Writing the second part of this post was hard. Not because I didn’t know what I wanted to say, yet because the need to summarize it into a readable blogpost meant leaving out important nuances….
Still, I’ve tried to highlight how marketing as a function can help organizations overcome the challenges described last week. And for the impatient ones wanting to impress their CEO still this quarter, I’ve also added a number of “quick fixes” 
So while you won’t find silver bullets, here are a few remedies to the “uncomfortable truths.”
Truth #1: Most people in your organization haven’t got a clue what you’re on about.
Delivering on your brand’s promise starts with making sure that the people in your organization understand what it is and how it affects their job.
Still, many marketing departments allocate insufficient time and budget to working with HR on making this happen. As a result, internal communication programs seldom get beyond employee newsletters, intranets and the occasional motivational speech.
Ask yourself this question: would you try and convince the consumer in the street of your strategy with the proverbial powerpoint presentation and an email? Well, as it stands that consumer may actually be working for your company, so maybe there is a lesson to be learned.
To stand a chance in the market, marketers should allocate a significant portion of their time and budget to support HR in putting together a communication and capability development plan that truly affects the organization. Only then, things will start moving.
Quick win: do a survey to check in how far the people in your organization actually understand your strategy and think it’s a good idea. Turn it into a KPI and track it. Never point fingers when the figures turn out pretty dim, yet involve everyone who can influence the numbers into a supporter of your cause.
Truth #2: Many leaders in the organization behave against the best interest of the company.
Yet, as I said before, can you blame them? When facing their boards, most CEOs I ever met are prepared to go for the long run, yet simply don’t get decent marketing ammunition to actually pull it off.
Marketing departments need to back up their leaders with ‘hard number’ based business cases. This means getting serious about customer (life-time) value and measuring the impact of different business initiatives. It means integrating with sales and using decent scenario planning and market prediction methods rather than hazy market research. It means talking the language of money rather than that of “propensity to buy.”
Boards are greedy and will support a plan that makes them more money in the long run. Yet to be able to sell such a plan (and its quarterly sequels) leaders need ammunition. The marketing department needs to provide this.
Quick win: start building your credibility by connecting your various marketing initiatives to your sales line. If you’re in B2C this will typically allow you to cut your budget with 20% or more without affecting sales. If you’re in B2B, it will either increase your closing rate or give your sales people more leads. Win brownies with this initiative and propose to use the money freed up to do “more of the same” working on a larger scale customer value project.
Truth #3: The people in the organization are often paid to do something else than what the strategy says.
Don’t worry, I’m not going to propose that you need to go and challenge the pay grades in your organization (even though someone should). Yet what you can do is translate the promise of your company or brand into desired behavior at the “moments of truth” and then work with HR to devise non-financial reward and recognition systems to support each of them. These can be “employee of the month” programs, a mention in the company newsletter or simply a personal thank you. People respond to recognition and if you reward them for “getting it right” this can be a first step in offsetting salary inconsistencies with the strategy.
Quick win: Rather than trying to take on the whole company, start with identifying for each department in the organization the “one thing” that would definitely need to go right to deliver on the promise to the customers. Partner with HR and then promote the hell out of this one thing + back it up with non-financial incentives which are visibly spread throughout the organization. Once you have established the principle of recognition, the following steps will be more easy.
Truth #4: Quite a few people in your organization are at a loss when it comes to the customer.
While many struggle with the concept of “customer insight,” I typically find that when ever you hit upon a real one, it tends to be simple and straightforward. As marketing needs to uncover these insights, it’s also its role to spread it to every person the company.
After all, understanding how the organization responds to very specific customer types and needs means that your people are able to come up with the right answers and solutions without the need for extensive processes, manuals or control mechanisms. This accellerates the appropriate service reaction and in turn increases customer satisfaction.
Quick win: Rather than taking on the whole company, pick the group which is currently most remote from the customer (e.g. R&D or engineering). Expose them to the insights you have uncovered and have them work through the implications for their job. Make them understand the customer. Then let them loose on the company again. It will work.
Final Thought
As I said, trying to cover all of this in one blogpost was probably chewing off too much. Still, the main message I wanted to give is that many of the disconnects in organizations can be resolved if marketing and HR work together on communicating and incentivizing people to act according to the strategy (staff and leaders alike).
And while you may say that this is also the job of other departments, marketing needs to take the lead. After all, it’s not just marketing’s job to “come up” with a value or brand proposition, yet also to make sure it gets acted upon. This means addressing the above through communication programs, market insights, decision support systems and strong analysis.
And the good news is that these are all things marketing is good at. Right ?
In most companies I know the distance between the marketing and HR department is less than 10 minutes. Perhaps it’s time for a walk –
Technorati tags: marketing HR management
Build A Brand that Reaches Out to Serve People and You Develop A Brand that People Become Passionate About
No matter what your business does and no matter how it does that business, customers, clients and potential customers and clients will internally create an image–or perception–of your business.
That perception is your Brand, and it ultimately determines any and all levels of success that you will achieve. We discuss this now instead of later because your Business Plan and all of your strategic plans need to incorporate the driving forces that build a great Brand image.
If your Brand is not authentic, from the heart, and people-centric, your Brand likely will be spelled with a little “b”. In other words, few people will be passionate about your products and services or your business image.
Bearing that in mind, everything your business does or says determines what your Brand looks like in the public’s eye and whether or not the public will purchase your products or services (including other executives if you are in the B2B world).
In other words, your Brand must be built from the inside-out. Because your employees are the face of your Brand, your employees represent the most important part of your business.
Employees touch customers and clients in very personal ways, whether they work in the Call Center, Marketing or on the plant floor. They communicate with the customers, they make the products or furnish the services and they build the image. How customers perceive your business is equal to their contact with your employees. If you do not lead them from your heart, using values as your backbone and The Happiness Quotient as your soul, your Brand will suffer, and your business succeeds or fails on the back of your Brand.
Dear Alain,
Thank you for your post on “Uncomfortable Truths” and for the ways you suggest (in Part Two) to overcome these truths:
Truth #1: Most people in your organization haven’t got a clue what you’re on about.
Truth #2: Many leaders in the organization behave against the best interest of the company.
Truth #3: The people in the organization are often paid to do something else than what the strategy says.
Truth #4: Quite a few people in your organization are at a loss when it comes to the customer.
There is a way to cast some additional light on the fundamental drivers of these unfortunate truths. That is to measure the relative spending on enterprise marketing vs. segment marketing resources. You can do this in many public companies using the financial data published in their income statements.
One particularly revealing example is found in big pharmaceutical companies: GlaxoSmithKline, Johnson & Johnson, and Novartis (see Cook, Competing for Customers and Capital, 2006, Thomson, page 88).
If you think of enterprise marketing as the act of marketing the man behind the curtain — the corporate parent as opposed to the individual product …. what comes to mind? Your first thought might be that the related assets are the corporate brand (Pfizer, Ford) and its connotations –which are distinct from those of an individual product. You’re right. The brand and its connotations are behind the first curtain. But enterprise marketing resources are more than that. What else is on the stage? Behind the next curtain are the intangible assets that contribute to shareholder value.
The value of intangibles (note 1), like client lists, patents, copyrights, distribution rights, goodwill, licenses, and trademarks, doesn’t just appear magically on the balance sheet. That value is created by people. The current costs of the people who create technology-based assets (R&D expenses), customer-based assets (sales operation expenses), market-based assets (advertising and promotion expenses), talent-based organizational assets (employee compensation), and contract-based statutory assets (legal expenses) provide a flow measure of how enterprise marketing expenses create intangible value. Each of these expenses effect the way customers and investors feel, think, and act toward the firm. Conceptually, the management of these intangible assets is the domain of enterprise marketing.
An inclusive measure of the costs of intangible assets appears on the income statement of most public companies. By accounting convention these costs are called Selling, General and Administrative (SG&A) expenses. What’s more, this measure is taken far enough up in the earnings stream to include most of the factors that have an impact on customer behavior and perceptions. In short, almost everything a company spends on creating shareholder value appears in this account. Eventually, some significant proportion of these expenses appear on the balance sheet as “Intangibles.”
The three main components of SG&A expenses reported in company income statements are salaries and related (S&R note 2) expenses, advertising and promotion (A&P note 3) expenses, and research and development (R&D note 4) expenses.
Take GlaxoSmithKline for example. Its sales in 2003 were $38.4 billion. Gross profits in that year were $32.5 billion. These numbers should get your attention right away. GSK’s gross profits were 85% of sales. Fat margins are typical of big pharma companies. JNJ’s sales were $41.9 billion with gross margin was 75%. NVS had sales of $24.9 billion with a gross margin of 81%. Make a note: gross margin rules in enterprise marketing.
Meanwhile, GlaxoSmithKline’s SG&A expenses were $19.2 billion. This is the second number that should get your attention. SG&A expenses accounted for 50% of GSK’s sales revenues in 2003. The company spent $9.0 billion on salaries and related expenses (47% of SG&A expenses); $1.1 billion on A&P (6% of SG&A), and $5.0 on R&D (26% of SG&A expenses). The sum of these three components was $15.1 billion, or 78% of SG&A expenses. Similar results were found for J&J where the three components amounted to 92% of SG&A expenses and for NVS (84% of SG&A expenses).
Taken together these numbers give you the information you need to answer the question “What drives the unfortunate truths about marketing?” Of course, the answer depends on how you define “marketing.” If you subscribe to the traditional view of marketing as advertising and promotion expenses, it’s a relative drop in the bucket. Just 9 and 7 percent of SG&A expenses were for A&P at JNJ and NVS respectively. This means that 91% and 93% of the money spent on enterprise marketing is funding the misunderstanding of segment marketing! Even though GSK and NVS spent around one billion U.S. dollars on A&P, while JNJ spend almost two billion, it’s a small percentage of enterprise marketing expenses.
On the other hand, all three big pharmas spent around 50 percent of SG&A dollars on people. This is why Jeffrey Pfeffer (1994, Competitive Advantage Through People: Unleashing the Power of the Work Force, Harvard Business School Press) traces advances in shareholder value to people. S&R spending swamps even R&D expenditures in an industry famous for its heavy investments in R&D. Remember S&R expenses pay for the sales force and the salaries of marketing managers themselves. If a company’s investments in people are effective, if the talent this money buys is productive, it will have a huge positive impact on earnings and shareholder value. By implication the opposite also is true. I hope this adds some perspective your prescriptions.
1 COMPUSTAT annual data item number 33. Intangibles are not reported quarterly.
2 COMPUSTAT annual data item number 42: This item represents the costs of employees’ wages and benefits allocated to continuing operations. This item includes incentive compensation, other benefit plans, payroll taxes, pension costs, profit sharing, salaries and wages. This item excludes commissions. Direct labor costs in manufacturing are included in the cost of goods sold (data item 41).
3 COMPUSTAT annual data item number 45: This item represents the cost of advertising media (radio, television, newspapers, and periodicals) and promotional expenses.
4 COMPUSTAT annual data item number 46: This item represents all the costs that relate to the development of new products or services. The amount reflects the company’s contribution to research and development. This item includes amortization of software costs for companies that recognize software revenues, company-sponsored research and development, purchased research and development, research and development expenses, software development expenses. This item excludes customer or government-sponsored research and development expenses, customer-sponsored software expenses, engineering expense, extractive industry activities, inventor royalties, market research and testing, support expense.