RELATING MARKETING TO KEY MANAGEMENT QUESTIONS
First, it may be helpful to assume the role of a very senior manager, or member of the board of a firm. In that role, based on the way businesses operate, there are only four main issues. That is, as a senior manager there are basically four tools available in order to manage the business. These can be called credos. The first credo is to make the business grow. If the firm is a publicly-held company, it must be grown at the level of the market analysts, not at the satisfaction of the employees or management. Market and marketplace expectations must be met.
A problematic example of this would be John Chambers, the CEO of Cisco, the technology firm. He is still growing the Cisco business at about 20 percent per year. Since the previous growth rate of Cisco was 60 percent per years, market analysts have begun to discredit him and the shareholders began to lose faith. But this is reality. Many CEOs have been discarded because they did not grow the business to the satisfaction of the analysts and ultimately the shareholders. The second credo is to remember that only two things really matter: cash flows and shareholder value. The question in the minds of senior managers is: What are marketing, communication and branding doing to either increase cash flow or drive shareholder value? Unfortunately, the current yardstick for this evaluation primarily in the short term, is current cash flows. In addition, the returns marketing creates are generally not final returns or outcomes. That is because today, almost everything in the organisation is adjusted to determine its net present value through some type of discounted cash flow calculation. Thus, as a senior manager, what the marketing people do in the future is interesting, but the primary concern is what happens now, in the present – current cash flows that hopefully can be turned into future shareholder value.
Much of the problem with marketing is that there is continual talk about investing in the brand to build brand value. But, consider this: as a senior manager, you can invest US$100,000 in a brand building programme today, and then, based on a net present value calculation, determine that five years from now that investment will only be worth US$60,000. That’s a difficult decision for a manager to make, but that’s what discounted cash flows are all about. How much money would any senior manager want to put into marketing, communication and branding under that scenario? This is the burden of the marketers.
They make promises for the future. But, to the organisation, the future does not
matter nearly as much as the present. Certainly not in a cash flow or a discounted cash flow and a net present value market place. One of the biggest problems marketers face therefore, is promising future value when the company is living in the present. The third credo is that a senior manager (CFO) generally has three choices for investments to grow the company. He, or increasingly she, could invest it in (a) R&D for new products, to bring new items onto the market, to grow geographically, to recruit, etc. or (b) it could be invested in supply chain improvements. That is, software to reduce the internal and external friction, cut the time, get to market faster, etc. That would be positive, because the money saved would drop directly to the bottom line; or (c) the CFO could give the money to the marketing and communications people.
RELATING MARKETING TO KEY MANAGEMENT QUESTIONS
First, it may be helpful to assume the role of a very senior manager, or member of the board of a firm. In that role, based on the way businesses operate, there are only four main issues. That is, as a senior manager there are basically four tools available in order to manage the business. These can be called credos. The first credo is to make the business grow. If the firm is a publicly-held company, it must be grown at the level of the market analysts, not at the satisfaction of the employees or management. Market and marketplace expectations must be met.
A problematic example of this would be John Chambers, the CEO of Cisco, the technology firm. He is still growing the Cisco business at about 20 percent per year. Since the previous growth rate of Cisco was 60 percent per years, market analysts have begun to discredit him and the shareholders began to lose faith. But this is reality. Many CEOs have been discarded because they did not grow the business to the satisfaction of the analysts and ultimately the shareholders. The second credo is to remember that only two things really matter: cash flows and shareholder value. The question in the minds of senior managers is: What are marketing, communication and branding doing to either increase cash flow or drive shareholder value? Unfortunately, the current yardstick for this evaluation primarily in the short term, is current cash flows. In addition, the returns marketing creates are generally not final returns or outcomes. That is because today, almost everything in the organisation is adjusted to determine its net present value through some type of discounted cash flow calculation. Thus, as a senior manager, what the marketing people do in the future is interesting, but the primary concern is what happens now, in the present – current cash flows that hopefully can be turned into future shareholder value.
Much of the problem with marketing is that there is continual talk about investing in the brand to build brand value. But, consider this: as a senior manager, you can invest US$100,000 in a brand building programme today, and then, based on a net present value calculation, determine that five years from now that investment will only be worth US$60,000. That’s a difficult decision for a manager to make, but that’s what discounted cash flows are all about. How much money would any senior manager want to put into marketing, communication and branding under that scenario? This is the burden of the marketers.
They make promises for the future. But, to the organisation, the future does not
matter nearly as much as the present. Certainly not in a cash flow or a discounted cash flow and a net present value market place. One of the biggest problems marketers face therefore, is promising future value when the company is living in the present. The third credo is that a senior manager (CFO) generally has three choices for investments to grow the company. He, or increasingly she, could invest it in (a) R&D for new products, to bring new items onto the market, to grow geographically, to recruit, etc. or (b) it could be invested in supply chain improvements. That is, software to reduce the internal and external friction, cut the time, get to market faster, etc. That would be positive, because the money saved would drop directly to the bottom line; or (c) the CFO could give the money to the marketing and communications people.
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