Patrick Coveney, CEO, Greencore Group and non-executive chairman, Core Media, on the importance of marketing as a driver of corporate performance.
Many of us know and love the cult US TV series Mad Men. It depicts life in a New York advertising agency in the 1960s and 1970s; it tells a tale of sharp suits, glamorous lifestyles and intrigue. For a lot of people, even CEOs of large multinationals, Mad Men might seem to offer an insight into the world of advertising today.
The reality couldn’t be further from the truth, but misconceptions like this are partially responsible for how marketing, and advertising in particular, are among the least understood of the services and strategies available to drive corporate performance.
The lack of real belief, in many boardrooms, regarding the critical role of marketing to drive business growth is puzzling. This may have been excusable in the distant past, when measurement techniques were more intuitive and less reliable, but that is no longer the case.
Since becoming involved in the advertising industry I have been impressed by many things, but I have been particularly taken by the ability now to empirically validate marketing and advertising effectiveness, primarily through econometric modelling. Much of this work is carried out by a new breed of marketers – data science professionals and teams that look radically different from the caricatures in Mad Men.
The facts are compelling. A study conducted by Deloitte in 2013 found that €1 spent on advertising generates €5.70 for the Irish economy. That’s an immense contribution of €5.3bn to Irish GNP1, achieved through advertising’s capacity to drive demand, spread innovation and foster competition.
Looking further afield, a McKinsey study in 20122 found that advertising fuelled 15% of growth in GDP for G20 economies between 2002 and 2010, while only accounting for 2% of economic spend – a remarkable finding.
The return for Irish businesses is equally impressive: the data team at Core Media have found that €1 spent on advertising typically delivers a gross sales return of €8.26 and a net return on investment of €5.443 for brands operating in Ireland.
The lack of real belief regarding the critical role of marketing to drive business growth is puzzling
Statistics like this provide a clear case for marketing, but we shouldn’t rely on cold analytics alone to justify its worth. The power of marketing is all around us, and you don’t have to look further than Orchard Thieves cider, which won the Grand Prix at the recent Irish Advertising Effectiveness (ADFX) awards, to see its true impact. Here is a brand that broke into a market dominated by Bulmers and captured a market share of 11%, after only 15 months – an outstanding achievement in such a short period.
Orchard Thieves is a great product, but there have been many great ciders that have failed to succeed in the past. Make no mistake, this was a brilliantly researched and executed marketing triumph, which has led Heineken to launch the brand in the Netherlands and South Africa using Irish-produced marketing assets. Quite a success story.
GETTING ON BOARD
With all of this evidence you would think that marketers would be in demand by boards, but this is not the case; they are severely underrepresented on the boards of large companies.
An article in Forbes4 earlier this year brought the issue into sharp focus. In a study of S&P 1500 US boards, only 2.6% of the 65,000 board members had managerial-level marketing experience. This is an astonishing statistic. In the UK, only 21% of FTSE 100 CEOs had a marketing background in 20155 and I have no reason to believe that the situation is any better in this country. Not surprisingly, the US study found that boards with marketing-experienced members tended to be more successful, delivering a three-percentage point increase in total shareholder return over a board with no marketing-experienced directors.
The absence of marketers from boards cannot be good for companies; it means that a critical part of the business is not being given sufficient voice or respect and it goes a long way to explain why marketing budgets are thought of as an expense rather than an investment. Boards tend to be dominated by people with financial or engineering backgrounds who are not necessarily trained to understand the consumer, the competitor landscape and external environment in a way that a skilled marketer can.
Boards often explain this shortcoming by saying that marketing is a tactical rather than a strategic pursuit and therefore has less of a place in the boardroom. This is plainly ridiculous. Of course, this challenge cuts both ways – marketers need to ‘up their game’, to make their input, agenda and style more relevant to their board peers. What’s needed here is to configure senior management teams and corporate boards with complementary skills; to embrace diversity of thought; to balance creativity, analytics and performance discipline.
Advances in data science will bring us to a point where marketers will be able to predict outcomes
According to Dr Philip Kotler, marketing is “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” Surely, this is the essence of strategy.
Of course, the role and practice of marketing is changing and the ultimate destination is to get to a stage where marketing insights, and creative ideas, are devised using data analytics as a core ingredient in the decision-making process. The advances in data science will bring us to a point where marketers will be able to predict outcomes for brands based on thousands of case histories and billions of rows of data.
In such a hyper-digitised age, when brand identity is vulnerable and loyalty can’t be taken for granted, it is essential that we recognise the value of marketing and place it at the centre of our businesses. While embracing the opportunities that technology and data analytics now offer, let’s not forget the importance of creativity and innovation to business performance. What we advocate is the fusion of art and science, not some bogus trade‑off between them.
The reality of marketing and advertising, with its renewed emphasis on data analytics, mightn’t be quite as glamorous as Mad Men, but I’m pretty sure it delivers better, client-focused results and I’m looking forward to being part of the journey.