketing investment decisions based more on facts than judgments
• Move focus from “should we be spending on marketing at all” to “what's the optimum marketing spending needed to hit our targets”
• Link marketing spend not only to bottom line results but also align with strategic priorities
• Better business case for evaluating marketing spend and budget increases
The Finance Marketing Divide
KEY BENEFITS
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• Better understanding of time-frames to achieve marketing campaign results
• Greater transparency around marketing activity and productivity
• Integrate marketing into the already well accepted world of finance
• Better quality market data for financial forecasting
The Finance Marketing Divide
MIGRATION TO THE DIGITAL DOMAINSimple e-commerce metrics
KPI Metric
User Acquisition Cost
• Cost to get customer to the website• Conversion rate to paying customer• Cost per conversion (Total campaign costs/no. of
conversions)
Visitor Value • How much is each visitor generating in revenue• How much should we spend to buy traffic to the site
Purchase funnel • Where do customers drop out of the funnel – landed on site, multiple page views, product on wish list, basket created, check-out not complete, check-out complete
Google Analytics
• How visitors use your site• how they arrived on your site (Click through rate)• how you can keep them coming back
Page 20
The Finance Marketing Divide
END RESULT!
Page 21
Promotes ‘Constructive’ conflict.
Only possible when Marketing and Finance are:
1. Communicating
2. Talking the same language, and
3. Rowing in the same direction!
The Finance Marketing Divide
QUESTION…
What if you could ‘outsource’ this challenging area to an integrated
team of financial marketing experts?
Page 22
The Finance Marketing Divide
THE SOLUTION…
BDO’s finance marketing teamWe provide services that integrate the
best finance expertise with your marketing activities
Page 23
The Finance Marketing Divide
OUR SERVICESBrand Marketing Audit
• Provide financial leadership and strategic support to your marketing leadership team
• Partner with key stakeholders to structure and evaluate pre-campaign investment ideas
• Measure and evaluate the impact of post-campaign investments and optimize ROI
• Set metrics such as indexing marketing spend and report results through key performance indicator development and tracking
• Provide financial education and transparency to marketing business partners and cross-functional teams
• Provide financial, operational and decision support for media mix, production, CRM, digital, PR, marketing research, market-based development initiatives and other brand programs to help increase revenues
• Provide accounting support, analysis and financial reporting, planning and forecasting of media, production and brand promotions budgets
• Collaborate with external agencies and internal teams to develop tools and reporting systemsPage 24
Page 25The Finance Marketing Divide
Authors Contact Details:
TIM [email protected]: +64 9 366 8057Mobile: +64 21 400 846Connect via LinkedIn: nz.linkedin.com/pub/tim-gacsal/45/a43/36b
About the Author:
Tim has a solid background in Finance (EY/KPMG/BDO) and an MBA in Marketing. This rare hybrid background means Tim’s fluent in finance combined with marketing strategy and measurement
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