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Marketing questions from the Board

10 questions boards are asking their


marketing colleagues
Directors no longer tolerate sloppy, unprofessional marketing departments that fail to justify
the often-substantial sums of money they spend. The following are ten crucial questions that
board members are increasingly demanding answers to. Not all of them will be relevant to all
markets, but marketers must be able to answer the relevant ones

1 Do we know and understand our key markets?

We define our markets in terms of needs satisfied, not the products we sell.

We map our markets showing product/service flows, volumes/values in total, our


shares, and draw critical conclusions for our company.

We know what the key decision points are. In particular, we understand the 20/80
rule (that 80 per cent of your profit comes from 20 per cent of your products), as this
is where segmentation is done.

2 Do we address real segments in our markets?

We conduct proper needs-based segmentation rather than relying on a priori nonsense


such as socioeconomics (not all As behave the same); demographics (not all 18 to
24-year-old women behave the same); geodemo-graphics (not everyone in the same
street behaves the same); and so on.

We also understand the needs of members of each segment.

3 Do we know what our sources of differentiation are in each of the principal segments in our key target markets?

We regularly check on the buying motives of segments and compare how well our
company performs against our main competitors.

We act on the strengths and weaknesses that we identify. We ensure that our strengths
create value for us and the customer and that they are difficult to copy. We work hard
at tackling the weaknesses that are meaningful to the customer.

We regularly monitor the opportunities and threats by segment to take advantage of


the opportunities and to nullify the threats.

4 Do we all agree where we should target our limited resources?

We prioritise specific segments in each market, having classified them all according to
relative potential for growth in profits in each segment over the next three years and
according to our companys relative competitive position.

Marketing questions from the Board

5 Are our objectives for revenue growth and market share


realistic?

For attractive markets (in other words, those in which there is potential growth in
sales and profits in the next three years), our objectives are to improve net present
value, while investing in growing/retaining our competitive position.

For attractive markets in which we have few strengths, having chosen the better ones,
our objectives are to improve our competitive position by investing in them.

For unattractive markets in which we have few strengths, our objectives are to
maximise net-free cash flows.

For unattractive markets in which we have strengths, our objectives are to minimise
costs consistent with retaining our competitive position and to maximise net-free cash
flows.

6 Are our strategies for product development, pricing, customer service, channel management and promotion consistent with our objectives?

Our strategies match the objectives referred to above. For example, the majority of the
available budget is channelled into attractive markets in which we have strengths,
followed by unattractive markets in which we have strengths, followed by attractive
markets in which we have few strengths in that order.

7 Have we dispassionately assessed the risks associated with our strategic marketing plan?

We assess the risks associated with our market forecasts by using the long-established
tools of marketing, such as product life-cycle analysis.

We assess the risks associated with our declared strategies by testing whether we are
addressing needs-based segments with specific offers and whether we are leveraging
our strengths, minimising our weaknesses, taking advantage of opportunities and
nullifying threats.

We assess the risks associated with our declared budgets by checking our forecast
margins against historical margins and by ensuring that we are not setting unrealistic
objectives, such as rapid growth in static or declining markets.

8 Have we calculated whether our strategic marketing plan creates or destroys shareholder value?

We work with our senior accountants, having taken account of the risk-adjusted, netfree cash flows from all products. We then calculate whether these cash flows are
greater than the cost of capital. If they are, we are creating shareholder value and can
quantify this.

9 Have we agreed the metrics for measuring market effectiveness?

We know the levels of promotional expenditure necessary to maintain our current


level of sales (maintenance)

Marketing questions from the Board

We subject any promotional expenditure over and above maintenance expenditure


(investment/growth expenditure) to net present value calculations.

We know the difference between lead indicators (such as actions that cause sales) and
lag indicators (outputs such as sales growth).

As a result we know what needs reporting, why, when, how often and to whom it
should be reported.

10 Are we happy with our marketing planning processes?

Our plans demonstrate:


1. A deep understanding of our markets
2. A clear understanding of needs-based segments
3. A clear prioritisation of our objectives and strategies
4. Quantified proof that they create shareholder value
5. They are clear, creative and interesting
6. They enable us to allocate our scarce resources differentially
Professor Malcolm McDonald is emeritus professor at Cranfield University School of
Managment and one of the UK's leading authorities on marketing.

8 ways to reduce complexity


The finance function sits at the hub of a complex network of systems and processes, from
financial reporting to performance management. Perhaps its time to de-clutter, says Richard
Young
1 Grasp the scale of the problem

There are two types of organisational complexity: the kind that creates value to give your
firm a competitive advantage or helps solve knotty problems, or theres bad complexity.
Most organisations start with simple path dependencies, explains Simon Collinson,
professor of international business and innovation at Warwick Business School. Then you
develop internal processes to support those. Then you get layers of management or you roll
out new IT systems, or regulations change. Complexity is then embedded and selfreplicating.
Prof Collinsons research among the largest 200 global companies showed theyre losing an
estimated 10.2 per cent of their profit (EBITBA) as a result of harmful complexity in their

Marketing questions from the Board

business. So its well worth looking at your own finance function and across your
organisation to see whether reducing complexity can help.
2 Take ownership

Finance is probably the best-placed team to address complexity. The FD is the guardian of
profit and that means the finance function must lead on removing complexity, says Melvin
Jay, CEO of consultancy Simplicity.
Its often the management accountants who have the right tools for this, too.
For example, its important to use valuation techniques to assess exactly which activities cost
the most and generate the most value.
And, Jay adds, because finance sits at the hub of so many information flows it can trace
complexity: It can be as simple as being aware of what reports the team is producing. Then
you need to look at what that information is doing in the rest of the business. Is it supporting
value-creating decisions or is it just being ignored?
3 Carry out an information audit

The first task is an information audit. For example, you can use tools to see where
information is flowing and whos actually using it and then why, says Collinson.
A typical example in a global business is finance teams offering departmental, then
organisation-wide, regional, national and finally global versions of reports, all containing
more or less the same data. And in many cases theres a perceived demand for information
thats actually not helping anyone to add value.
He cites one company in the automotive sector which cut right back from 200 reports to zero
then added them back as managers requested the information, says Collinson.
4 Focus on value

Its easy for each individual or department to understand how they contribute to profits in
smaller organisations, but in larger organisations that visibility declines rapidly. That makes
transparency and self-analysis valuable tools in eliminating complexity.
Theres no reason why the principles of lean manufacturing cant be applied more generally
to the processes governing the back office functions, says Paul Lee, CFO at warranty
provider Domestic & General.
That means you have to identify what value every procedure generates, then focus your
efforts on the ones that add it.
And there are usually quick wins. For example, if the processes around closing out a
transaction are time-consuming, youre taking salespeople away from customer-facing
activities, says Jay.
5 Be clear about strategy

Framing the big picture more simply can help. The organisations strategy is the acid test for
what actually adds value, says Collinson.

Marketing questions from the Board

If its clear and coherent it should offer middle management and frontline staff well-defined
boundaries for their decision-making.
Thats endorsed by Richard Hutton, group finance director at food retailer Greggs. We have
a statement that outlines our values and how we like to behave. Thats what guides people
and what comes across in our advertising. Its one and the same.
In other words, its simple for staff to check their activities are helping to deliver on that
strategy rather than just adding complexity.
6 Get the systems right
In theory enterprise-wide IT systems ought to reduce complexity by automating processes,
making it easier to disseminate the right information to people that need it.
But because technology makes it easy to do things like run off reports, for example its
common to see over-engineered systems, says Jay.
Why not design the system with 20 per cent of the features or capabilities to cover 80 per
cent of situations, then manage the rest by exception?
7 Change behaviour and culture
Its one thing to talk about simplifying the business. But its better to show people how to be
more efficient rather than telling them, says Collinson.
Equally, some complexity actually creates competitive advantage. So this isnt about an atall-costs efficiency drive.
If the finance function is addressing obvious areas of complexity rather than simply nagging
about costs, the project will go much more smoothly.
Ultimately, this is a question of leadership and behaviour, says Jay.
8 Savage pruning
If its proving difficult to unpick the value-enhancing complexity from the mesh of
interconnecting systems and processes it might be time to take a drastic approach.
Outsourcing can help.
One good method we use is provocation getting management to create a process or even
a whole business from scratch, says Jay.
And dont be afraid to prune hard in your own team, too. The key question for finance
people is, why are we producing all these reports? says Lee. You have to look at whos
getting them and ask directly how theyre being used.
93% OF CEOs SEE SUSTAINABILITY AS CRITICAL TO THEIR
COMPANY'S SUCCESS (SOURCE: ACCENTURE)
THE SUSTAINABILITY ISSUE: