Just because it spends money, doesn’t mean it is a “cost centre”

Too many CEOs and CFOs continue to think of marketing as a cost centre. Not only is this counterproductive, but it also reflects an organisation that is lacking maturity in terms of marketing, which is likely to have a negative impact on how marketing ultimately contributes to the bottom line.

In a typical “chicken and the egg” style approach, organisations refuse to align marketing with the business strategy, and then proceed to treat it as a cost centre – virtually ensuring a self-fulfilling prophecy where marketing is seen as a big spending machine that makes no measurable contribution to the bottom line.

Smart organisations understand one thing: indirect cost pools are not “murky waters”, but need to contribute to the bottom line in a measurable and clear way. Only by putting in place a clear cost (and profit) measurement process can executives identify the value of marketing within the organisation

Measuring Bottom-Line Marketing

Clearly identifying marketing’s role in growing business profitability means one thing: putting in place clear goals and objectives, with a measurement framework that helps identify who does what, when and how (much).

• Define marketing goals and link them directly to the organisational  goals (mission, vision, strategy)
• Set clear objectives, and put in place appropriate measurement criteria
• Introduce accountability for marketing spending – especially outside the marketing department
• Track marketing expenditure across previously defined criteria and measure the net marketing contribution
• At the end of the period, revise goals and finetune metrics – then, “lather, rinse, repeat”

In the recently released “2009 Marketing ROI & Measurements Study“, The Lenskold Group/MarketSphere concluded that “companies that indicated their marketing was highly effective and efficient (9% of the total) showed much greater strengths in having data, facts, and insight to better guide marketing spending decisions (75% vs. 33% of all other firms), using good measurements (69% vs. 30%), using customer analytics (65% vs. 31%), and having marketing operations processes to improve the business of marketing (64% vs. 29%).”

This article is part of a series, entitled “The 10 Biggest Myths In Marketing”, which will be published as a whitepaper on this site. Check back for more information, or get in touch in case you would like to pre-reserve a copy.