As businesses evaluate revenues and forecast their spend for the coming year in light of the ongoing impact of Covid-19, marketers will be asked to spend more wisely and clearly demonstrate how they are improving the efficiency and effectiveness of their marketing activities.
Our client Nomey recently shared a Marketing Week article1 with us, which highlights the ways in which marketers are going to need to validate their activities in response to a deeper evaluation of spend and return. In the article, MoneySuperMarket CEO and former marketer, Peter Duffy predicts that “the spend that has gone out of the industry [due to Covid-19] will inevitably come back in, and it’s going to be analysed in a way that it’s never been analysed before.”
Marketers are going to have to really demonstrate that incremental spend is going to drive return to shareholders and is actually going to do what shareholders want, which is begin to significantly drive revenue and begin to excite customers to buy products that they haven’t been for a period of time.
Yes, every marketing dollar needs to create value, although it’s not always sales value. The fly in the ointment that the Marketing Week article doesn’t discuss is long-term intangible asset value and how marketing and brand development contributes to its creation.
In 1975 intangible assets such as data, brands, content, code, industrial know-how, design rights and regulatory approvals, accounted for 17% of a company’s value. Today it’s 90%, with intangible assets the primary drivers of competitive edge and company financial performance2. According to EverEdge who are global intangible asset specialists, “correctly identified, valued and leveraged intangible assets can dramatically enhance competitive edge, unleash company financial performance and materially boost investment returns.”
Therefore, more correctly, marketing must always be creating value, be that via revenue or increasing intangible asset value or a combination of both.
Transparency of contracts
Central to the discussion of measuring value – tangible and intangible – is the issue of transparency of contracts, which Duffy also touches on in the article. The lack of clarity and understanding of supply partner contracts is causing damage between the client-agency relationships, for example media and advertising contracts including how they are set up and who is marking what up.
Also under scrutiny are the transparency of charges, or rather lack of. The smoke and mirrors of old ad-land ways are being blown away as clients seek more transparency around who is earning what. The lofty days of 20% hidden media commissions are long gone and clients are searching for fairer models and ways of doing business.
Objective Director Anna Leary says Objective’s business model is ahead of the curve when it comes to contractual transparency.
We on-charge external costs to clients at net and organise transparent supply partner relationships on behalf of our clients, for example, media commissions being fully rebated and being fee-based.
Accountability and measurement
It is our view that marketers and agencies need to be more accountable. The first thing is to ensure marketing activity ties back to a business level goal. Secondly, marketing activity needs a robust strategy, so the investment in this increases ROI.
- Plan tactical implementation to be on-strategy to ensure synergy between activity and channels.
- Use data to set benchmarks and monitor activity. It is more available than ever before and needs to be presented in a way that you can determine both insights and actions.
- Ensure what you are measuring is relevant and avoid ‘vanity metrics’. There is no point having 5,000 followers when none of them are in your target segment. It’s better to have 50 that are.
Measurement is easier said than done with intangible asset value that requires research or a well-timed valuation. The ultimate test is what someone is prepared to pay for your brand and business.
So yes, scrutinise marketing spend, but make sure it is in light of your business strategy, and ensure you have adequate measurements to demonstrate how the investment increases ROI.