For any business to be effectively managed it needs to have a clear objective of its purpose, which may be defined in a Mission Statement. A Mission Statement should define what business the organisation serves and how it benefits the market. It should be accompanied with a Statement of Strategic Purpose, defining the strategic objective of the company and relationship with its parent company or owners. The Mission Statement is aspirational, while the statement of strategic purpose concentrates on the objective of the business. These two statement provide the foundation on which all business objectives and planning should be based.
The primary purpose of any business is to make money, which it does by anticipating and satisfying customers’ demands, a management process which is called Marketing.
Any business organization consists of three elements, customers, shareholders and staff. If the business is to be successful, then the satisfaction of all three elements must be kept in balance, so that no element has priority over another. Shareholders want a share of the profit in return for their investment; staff must be rewarded, for without them no profits can be made, and customers must be satisfied or there will be no revenue for profit. If there is no profit there is no business, which fails the shareholders, fails the staff who lose their jobs and ultimately fails the customer, who loses the source of product or service.
Terry Smith, manager of the £29bn Smith Equity Fund, said recently, that the consumer goods behemoth Unilever, has become “obsessed” with ” publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business”, namely, producing profit and share value.
The only way to assess business success is to compare objectives with achievements. Business is about making profit. As the late Robert Townsend said, “If you’re not in business for fun or profit, what the hell are you doing here?” Profit is what is left when all the costs and investments involved in running a business have been subtracted from all the revenue generated by the business activity. Profit rewards the investors and provides for reinvestment to develop and sustain the business.
The prime requirement of the commercial manager , is to maximize sustainable profitable revenue, for the long term future, achieving the required marketing objectives within the budget, while minimizing the use of marketing costs and investment, The responsibility of converting profitable revenue into profit is that of the Chief Executive and Financial Officer, but not of the commercial manager.
In recent years commercial managers have tended to concentrate on the customer to the exclusion of everything else. Customer satisfaction is vitally important, but sustainable profitable revenue is the prime requirement of every business, and customer satisfaction is merely the means of obtaining it. For the commercial manager who aspires to senior management and a board level position, profit must no longer be the unspoken word. The aspirant commercial manager must view all the business getting and retaining activities as contributing to the generation of sustainable profitable revenue.
Thus the most important activities for the commercial manager is the establishment of quantifiable marketing objectives, a plan for their achievement, including necessary assets and resources, and a budget to support the plan. Preparing a marketing plan should not be confused with producing a marketing budget. There is an erroneous assumption, that a spread sheet of numbers relating to allocated spending on the various activities of the marketing function is sufficient to be called a marketing plan; – it isn’t! Such a spread sheet may illustrate how money is to be spent, but does not include the actions required to produce income. What then should a marketing plan include?
Setting objectives is the first priority, because it defines what is to be achieved to support the requirements of a firm’s corporate plan. Peter Drucker is quoted as saying that “if you can’t measure it you can’t manage it.” marketing objectives should be largely quantifiable and thus measurable.
The objectives of both financial and marketing aspects must be clearly stated. Financial objectives should state the monetary objectives of the plan in terms of the target revenue, the net profit and the required return on assets. These are all terms that will be understood by both the Chief Executive and the chief financial officer, and are therefore particularly important. Marketing objectives will relate to product, price, promotion and place or market, but should also include quantifiable objectives such as marketing contribution and optimum performance.
Marketing planning should not be done in a vacuum, and should include:
* Description of the market and economic situation in which the plan is supposed to operate.
* The assumptions made about the prevailing economic and market environment and the potential risks highlighted.
* As both the market and economic situations are dynamic and evolving, so it must be expected that plans, especially those for the longer term will need to be adapted to meet those changes.
* Listing of the actions necessary for the achievement of the objectives, together with a required completion date.
* The identity of those delegated with the responsibility for specific actions.
Preparing alternative actions to be used when the unexpected happens or the contracts fail to materialize, is an important planning process that is frequently forgotten. Commercial managers must be able to change tack or divert resources into other alternative actions, and to do it quickly, if the primary actions fail to produce the results; being able to do this effectively is the art of good planning and successful management.
Commercial managers will increasingly be measured by their ability in achieving their marketing objectives.
© N.C.Watkis, Contract Marketing Service 11 Feb 22