Effectiveness comes with the confidence to invest

Often when marketers talk about effectiveness they talk about brand perception, leads, outcomes, conversions, pipelines, or other commercial KPIs. Maybe campaign goals, business outcomes, even return on investment; although ROI is really a measure of efficiency not effectiveness.

My start point has always been slightly different. What is the role of marketing in this business? It’s a fundamental question to ask and surprisingly one that is passed over, or assumed to be understood, by many marketers. But until we are absolutely clear on the job of marketing and exactly where it fits in the business strategy with the executive team, how can we work out how to be effective? Everything will just be tactics, discretionary.

Entering the group CEO’s office at the end of my first week in a new job years ago, I was treated to words that still ring in my ears today: “We’re spending too much money on marketing. I don’t think we should spend any of it. You’re the new head of marketing, I want you to show me why we should invest any of our money in marketing.”

There began a great adventure in confidence building, transformation and effectiveness. Within five years of that first meeting we had increased the return on marketing investment fourfold to over £100m per annum net of costs, and created a roadmap for growth that hadn’t existed before.

So, how did we do it? What did we learn? What role did effectiveness play?

Defining the role of marketing

When I joined the firm, marketing had no clear role. In fact, the commercial plan we were working to could be delivered without any spend on marketing activity at all. Even now I’m not surprised the CEO and CFO wanted to cut the budgets and function.

The first job was analysis and clearly defining a role for marketing that made a significant difference. How could we be effective if we had no clear purpose or mission in delivering the business strategy and commercial plan?

Internally, we started with the numbers and products. The basic numbers: volumes, revenues, gross and incremental margins. Then the products: what was growing, declining, trading stable. And joining them together, so we knew our product lines by profitability and incremental margin.

Effectiveness is so much more than a standard method, it is a mindset and culture grounded in business strategy.

Externally, we got to grips with the market dynamics, customers, their expectations, where value lay, churn drivers and our competitors. We started to understand our strengths and weaknesses. The channels we needed to be in, the levers we needed to pull to grow beyond the current plan.

Critically, it became very apparent that the role marketing had to play varied by division. Domestically the brand was incredibly strong and salient. Improving customer experience would be crucial to supporting that.

In consumer it was about increasing market share efficiently whilst increasing share of voice. In one B2B market it was about retention, in another it was growth.

Internationally it was about both brand building and growing a sales pipeline. Plenty to do.

Getting governance right

At its heart, I learnt that effectiveness was as much about confidence to invest, as it was in delivering a great return. But not the kind of confidence that would mean we could rush in like fools, while the finance angels dared not spend a penny.

We, the marketing team, didn’t need confidence to invest, others did. They needed confidence in our abilities and plans. To overcome this we did several things – all remarkably unpopular with my colleagues in the divisions.

Firstly, we committed to a series of quarterly marketing business reviews with the group CFO to review performance and the future spend/return profile, culminating with an annual review with the group CEO and executive team. We called that one the ‘Fireworks’ meeting.

Frankly you never really knew what would happen. So much was determined by the prior meeting and how frustrated it made her. Whilst this process and governance was onerous, it provided shape and impetus to succeed. More importantly it embodied accountability and transparency. We stood up. We talked through what worked, what didn’t and what we would do differently. It could be absolutely brutal. But it was a great enabler and positioned us as grown ups.

When it comes to marketing payback, words matter just as much as numbers

Secondly, with the group CEO and CFO, I agreed hurdle rates for investment in marketing activity, measurement criteria and evaluation. Inbuilt, was one source of the truth on incremental margins provided by the finance team.

The marketing units loathed the hurdle rates too. We had set a very high bar. For every £1 we invested, after costs had been taken, we wanted to see a return of £2 of incremental margin, not revenue. Whilst you can’t run your business on margin alone, we set the stage for effective marketing to be about driving significant amounts of incremental volume through a largely fixed cost operation. This was all complementary to the sales forecast in the B2B businesses and pre qualified to convert better than self-generated activity.

Plan, test, learn

Operationalising the approach required the divisional teams and my central function to work hand in glove. Not only understanding and benchmarking conversion rates and average units of revenue across multiple products and sales funnels, but also working back to understand clearly the kind of share shifts we would need to achieve to hit our numbers – and therefore what the budget asks would be.

Inevitably, many plans never made it past this stage. They either cost too much and didn’t reach the hurdle rate on return, were too small to bother with, or the share shift required was simply unrealistic. What this did was really focus everyone on effective marketing, looking beyond comms into pricing, better propositions and entering adjacent markets to find greater value.

Of course, some campaigns failed. In fact in year one nearly 50% failed to hit the hurdle rate. But everything was measured, we got good learnings. New campaigns improved. We never had a budget cut or spend paused at a quarterly review. Continuous reporting led to continuous improvement. It became self perpetuating to such a degree that people started asking what would happen if we invested more.

The power of confidence

By the end of year two on this journey we knew what we needed to do. So the chief customer officer, commercial finance director and myself took a calculated risk.

We sequestered funds from the overall commercial budget (we called it a ‘stretch’), got the green light from upstairs and initiated a new central marketing programme to run alongside the divisional activity – a new customer segmentation and then a central CRM programme.

Starting small, over three years this programme grew to deliver an astonishing return per annum in retained, grown or new revenue. Customers in the programme spent 3% more than the control group.

I learnt that effectiveness was as much about confidence to invest, as it was in delivering a great return.

It was low cost and very high return. We were also able to maximise resource and reduce costs in sales by increasing customer coverage via CRM, which delivered staggering savings with no loss of revenue. We reduced churn and grew new revenues with better propositions. We would never have been able to take this customer-centric approach over the divisional product-led method, had we not had the confidence of the business and hard earned track record.

I learnt that effectiveness in marketing is very much more than setting KPIs, or commercial goals. It is about understanding and establishing the role of marketing in delivering the business strategy, alongside nurturing an outcome-led culture and way of working, with continuously improving capability. Effectiveness is so much more than a standard method, it is a mindset and culture grounded in business strategy, focused on how we reach our commercial goals in a smart way.

I’d like to say the group CEO thanked me for the improvement of our activity and establishing a clear and effective role for marketing in our organisation, but that would be to misunderstand her approach.

She was always, and probably still is, sceptical about marketing, but as I found out in my many interactions with her over the years, she was sceptical about everything. It was how she led the transformation of our business and ensured change happened. What she respected was courage, focus and tenacity. And, in my experience, you won’t get effectiveness without them.