Marketing is mostly misunderstood

And Operational Finance professionals need world-class Marketing functions

One of the greatest ironies of Marketing is that it is mostly a very misunderstood profession. Experienced Operational Finance professionals recognize the need for world-class Marketing for our businesses to win.

Consumer-facing businesses like Amazon, Nike, Samsung, Coca-Cola, and Procter & Gamble have deep expertise in all aspects of Marketing. High-performing Technology startups have Marketing expertise at the epicenter of their product development cycles. They routinely use customer development techniques developed by Steve Blank and others like the Lean Startup methodology.

However, most businesses have structures and processes that make it difficult to measure if any meaningful ROI for the money, time, and effort being applied to Marketing activities is being achieved. And too often in established businesses, the only real scrutiny given to Marketing is as Budgets are being set once per year.

So what can Operational Finance professionals do? Let’s start by defining Marketing.


Marketing

The definition of Marketing agreed upon by the American Marketing Association is a good place to start.

Marketing1 is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

So clearly, Marketing is not Sales. As Operational Finance folk, we know that to achieve the business goals being pursued, we always need to see structures, business design, incentives, and processes adapted to our business model before we will be convinced Marketing (and Sales) initiatives will yield an appropriate ROI.

A key signal for Operational Finance professionals that allows us to assess the likelihood of efficient use of capital is how the Marketing is structured.

Share

Organizational Design

We think of Institutions in terms of organizational design. To achieve our CEO's financial outcomes, we need to have organizational designs and structures that align resources, people, behaviors, and incentives.

The distinction between a Chief Marketing Officer and a Chief Revenue Officer is crucial. The CRO is focused on revenue, sales team structures, effectiveness, and sales operations. And the reporting lines are as important, as when Marketing and Sales organizations are working well, there will be appropriate tensions.

When the Sales organization achieves a 10% year over year (YoY) revenue growth rate in a market segment, is that good?

The CMO can tell us; maybe it is a marvelous success if the market is shrinking by 10% YoY due to technology disruption. Alternatively, it might be an abject failure if the market segment is growing 50% YoY.

  • Where should we allocate CapEx and people?

  • What acquisitions should we aggressively pursue?

  • What revenue growth and in what market segments should we compensate?

When Marketing is working well and provides superior Market Intelligence, we can make informed decisions and allocate capital accordingly. So this is critical for the business.

Activities

We developed this simple framework to understand Marketing from an Operational Finance perspective. When discussing proposed Marketing activities, we have found it useful to ask questions with this framework in mind.

Next Steps

We highly recommend reading this Harvard Business School article written in 19772, which sets out many of the challenges that still exist today.

As operational Finance professionals, we need the Marketing function to be extraordinarily successful. That will provide our CEOs and us with the key strategic insights, market intelligence, analysis, and information needed to make good decisions and allocate capital and resources wisely.

1

Definition by the American Marketing Association https://www.ama.org/the-definition-of-marketing-what-is-marketing/

2

https://hbr.org/1977/11/from-sales-obsession-to-marketing-effectiveness