GETTING TO THE BOTTOM LINE IN MARKETING
In order to provide a financial overview of marketing activity, several experts have developed new approaches to thinking about marketing to see the big picture and getting to the bottom line in marketing. We are trying to present as few glimpses of some approaches in this article.
Value-based marketing is not primarily about numbers. It consists of three main elements. First is a set of beliefs about the objectives of marketing. The primary task is to develop strategies that will maximize shareholder return. Second is a set of principles for choosing marketing strategies and making marketing decisions that are consistent with these beliefs. These principles are based on estimating the future cash flow associated with a strategy to calculate the shareholder value added.
Finally, it is a set of processes that ensure that marketing develops, selects, and implements a strategy that is consistent with these beliefs and principles. These processes concern management of the financial, marketing and organization value drivers of the business. The financial value drivers are those key ratios that have the most significant impact on shareholder value.
The marketing drivers are the customer-oriented plans necessary to drive improvement in the financial ratios. The organizational value drivers re the core capabilities, systems and leadership styles needed to create and implement the share holder value orientation in the business.
According to Doyle a marketing wizard, financial value drivers relate to sales growth, operating margin, and investment; marketing value drivers relate to strong brands, customer loyalty, strategic relationships, market selection, and differential advantage.
Roger Best another marketing champion maintains that:
Market based management is at the base of a business with a strong market orientation. A strong market orientation translates into a strong customer focus, competitor orientation, and a team approach that cuts across organizational functions. The result is a market-based business that is in a strong position to develop and deliver market-based strategies designed to attract, satisfy, and retain customers. Implemented successfully across a wide range of market situations, a market based approach will deliver higher levels of profitability, cash flow, and shareholder value than will a cost-based approach.
Best maintains that the only source of positive cash flow is the customer and therefore the customer must be the focus of market-based management.
Another expert Tim Ambler suggests that if firms think they are already measurable marketing performance adequately, they should consider themselves the five following points:
1. Routine research consumer behavior (retention, acquisition, usage, etc) and the reasons the consumers behave that way (awareness, satisfaction, perceived quality, etc).
2. The results of this research routinely reported to the board in a format integrated with financial marketing metrics.
3. In those reports the results must be compared with the levels previously forecasted in the business plans.
4. They must also be compared with the levels achieved by key competitors using the same indicators.
5. Any short term performance adjusted according to the change in marketing-based asset(s).
Firms must give priority to measuring and reporting marketing performance through marketing metrics. The evaluation can be split into two parts: (1) short-term results and (2) changes in brand equity.
Short term results often reflect profit-and-loss concerns as shown by sales turnover, shareholder value, or some combination of the two. Brand-equity measures include awareness, market share, and related price, number of complaints, distribution and availability, total number of customers, perceived quality, and loyalty/retention. It is also recommended developing employee measures and metrics, because the end users are the ultimate customers, but marketing staff are the first. Therefore it makes more imperative for the need to measure the health of the internal market.