| Welcome to
our newsletter for April-May 2004.
This issue focuses on growing the influence
of marketing within professional services
firms, and the relationship between shareholder
value and marketing.
Please forward this newsletter on to colleagues
and friends who may also find it of interest.
As always, we want to ensure your continued
interest in receiving our newsletter - so
if you wish to unsubscribe, please email
us at: info@davismarketing.com.au.
Dianne Davis
Principal and Managing Director
www.davismarketing.com.au
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ITEM
1: Professional Services
Marketers – Building Influence
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| A unique set of challenges
face marketers in a professional services
environment – especially in partnership
structures:
- Partners are effectively the “owners”
of the business – and, as such,
each may believe he / she has a legitimate
right to influence the direction of marketing
within a firm
- Decision-making is essentially collegiate
– thus, an influential partner /group
of partners can sway sentiment about marketing-business
development initiatives
- Core marketing-business development
activities required to underpin a firm
may potentially be under-funded because
they require ongoing investment from the
partnership – and such investment
can impact partner’s share / equity
- A strong sense of professional pride
runs through partnerships; marketers may
be viewed not as “professionals”
in their own right but, rather, as support
staff
- Because of the foregoing, marketing
may be seen as a cost rather than an investment.
In seeking to address these issues, there
are a number of initiatives and activities
marketers can undertake; we suggest six
key actions:
1.
Accountability and Measurability:
Develop, report on and actively communicate
a set of relevant metrics that demonstrate
marketing’s contribution to
business performance (where appropriate,
adopt measures which the firm’s
own management understand, accept
and use to assess effectiveness and
success).
For guidance on relevant metrics
see: Marketing and The Bottom
Line (Tim Ambler); Building
the Brand-Driven Business (Scott
Davis & Michael Dunn), and Item
2 below (Marketing and Shareholder
Value).
Metrics should incorporate a mix
of quantitative and qualitative measures
to provide a richness of data, but
underpinning all should be a link
between marketing and the contribution
to business performance.
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2.
Conduit and Sponsor of Marketing Intellectual
Capital
There’s an old saying: “It’s
hard to be a prophet in your own organisation”.
Rather than always seek to promote
ideas and initiatives yourself (and
perhaps win over a few partners on
the way), where appropriate, use external
authorities and sources to introduce
and “sell” in ideas and
concepts.
For example:
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Identify and “sponsor
in” recognised marketing
academics / subject experts
to address partners on key topics |
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Invite CEOs of organisations
(who are advocates of the particular
concept you are seeking to promote
and who have successfully implemented
it within their own organisations)
to meet with partners |
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Produce a bi-monthly internal
marketing email for partners
(highlighting relevant articles
& case studies on professional
services marketing, recommended
readings & websites) |
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Increase internal marketing
knowledge and literacy by sponsoring
a marketing-business development
education program for staff
(e.g. “Marketing Essentials”),
drawing on suppliers and external
experts to lead discussions
across a range of topics (e.g.
market research, PR, brand strategy,
brand identity, database marketing
/ CRM, direct marketing, account
management, tendering etc).
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3.
Operate On A Consulting Model
Create a consulting model and framework:
operate the Marketing function as
if it was a consultant to each of
the business areas: provide strategic
and operational advice; add value
through relevant information and IP;
develop templates to better “operationalise”
key marketing processes; implement
a strong client services ethos; deliver
projects on time, within budget and
in line with agreed KPIs; report regularly
and meaningfully (i.e. relevant metrics)
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4.
Actively Cultivate Marketing-Friendly
Partners / Managers
Within a firm there will be always
be a cluster of partners (and senior
managers / associates) who want to
work with marketing, who are open
to new ideas and ways of doing things
and who are naturally intuitive marketers.
Spend time cultivating these partners
and managers – you will maximise
your effectiveness and success; such
partners/managers can act as marketing
“ambassadors” amongst
the partnership.
Don’t spend unnecessary time
and effort seeking to change / convert
partners who are unlikely to embrace
what you want to offer them. It doesn’t
mean neglecting them – just
recognise the need to channel your
efforts accordingly (a client management
analogy is appropriate here: you would
focus more effort on higher value
client segments and less on passive
/ disinterested clients).
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5.
Part of the Management Team
Ideally, before you accept a position,
you should seek - as part of your
contract of employment – to
be appointed to the firm’s management
team (or at least on the same level
as other key functional heads –
HR, IT, Finance etc).
Being on the management team means
you are exposed to the broader operations
of the firm and have the opportunity
to discuss marketing-BD in a wider
context.
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6.
Market Marketing
In addition to formal management
reporting on key metrics, communicate
and reinforce Marketing’s contribution
via a range of internal tools; for
example:
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Post quarterly updates/summaries
on the firm’s intranet
highlighting Marketing’s
key activities and initiatives
during the previous quarter(this
can be part of a wider firm
and/or marketing-specific intranet) |
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Produce a monthly email update
(short and to-the-point) specifically
for partners, outlining key
activities / achievements |
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Operating within a consulting
paradigm, conduct regular and
formal internal client satisfaction
assessments, probing circumstances
and behaviours that drive satisfaction
/dissatisfaction. Publish the
results to participants and
develop clear, practical strategies
in response to findings. |
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ITEM
2: Marketing and
Shareholder Value
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| A central issue facing
the marketing profession today – the
degree of influence over business strategy
–lies in marketing understanding what
shareholder value is and the connectivity
between marketing and finance (centred on
the relationship between the marketing function
and shareholder value) – Lukas, Whitwell,
Doyle (Journal of Business Research,
2003).
The authors argue:
”Modern marketing’s reluctance
to fully incorporate current financial valuation
techniques, and thus properly quantify its
contribution to financial market performance,
has made it a bystander in many boardrooms”
and
“.. marketing executives ignoring
market realities and the financial drivers
of share price leaves them exposed in the
boardroom as functional advocates rather
than genuine contributors to the balanced
development of their business”
They further contend that if marketing
embraces and incorporates shareholder value
principles and metrics, it can begin to
exert - “strategic and managerial
influence… commensurate with its importance”.
This requires marketers to understand the
language of finance in general and shareholder
value specifically.
A shareholder value approach is defined
as:
“..the application of shareholder
value analysis to create and utilise marketing
assets to generate future cash flows with
a positive net present value”.
(While shareholder value is normally associated
with listed companies, it can also be conceptually
applied by private companies).
The authors advocacy for shareholder value
metrics (rather than accounting measures
– earnings, PE ratios, ROI, ROE etc)
is based on the view that accounting measures
are arbitrary, fail to adequately include
investments and can be manipulated (“while
profits are an opinion, cash is a fact”).
Shareholder value relies on four key financial
drivers: level of expected cashflow; its
timing; its sustainability; and the risk
attached to it.
Lukas et al, believe there are five key
ways in which shareholder value can contribute
to marketing:
1.
It changes marketing’s objectives:
from a value-based perspective, the
job of marketing becomes to ensure
that cashflow levels are high, that
cashflow effects endure and that cashflows
are not put at risk.
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2.
It provides the language for integrating
marketing more effectively with other
functions of the business:
If marketers can demonstrate how their
strategies and activities impact on
the major financial drivers underlying
shareholder value, their influence
in the boardroom will increase and
marketing’s contribution can
be more directly compared with other
business functions. Proposals for
additional investment in marketing
assets can, thus, be cast in terms
of their capacity to generate cashflow.
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3.
It allows marketing to show the importance
of its assets:
Marketing assets (brands, customer
relationships, marketing knowledge,
strategic relationships etc) are essentially
intangible.
Unlike accounting-based measures,
shareholder value analysis recognises
both tangible and intangible assets
(and evaluates them in terms of their
contribution to cashflow). It provides
a
potent framework for demonstrating
the financial contribution of marketing
assets.
The authors define two broad kinds
of marketing assets: intellectual
(e.g. marketing knowledge - systems,
tools etc to identify market opportunities,
competitor analysis etc); and relational
(brands, customer relationships).
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4.
It protects marketing budgets from
profit maximisation:
A shareholder value approach helps
- in two key ways - to prevent marketing
budget cuts as a quick fix for improving
short-term profits.
a) |
Inherent to shareholder value
is a long-term perspective,
with an “explicit disdain
for short-term solutions” |
b) |
Marketing assets are seen
as contributing to long-term
growth, and spending to build
these assets is an investment
not an expense. |
In sum ”..profit-driven marketing
budget cuts destroy rather than build
..value”.
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5.
It puts marketing in the seminal strategy
formulation process:
At the core of shareholder value is
competitive advantage.
Marketing – more than perhaps
any other discipline – possesses
the tools for creating competitive
advantage (e.g. frameworks for analysing
customer needs & preferences,
identifying growth opportunities,
undertaking competitor analyses, measuring
and enhancing customer loyalty etc).
The key is to make the link explicit:
“Shareholder value depends
on the creation of competitive advantage;
marketing strategy contributes fundamentally
to identifying the sources of competitive
advantage”.
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To read the article in full, see Journal
of Business Research, (xx 2003); we
also recommend Peter Doyle’s seminal
text (“Value-based marketing: marketing
strategies for corporate growth and shareholder
value”: Wiley, 2000)
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ITEM
3: In the News /
On the Hustings
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| Media - Dianne had
a contributor piece on branding and the
mid-tier accounting sector published in
the AFR (26 March,2004), was quoted
in BRW (25 March 2004) on procurement and
marketing services, and contributed to a
column in Professional Marketing
(April edition) on marketing recognition
and representation in the boardroom.
Presentations - in April (7 & 28/4),
Dianne will conduct an executive forum and
workshop on “Brand as a Strategic
Business Asset” as part of national
accounting firm - Bentleys MRI’s -
Thought Leadership series; in May
(19/5) at Diabetes Australia, Dianne and
Rhonda Smyth (Davis & Associates not-for-profit
consultant) will address NFPs on key branding
trends & issues in the NFP sector .
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| NEXT
ISSUE: MARKETING’S ROLE IN CHANGE MANAGEMENT
INITIATIVES
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Item
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