What the Board expects of Marketing in the midst of the Global Financial Crisis

It's tough for financial services businesses out there right now. However, it's as tough, if not tougher for their customers and staff who are experiencing the trauma of all sorts of layoffs and job losses globally in the midst of less-than-perky business confidence. The woes of their customers are being reflected in the performance of financial services institutions all over the world. 

Looking at North America as an example, today the Bank of America announced that it was closing 600 branches and laying of 30,000 people. Earlier this month, 847 teachers were laid of in North Carolina amongst 2,000 other school staff during the year, Bombardier is looking for opportunities in emerging markets to sell its regional jets into to prevent layoffs, while last year, the US state and local governments cut 200,000 jobs. The story is similar across the world.

As a result, impairments and write-offs continue to creep up as the affected people fail to keep up to their financial commitments. And while this is all happening, the income streams of retail and corporate financial services institutions come under increasing pressure, squeezing jobs even more.

The financial services brand does not escape a beating under these circumstances either, as affected people and the ensuing negative market publicity impacts negatively on brand equity.

The point however, is that the three highest costs in most financial services companies are generally staff costs, IT, and marketing (including branding) costs. As a result, there is as much pressure on bringing staff costs under stricter control as there are for IT and total marketing costs.  This article focuses on the latter.

Given the cost pressures out there, formal and informal research by the likes of AMA Insight, Forrester Inc, GlobalSpec Inc and even MarketingProfs (n=3449) show that the top issues impacting marketing right now are:

• Increasing accountability for marketing spend. While the drive for campaign ROI is pretty much well established, in the case of brand spend its still a challenge. It's no longer sufficient to merely say we spent $80 million on rebranding. If you cannot show how that rebranding will quantifiably impact brand equity positively, how that change in brand equity will be realised in customer equity, and how customer equity will be converted to cash flow, the chances are you're going to have a very tough time justifying that spend.
• Optimising marketing spend. The more you can prove the effectiveness of marketing spend in generating an income stream in respect of the total customer portfolio, the stronger your case to keep that level of spend. The more you can demonstrate how customer equity is converted into cashflows via your CRM investments (not only CRM technology), the stronger your case for the spend you're aiming to justify.
• Demonstrate the link between brand equity, customer equity, contribution and e.g. EPS (earnings per share). Brand equity does not stand on its own in a vacuum, and neither does customer equity. They are linked, and you need to show that their is a flow from brand equity into e.g. customer acquisition. 

The more you can show the positive, productive impact between all these strategic marketing elements, the stronger the case for your total marketing spend. The weaker the link, the more work you need to do to increase the value and productivity (efficiency and effectiveness) of your marketing spend.

The first step in meeting the Board's expectations is to quantify all of your strategic marketing elements. I include the following examples in this respect for your information:

Brand Equity quantification and analysis

Customer Equity quantification and analysis

Contribution

Quantification is a bit of a challenge perhaps, but its entirely credible and possible. However, the journey towards meeting the Board's expectations is only halfway complete at this point, as we have not yet analysed the productivity of converting brand equity to customer equity, and in turn converting that to contribution. This will be written up in a following post.

In the meantime, what we have demonstrated here is a quantification of the marketing elements covering some of the issues on the Board agenda of the world's biggest companies. To some marketers, this will have been a huge achievement in itself! But the information is a lot more powerful than it looks at first sight...

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The methodology used to determine marketing productivity is World Class, with the core of the methodology having been presented for global critique to the International Academy of Marketing - an academic, peer review institution with a focus on developing marketing  theory  -  at the University of Birmingham in the UK in 2008. A requirement for acceptance is that the material is a unique contribution to global marketing knowledge, and peer review means that it is global marketing experts that determine whether your material meets these requirements. Since I presented my work for the first time in 2008, the methodology has been continually expanded and refined since then