The business value of marketing operations

The business value of Marketing Operations Byline Article for CMOcouncil report “Calibrate how you operate” The information contained in this communication is confidential, intended solely for the use of the individual or entity to whom it is addressed and may be protected by professional secrecy. You should not copy, disclose or distribute this communication without the authority of MRMLOGIQ BV. MRMLOGIQ BV, its subsidiaries, affiliated entities, directors, employees and agents shall not have any liability, on whatever basis, contractual or not, for any direct, indirect or consequential damages you may incur arising from the use of this document and/or the information contained herein. Copyright © 2009 MRMLOGIQ BV All Rights Reserved Table of Contents The business value of marketing operations 3 1. Savings 5 2. Increased sales and revenues 6 3. Balance sheet and Shareholder value 6 Endnotes 8 MRMLOGIQ – Company Confidential 2/8 20.02.2009 The business value of marketing operations Marketing operations is too important to leave to the marketing operations department. By Frans Riemersma & Romek Jansen, MarketingGovernance.com, MRMLOGIQ Authors of the book “Marketing Resource Management; the noble art of getting things done in marketing. Efficiently.” Over the years, pressures from the market have forced companies to constantly innovate and diversify products and services. Finally this resulted in more products, more variations and shorter Product Life Cycles. Departments such as product development, procurement, finance and logistics had to improve their methods to design, buy, produce and distribute new products and services to keep up with the accelerating pace. And they did. Methods such as Six Sigma, TQM, and balanced scorecard combined with ERP, Business Intelligence and other technology have dramatically improved efficiency and accelerated the time–to-market of physical goods. The marketing department reacted in a piecemeal fashion on this acceleration, leaving a gulf of frustration in its wake. In fact, marketers often have a hard time producing collateral and campaigns in line with the physical flow of goods and services, let alone producing campaigns within budget. An international hardware and software provider worked with a product life cycle of 6 months. It took the marketing department 5 months, starting just days before the product launch, to create, produce and distribute all of the new marketing collateral to the retailers in the region, leaving exactly one month for effective communication. This is just one example to fuel the critics. Historically, CEOs and CFOs have looked askance at the marketing department and often felt there was something that needed nailing. If only it weren’t so darn slippery. Nowadays, new insights and techniques enable marketers to better control marketing activities and measure results. Also in the marketing operations space, specialized MRMLOGIQ – Company Confidential 3/8 20.02.2009 marketing methods and technology have appeared, like Marketing Resource Management or Marketing Operations Management. The challenge is to link the marketing operations and technology investments to business value, to link source code to shareholder value. Calibrating how marketing operates with the corporate strategy can lead to huge improvements. The projects to improve marketing operations are often associated with technology and savings. The relationship between savings, sales and shareholder value is illustrated below. The contribution of marketing process enhancements and MRM technology to shareholder value MRMLOGIQ – Company Confidential 4/8 20.02.2009 Marketing Resource Management (MRM), also known as Marketing Operations Management (MOM) is “The definition, orchestration, optimization and adoption, of processes and software applications, to transform and enable an enterprise’s ability to plan, budget, execute, and measure the impact of enterprise-wide marketing”. 1. Savings The vast majority of figures on the marketing operations market available are about savings related to the implementation of marketing technology. Research has shown that the majority of marketing automation projects result in at least cost savings of 6%1 to 10%2. If a project includes two other steps prior to the automation phase (1. consolidation/rationalization of the material produced and 2. standardization/innovation of processes), the full potential is far higher. Cost savings up to a staggering 60% on marketing operations (not the entire marketing budget, and excluding media budgets) are achievable3. The consolidation phase leads to insight as to which amount of marketing campaigns and materials are produced in a certain period. Research revealed that 20% to 40% of all operational activities within marketing environments go nowhere near serving any strategic or tactical purpose4. This insight will enable the marketing manager to rationalize the amount of materials and decrease the volumes in the publication portfolio to the essential. Consolidation savings of 10%-20% are realistic. Once you have done the sanity check during the consolidation exercise, you can tackle process redesign and standardization of resources. This will ensure that all your resources are efficiently allocated and your processes predictable. It is calculated that as much as 65% of a marketing manager’s time is taken up with administrative tasks5. It is easy to imagine this standardization step can save you another 10% to 20% on top of the earlier savings. MRMLOGIQ – Company Confidential 5/8 20.02.2009 2. Increased sales and revenues If we build the business case on business value by calculating increased sales and revenue, instead of on cost savings only, the potential becomes a lot more powerful. Exploring the business value of improved marketing operations includes asking questions like: What would be the impact on sales and revenue… If marketing material is available in the market two days or weeks before your competition? If “Point-of-Purchase presence” at your retailer network increases from 30% to 45%? If you double the frequency or scale of your best running campaigns? The answers to these questions can be found at departments like sales, procurement, logistics and finance. There is this example of a marketing director that agreed on an SLA with the sales director, based on the following idea: “If marketing runs twice as much campaigns of a certain type, the amount of sales deals will increase with x%”. In general it can be said that “Enterprises that successfully deployed Marketing Resource Management solutions (…) achieved more than 20% greater revenue gains compared to their peers”6. Other studies estimate “20% higher returns on customer relationship management (CRM) programs and significant increases in profits both from top-line revenue improvements” resulting from marketing operations projects7. 3. Balance sheet and Shareholder value There is circumstantial evidence that an improved marketing operational infrastructure can have a positive impact on the balance sheet and share holder value. This of course, would make the most powerful business case. Potentially bringing marketing on (instead of ‘at’) the board room table. When we were executing an MRM scan for an international Fast Moving Consumer Goods company we discovered that from the thousands of daily operational marketing processes for hundreds of brands, only one marketing communication process was documented ‘by the minute’ and agreed upon by the management team. No, it was not the process that was used most often. No, it did not deal MRMLOGIQ – Company Confidential 6/8 20.02.2009 with the sign off on budget. Actually, it was the process they hoped never ever have to use, ”what to do when we have a product recall (in case somebody finds e.g. glass particles in baby food or rat poison on a frozen pizza)?”. The reason for this strict process was its immediate impact on share holder value. Savings from improved marketing operations can be re-invested in marketing campaigns, but also might be added directly to the balance sheet. “Research has shown that being late to market by 6 months in fast turning industries, e.g. consumer electronics, can (…) negatively impact shareholder value by as much as 11%.”8 Remember our first example? Using the brand as a guide for operations has also proven profitable. There is a clear link between brand orientation and profitability.