Sara Shipton

1
Welcome
Sara Shipton Innovation Development CIMA
Return on ideas Better results from finance and
marketing working together
2
About Me

• Production/Distribution of Beer (Allied Breweries
  plc)
• Operational audit (Scottish Newcastle plc)
• Breakdowns/Recoveries (RAC)
• Leisure Hotels/Leisure group FC for SME
• Pub Retailing (Allied Domecq)
• Pub Wholesaling/Leased Model (Punch Taverns)
• Consultancy Business incl Freelance work for
  CIMA

Return on ideas Better results from finance and
marketing working together
3
Agenda

• Why now?
• Case for change the relationship between
  finance and marketing - measuring
  marketings return -
  marketings influence in business
• The Infinity Model.
• Checklist 1 Good practice guidelines, do we
  know what we have to do?
• Checklist 2 Key Players, do we know who should
  do what, and do they know how?
• Checklist 3 Conditions for success
• Steps to implementation
• Summary and close

Return on ideas Better results from finance and
marketing working together
4
Why important now?
Economic Downturn
Value of Marketing to the Bottom Line
Ideas
Numbers
Marketer
Management Accountant
Marketing looks like the easiest and most
logical budget to cut because companies dont
know how to measure its productivity. Sharan
Jagpal, Professor of Marketing Rutgers Business
School, New Jersey
Return on ideas Better results from finance and
marketing working together
5
Return On Ideas Case for change
Half the money I spend on marketing is wasted.
The trouble is I dont know which half Lord
Leverhulme, founder Lever Bros, first president
CIMA, former President of CIM
There is growing pressure from shareholders to
make marketing more accountable. Investors are
becoming more active in analysing and questioning
marketing expenditures.Sir Dominic
CadburyChairman Cadbury-Schweppes , May 2000
Many traditional marketing models employed by
CMOs today are being severely challenged and they
foresee the day when these rules of thumb will no
longer work. A more rigorous and pragmatic
approach treating marketing expenditures as
investments is warranted. The pressure,
therefore, to demonstrate tangible ROI on your
marketing and branding strategies, has never been
more intense.Stuart Green, Managing Director,
Interbrand SingaporeMalaysian Marketing and
Strategy Forum, Kuala Lumpur 2006
Return on ideas Better results from finance and
marketing working together
6
The Evolving Management Accountant
..the historical development of accounting -
viewed primarily as a technical and instrumental
activity carried out by a functionary whose role
was to control and thereby, indirectly to
oppress Fisher and Murphy (1995)
The common stereotype of the accountant
portrayed as male, introverted, cautious,
methodical, systematic, anti-social and above all
boring (Bougen, 1994 Cory 1992)
The role of the beancounter is being replaced
by the demands for accountants to add value in
terms of competency in financial analysis and
strategic decision-making skills (Parker, 2000).
Numbers
Balancing the tyranny of Accountants
Financial Management has failed to bridge the
marketing-finance interface.. (Doyle , Value
Based Marketing, 2000)
Return on ideas Better results from finance and
marketing working together
7
The Management Accountant of the Marketer
Finance thinks marketers spend like drunken
sailors. Finance asks for ROI marketers give
them brand value and unaided
awarenessMarketings spend forecasts are
never right Pat Murray, Marketing Management
Analytics
Management accountants were naturally cautious
and untrusting of predictions from marketing
citing marketingstendency to adopt implausible
assumptions and ignoreevidence in order to
support favoured ideasReturn on Ideas, Robert
Shaw
..many marketing professionals lack the
financial know-how to read and understand balance
sheets and PL statements, and so struggle to
understand how their work affects the companys
financial performance. Herbert Ortner, CMO and
interim CFO, Palfinger, an Austrian crane
manufacturer
Return on ideas Better results from finance and
marketing working together
8
Finance v Marketing
Whilst both marketing and financial
professionals believe marketing is delivering
ROI, they cant show it. Without being able to
demonstrate it, its an uphill struggle to argue
the case for increasing the marketing budget
and perhaps help to fund more measurement.
Peter Romaine, Director and General Manager,
Xerox Global Services, Xerox UK.
Return on ideas Better results from finance and
marketing working together
9
When the Management Accountant metthe Marketer
The Management Accountant Comfort ZoneCautious
and methodicalLoves History, and the
past Relishes indisputable solid fact Happy to
provide the post completion critique Like the
safe position of told you so, rather than risky
business of forecasting
The Marketers Virtual Reality Full of
ideas Impulsive and un-disciplined Excited by the
future and the unknown Un-willing to recognise
risk and potential of failure Rather not measure
if it might not look good Like to be in a
position to be selective about what results to
present Reluctant to be set targets, preferring
the freedom to find out along the way
Return on ideas Better results from finance and
marketing working together
10
Marketings Lost Influence Doyles Paradox

• Marketing is important for 3 reasons -
  Companies need to understand and adapt to rapidly
  changing markets. - It is marketing rather
  than production skills which have long
  proven the key to competitive advantage -
  Marketing performance is the root source of
  shareholder valueHowever.
• Study found, just 12 of chief execs in top
  100 companies had experience in a marketing
  role.
• Only 57 of larger companies have marketing
  represented on the board
• Whilst all boards will discuss profit, only a
  third consider customer attitudes and brands
  as part of the agenda.Why?

Return on ideas Better results from finance and
marketing working together
Source Doyle. P. (2000) Value-Based Marketing,
John Wiley Sons Ltd
Source Stephen Callender 1999
11
Marketing marginalised in many board rooms

• Failure to incorporate the concept of
  shareholder value
• No clear view of what success looks like
• No use of current strategic valuation
  techniques.
• No framework for engaging in the strategic
  debate.
• Professional education not highly regarded.

The main problem seems to be measurement and
communicating the right marketing knowledge to
the Board CMOs simply dont have the right
tools to do the job wellthis is making it
increasingly difficult to justify expenditure.
Ian Parkes, Coleman Parkes Research Marketing
Success Survey 2008
Return on ideas Better results from finance and
marketing working together
Source Doyle. P. (2000) Value-Based Marketing,
John Wiley Sons Ltd
12
Marketing success are accountants helping?

• Maximising profits does not always lead to
  maximising shareholdervalue
• Financial management steers many boards away from
  examiningmarketing strategy.
• Financial reporting focuses top management on
  company accountswhich show the historical value
  of assets, where internally developed brands,
  and other intangibles are often omitted.

With increasing pressure from management and
shareholders to deliver results, marketers often
resort to short-term sales tactics over long-term
brand building because they are quantifiable.
Ms Shauna Li Roolvink, MD, BrandHub. (Singapore)
May 2007
Return on ideas Better results from finance and
marketing working together
Source Doyle. P. (2000) Value-Based Marketing,
John Wiley Sons Ltd
13
The Evolving Management Accountant
Financial management is evolving from an
uninspiring, albeit necessary, function of doing
business to one of the most promising levers of
business transformation. In fact, without support
from the finance function in improving strategy
and operations, companies face an uphill and
often losing battle in transforming their
business(Deloitte Study, Finance Masters How
Finance is Quietly Emerging as a Key to Business
Transformation, Deloitte, 2008)
Finance business partnering is not so much a new
role as an extension or rebalancing of the
finance functions traditional responsibilities
so that finance is not just an overhead but helps
to create value. This requires a change in
culture whereby the finance professionals
objectives and the business managers objectives
are seen to be aligned, and finances
contribution to management decision making is
expected and valued. (Toby Wilson, FD,
Microsoft UK)
Numbers
Return on ideas Better results from finance and
marketing working together
Source Improving decision making in
organisations The opportunity to reinvent
business partners. CIMA 2009
14
Summary so far

• Marketing spends s
• Done well it creates sales, profit, and real
  share holder return
• Done badly it is incredibly wasteful.
• Poor or even just arms length relationship
  between the marketer and finance is a mandate
  for this.
• With better engagement, and common goals, and
  applying the findings of this new CIMA report,
  this neednt be the case

Numbers
Return on ideas Better results from finance and
marketing working together
15
The relationship MUST be more productive
Numbers
Return on ideas Better results from finance and
marketing working together
16
Return On Ideas

• This report is the product of a partnership
  between
• CIMA, the Chartered Institute of Management
  Accountants
• The Direct Marketing Association (DMA)
• The Chartered Institute of Marketing (CIM)

Return on ideas Better results from finance and
marketing working together
17
Professor Robert Shaw

• Honorary Professor of Marketing at Cass Business
  School and Director of the Value Based marketing
  Forum
• Veteran observer of marketing and finance, with
  over 25 years of experience.

Return on ideas Better results from finance and
marketing working together
18
Background

• An Investigative research programme from 1997 to
  2007
• 100 Companies Surveyed
• Shared working practices, internal meetings,
  plan, budget, models and tools
• Review of published case study papers
• Examined academic literature
• Demonstrating marketings contribution to the
  organisation how to predict it and how to
  find ideas to improve it.

New FRAMEWORK
Return on ideas Better results from finance and
marketing working together
19
Included in the Document

• Key questions for discussion
• Checklists dealing withThe fundamental
  requirements for affordable marketingDepartment
  al good practices
• The right conditions to ensure success
• Case Study examples

New FRAMEWORK
Return on ideas Better results from finance and
marketing working together
20
Good Practice Guidelines
Worst Case Marketing Practices
The infinity model of marketingvalue creation
Return on ideas Better results from finance and
marketing working together
21
Checklist One Good Practice Guidelines1.
IMAGINATION

• Can we really afford NEW STUFF?
• Are we hunting for AFFORDABLE ALTERNATIVES?
• Are we doing TOO MANY marketing activities or
  TOO FEW?
• Do we have the right MIX of affordable
  marketing activities and ideas?
• Are we PAYING TOO MUCH for Ideas and have we
  sought cheaper sources?

Return on ideas Better results from finance and
marketing working together
22
Checklist One Good Practice Guidelines2.
PREDICTION

• Do we insist on rigorous predictions of the
  financial contributions of all new marketing
  ideas?
• When we predict, do we do enough
• Historical analysis
• Testing and experimenting?
• Observing customers?
• Searching for analogies with existing
  situations to provide
• clues about how the future will unfold?

Return on ideas Better results from finance and
marketing working together
23
Checklist One Good Practice Guidelines3.
DEMONSTRATION

• Do we insist on post-implementation reviews of
  every marketing prediction?
• Are we using good practice analysis methods to
  link marketing activity to customer activity?
• Do we have financial models linking customer
  activity to sales and profit figures?
• Do we investigate cost-efficiency and drive
  down waste, scrap and re-work?

Return on ideas Better results from finance and
marketing working together
24
Good Practice Guidelines - Imagining Value

• Creation of New Ideas, requires a certain
  obsession !
• Can be a lonely exposed place,
• But can create opportunity for building team
  spirit

• Imagination is used at three levels 1.
  Strategic Portfolio 2. Value Proposition 3.
  Marketing Mix

Return on ideas Better results from finance and
marketing working together
25
Good Practice Guidelines - Imagining Value -
Strategic Portfolio

• Classify and categorise marketing ideas .
• Invest cash where it will generate maximum cash
  inflow.
• Do not allocate budget based on current level
  of sales
• Assess ideas using cost-benefit predictions and
  apply consistent risk-reward criteria.

Case Study IBM CEO, Lou Gerstner in the 90s
repositionedthe business alongside being
provider of hardwareand software, as a group of
service businesses.
Return on ideas Better results from finance and
marketing working together
26
Good Practice Guidelines - Imagining Value -
Value Propositions

• Use market research.
• Address both negative comments, and, exploit
  positive ones imaginatively.
• Keep appeal by stream of additional practical
  ideas
• Monitor from emergence through prediction and
  post-launch.
• Use predictive tests and demonstrate post
  launch sustainable value.
• Implement a shared plan and schedule activities.

Case Study Heinz 2003 invested in a massive
research programmeinto customer attitudes,
discovering their dissatisfaction with
theplastic bottle. The Top-Down Bottle was born.
Return on ideas Better results from finance and
marketing working together
27
Good Practice Guidelines - Imagining Value -
Marketing Mix

• Review evidence of mix effectiveness.
• Rethink, based on reviews.
• Switch budgets on a rolling monthly basis where
  appropriate
• Base future marketing activities on ideas
  translated from the mix.
• Monitor mix ideas from emergence through
  prediction and post-launch.
• Subject ideas to predictive tests before
  launch, and demonstrate value add, after
  launch.
• Guard against proliferation of un-scrutinised
  ideas.
• Plan and schedule mix activities.

Innocent Drinks used many innovative mix ideas,
including eye catchingpromotions woolly hats
for Innocent bottles, distribution of excess
stock to the homeless, a health tips book,
Fruitstock festivals, free eventsfor retail
staff. From 2002 to 2007 turnover grew from
6.5m to 100m.
Return on ideas Better results from finance and
marketing working together
28
Good Practice Guidelines - Predicting Value

• Analogies, substitutes and scenarios
• Customer Insight and foresight
• Tests and experiments
• Extrapolations from the past

Return on ideas Better results from finance and
marketing working together
29
Good Practice Guidelines - Demonstrating Value

• It is important to pre-plan how you are going
  to demonstrate the
• effect of every new marketing idea when put
  into action.
• Look for a chain of evidence that links
  marketing activity and expenditure to its
  financial benefits.

Return on ideas Better results from finance and
marketing working together
30
The Key Players Checklist Two
Increasingly information-age Companies are
shifting from vertical hierarchies to horizontal
cross-functional teamsresponsible for key
processes that add value for customer NOT for
functional inputs.
Peter Doyle Value Based Marketing
Return on ideas Better results from finance and
marketing working together
31
Conditions for Success
Return on ideas Better results from finance and
marketing working together
32
Conditions for Success points to consider
Checklist three
Return on ideas Better results from finance and
marketing working together
33
Steps to implementation
Return on ideas Better results from finance and
marketing working together
34
Steps to implementation in practice

• ONE DAY
• ONE WEEK
• ONE MONTH

• Workshop
• Detailed review
• Data collection
• Model development
• Tool implementation

Return on ideas Better results from finance and
marketing working together
35
Summary of key points

• Finance and marketing have a disjointed
  relationship.
• Finance focuses too much on budget and not
  enough on performance, whereas marketing
  concentrates of brand awareness/image but not
  on sales or profit.
• The best organisations strike a balance between
  financial rigour and marketing imagination.
• Progress can be made by holding
  marketing/finance workshops and ensuring both
  sides ask the right questions.

Engaging with the CEO, Finance and IT
departments..understandingthe CFOs expectations
from marketersmeeting and exceeding
CEOsmarketing objectives boosts competitive
advantage in the market. Ramesh Natarajan,
Deputy Country Manager, DHL Express, Malaysia,
CMO Conference KL 2006
Return on ideas Better results from finance and
marketing working together
36
10 benefits to your organisation

• Making the marketing budget work harder.
• Holding agencies rigorously to account for
  results.
• Eliminating production wastage and its causes.
  
• Making marketing assets and collateral (images,
  video, text) work harder.
• Maintaining media effectiveness while reducing
  costs.
• Getting agencies to do a better job in less
  time.
• Avoiding surprises in budget commitments.
• Wasting less time on budgetary bureaucracy.
• Faster marketing approvals with fewer errors.
• Forecasting more accurately.

Return on ideas Better results from finance and
marketing working together
37
Return on Ideas
Questions?
The quest to create more money from marketing
is a team effort.Professor Robert Shaw
Finance and Marketing working better together
www.cimaglobal.com/ideas
Return on ideas Better results from finance and
marketing working together