Much of the marketing related media seem to concentrate on virtue signalling regarding “green issues” diversity, social inclusion, gender politics, but seldom on the reality of making money for the long term future of the business. While such attitudes may have some relevance and affordability to large and international companies, to the majority of small and medium sized businesses, needing to concentrate resources to the efficient production of profitable income, they are an expensive irrelevance.
Business is about making money for the benefit of the owners, the workforce and the customers who rely on the business to remain in being to provide the goods and services they require. Marketing management is about control, which requires measurement and numbers. As Peter Drucker said: if you can’t measure it you can’t manage it. “Marketing” is not another name for advertising or selling, but is the management function that controls all those activities which anticipate and satisfy customer demand profitably. It is within this definition that there is scope for understanding and measuring its performance.
Business activities can be divided into those which contribute to support the delivery of the product or service to the customer, (business operations) and those which provide the necessary resources to do so for the business, (business support). Only customers provide the income on which the business survives. However, every activity which directly or indirectly helps to satisfy the customer’s requirement creates a cost for the business. Business operations include research, product or service development, advertising, sales, promotion, delivery, as well as credit control, amongst others. Business support includes, finance, purchasing and personnel.
The objective of the commercial manager is to maximize profitable revenue while minimizing costs and the use of assets and ideally they should have responsibility for all business operations those activities which ultimately contribute to generating income. While producing suitable products and services to meet customer demand always requires creativity and imagination, commercial managers need primarily to be effective and efficient in managing resources, rather than being creative themselves. As effective managers they have a responsibility to encourage, direct and manage those with the necessary creative talents who are often less suited to management tasks. Financial literacy is also essential, in order to understand the costs of income generation, as well as understanding all the activities involved in getting and maintaining business. As the executives responsible for generating income, commercial managers should be judged on the amount of money produced and their financial efficiency in its production. While brand awareness and market share may have their importance, only sustainable profitable income provides businesses with long term viability, and their employees and shareholders with a future.
For management decision making commercial managers need to consider:
- What do we need to know?
- Who needs to know?
- Why do they need to know?
- What should be measured?
- How can it be measured
They also need to know:
- What information does the Chief executive need to know about the performance of the business operations?
- What specific management data and metrics are required for analysis and decision making?
Metrics and measurements act as indicators of performance and as a guide to future action. Unfortunately, many marketing people misuse the word “metrics”, when in fact they mean measurements or management ratios. Metrics are the standards for measurement, providing target values that a company must achieve to reach a certain level of success. Measurements are the raw outcome of a quantification process, such as a company’s numbers, ratios and percentages, while Benchmarks are the very best measurements to which to aspire, the standard by which all others are measured.
Having decided what needs to be known by whom and why, identifying which marketing activities have to be measured is the next problem. Can the subject be measured accurately and how frequently should it be measured? Whatever activity is chosen, inputs or outputs are the only useful measures. This is why advertising measurements are problematic. The investment in an advertising campaign is easy to establish, but establishing the level of resultant sales is imprecise owing to a number of additional factors such as selling activity and the accumulated effects of previous advertising and sales campaigns.
The overall performance of business operations (Marketing), may be summed up in two principle indicators known as; the Optimum Marketing Performance (OMP) and Marketing Contribution. The OMP expresses the overall marketing performance by directly relating revenue with marketing investment, while Marketing Contribution, expresses marketing output as the derived from the revenue generated less the direct and indirect costs incurred by marketing activity.
The purpose of marketing measurement is to understand what works and what doesn’t within the organization. Having extracted selected marketing measurements the next questions must be:
- Is the result useful?
- What does it tell us?
Only information that actually assists in understanding and managing the marketing process should be used. Marketers often complain that marketing measurements are not actually very informative. If that is so, then the wrong things have been measured. Choosing the right things to measure is dependent on what one needs to know in order to make informed decision. Collecting volumes of marketing measurements achieves nothing if the information does not directly assist in informed decision making.
© N.C.Watkis, Contract Marketing Service 21 Feb 24
