presented to mria prairie chapter by: march 9, 2005
TRANSCRIPT
Presented to
MRIA Prairie Chapter
By:
March 9, 2005
From Adversaries To Allies:How Market Research
Can Improve The Relationship Between Finance and Marketing
Cal Harrison, MBA Deschenes Regnier
Thank You and Welcome
Our company is Deschenes Regnier.
We are a brand consulting firm in Winnipeg and Calgary.
We’re here to explore how market research can improve the relationship between Finance and Marketing.
Understanding The Relationship
A Tale of Two Cities
The city of Finance.
The city of Marketing.
Different Cultures - Finance
Finance is about controls and reporting.
There are stiff legal penalties for improper reporting (Enron, Worldcom, Martha).
There are securities commissions and legislation to regulate financial reporting.
Finance people are “certified” and can have that “certification” removed.
Finance people often have mandatory professional development requirements throughout their career.
They protect the integrity of GAAP.
Different Cultures - Marketing
Marketing is about visibility and communicating.
There are few meaningful penalties for improper marketing (excluding outright fraud).
There are few resources to regulate marketing.
There is no true marketing designation.
There is no mandatory professional development requirements throughout a marketing career.
There are few standard rules.
In Short...
Finance controls the money.
Marketing spends the money.
Is Finance Just Uninformed?
What Do CFO’s Know About Marketing?
Interviewed four “New” CFO’s and one business analyst
• Revenues in tens - hundreds of millions
• Two were prior successful business owners
• All around 40 years of age (“New”)
• Used questions about “branding” to judge marketing understanding
First - Some Background Info On Branding
A brief history of branding...
1. The Logo Phase
Ex: Coke logo
1960 the AMA definition of a brand:
• “A name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.”
2. The Feature Phase
Ex: Coke logo and packaging, taste
By 1988 P.D. Bennett presented this updated version in the AMA’s Dictionary of Marketing Terms:
• “A brand is a name, term, design, symbol or any other feature that identifies one seller’s good or service as distinct from those of other sellers”
3. The Holistic Phase
Ex: Coke Distribution channels, price, service, uniforms, corporate philanthropy
By 2000 Lisa Wood of Sheffield Hallam University, Sheffield UK summarized the most modern definitions:
• “A mechanism for achieving competitive advantage for firms, through differentiation.”
What Does A CFO Think A Brand Is?
Asked them:
• What is a brand?
• How do you measure the value of your brand?
• How do you measure/represent it on the financial statements?
• Any advice for the marketing community?
They Surprised Me...
I thought they would start by slandering “marketing people”…
They Surprised Me...
I thought they would start by slandering “marketing people”…
…slander them some more...
They Surprised Me...
I thought they would start by slandering “marketing people”…
…slander them some more…
…curse them...
They Surprised Me...
I thought they would start by slandering “marketing people”…
…slander them some more…
…curse them...
…and then start talking about logos.
They Focused On Holistic Definitions
“A set of attributes our name means to people.”
“Attributes relating to products that allow our products to stand out and above similar products.”
“Recognition of an idea by the general public.”
“Not just a logo - a customer experience.”
“An instant recognition of what it means.”
“A promise.”
“We recently valued our brand at the time of a transaction as price above NPV of future cash flows and assets.”
“We compare sales of our ‘premium’ product to sales of ‘generics’ and calculate value from there.”
“We take the NPV of revenue premium over the course of several years.”
“The ability to influence partners in the industry.”
“A good brand = good sales.”
“Our brand equity was instrumental is assisting us to open new distribution channels.”
They Connected “Brand” With Economic Value
They Were Also Realistic
Each one recognized that measurement of branding efforts can be very difficult.
“It’s easier to measure it qualitatively rather than quantitatively.”
CFO’s Want Accountability
If a CFO can discuss brand equity in the context of economic value they definitely expect marketing departments do so as well.
CFO’s want a more scientific process.
And hopefully a more scientific answer.
The Art Of Measurement
You Don’t Necessarily Need Numbers
“Brand equity is the ability to maintain a price premium and a sales advantage.”
- David Ogilvy
But Numbers Always Help
“Use historical transactional data to build predictive models.”
- Cal Harrison
Who Invited Finance To The Marketing Party?
When And Why Did CFO’s Get Involved?
Market collapse forced CEO’s to investigate cost cutting.
They assigned CFO’s to lead this.
Revenge Time: CFO’s had a greater lever to demand marketing prove ROI.
CFO’s Brought In Hired Guns
“75% of US ad agency searches now involve procurement people.”
• “Procurement, the 4th Party?”AdForum Worldwide Summit, New York City, October 2003
The Credibility Factor
I quote…
How Credible Are Marketing People to CFO’s?
I quote…
“Not.”
How Credible Are Marketing People to CFO’s?
I quote…
“Not.”
“It depends.”
How Credible Are Marketing People to CFO’s?
I quote…
“Not.”
“It depends.”
“They are a necessary evil and have a very unscientific approach.”
How Credible Are Marketing People to CFO’s?
Credibility Issues
“Marketing usually speaks in qualitative terms.”
“Investment is never linked to ROI.”
“Not enough definitive goals.”
“Won’t give me a correlation between spending and return.”
“Accountability must be accepted.”
“Marketing manages expenses.”
“Need a clear plan on how a brand will make life better.”
What Did CFO’s Ask Me?
“The last time I saw a sophisticated marketing model was in my Consumer Behaviour class in first year commerce. Why isn’t anybody using these?”
What Did CFO’s Ask Me?
“The last time I saw a sophisticated marketing model was in my Consumer Behaviour class in first year commerce. Why isn’t anybody using these?”
“Why do marketing budgets not forecast revenues?”
What Did CFO’s Ask Me?
“The last time I saw a sophisticated marketing model was in my Consumer Behaviour class in first year commerce. Why isn’t anybody using these?”
“Why do marketing budgets not forecast revenues?”
“Why won’t they just tell me the truth?”
“Why won’t they identify how marketing cost relates to a return to the corporation?”
Research Will Build Allies From Adversaries
Common Interests Already Exist
Finance’s concern is not with the concept of marketing but with the lack of sophisticated processes around it.
The “New” CFO’s understanding of Brand Equity is accurate and deep.
CFO’s responded well to marketing expenditure explained in the context of sales using qualitative or quantitative models.
CFO’s actively measure brand equity and marketing effectiveness.
Market Research Can Build Bridges
Market researchers are an “involved and relevant third party”.
You are the key to bringing credibility to the marketing department.
You must interpret marketing results in the manner dictated by marketing AND by finance.
Ask to include financial executives in meetings on marketing projects.
Where possible, link research activity and measurement of outcomes to long term corporate strategy vs. just short term marketing strategy - ideally to both.
Be brilliant.
