In a changing market where buyers are in control and relying on authentic ethical marketing to make buying decisions, it is essential that marketing is included as a critical component of every business and on the agenda for the board of directors. But how do you ensure that marketing is seen as important and necessary as any other strategy?
Usually, board meetings include little or no discussion on marketing. Marketing by nature is a very interesting topic and it's easy to be distracted by elements such as communications, visuals, analytics and spending without actually considering how those elements all align with the strategy or link to shareholder value. Very often the wrong questions are asked or misguided information is received from marketing.
When businesses fail, there is always a focus on the shortcomings of financial governance, but what about marketing governance? Marketing governance may not immediately harm a business, but over time, the lack of governance in marketing can damage the business and shareholders.
The primary mandate of directors is to protect and improve shareholder value, so understanding how marketing can create new shareholder value or potentially how marketing can put shareholder value at risk should be essential for directors.
There is no doubt that marketing contributes to growth. 77% of B2B purchasers said that they would not even speak to a salesperson until they had done their research (The Corporate Executive Board), in fact over half (57%) of the selling process is completed for buyers before a business even has a chance to interact with them. 93% of B2B buying processes begin with an online search and 94% of B2B buyers will research online before finalising a purchase. So which department do you think has a bigger impact on sales revenue growth?
Marketing now has a much bigger role to play in closing sales. Most businesses focus on sales to increase growth as they believe sales is a revenue driver, and that is how we have done it for years. Marketing has always been seen as a cost centre, an expense to the business, yet in today's market, marketing is contributing more and more to closing sales.
Directors need to ensure that marketing is on top of changes to target market definition, pricing, positioning, advertising, product diversification, sales effectiveness, distribution channels etc. Directors also need to understand how revenue will grow from inorganic growth such as mergers or takeovers to access new markets where there may be a once-off effect as a result of a specific marketing initiative.
It is important to acknowledge that marketing can also decrease shareholder value. Directors must be aware of the early signs and manage the risk accordingly. Marketing can harm shareholder value when it is not aligned with the overall business strategy.
What if marketing has already focussed on the wrong target market with the wrong value proposition and the wrong message? Unfortunately, when poor marketing performance results are presented, it's often irreparable. By the time mistakes and misalignment are identified, it's too late and too expensive to remedy. The board needs to be across the anticipated timing and level of results from growth, receive reassurance of the methods by which results are to be accomplished, and understand what the level of investment in marketing will be and the impact it will have on shareholder value if not achieved.
A proactive approach is necessary to ensure that marketing does not hurt the business and shareholder value. Thus, governance in marketing is about measuring investments made to deliver the best value they can and ensuring those responsible for marketing are accountable for the investment and the results. Marketing should think and act strategically when it comes to changing business models, disruptive technologies, changing industry trends and changing customer behaviour. It should be a warning sign to directors if strategic thinking is absent and there is only a focus on the day-to-day challenges.
Marketing governance is a structure of policies, procedures and processes used for the optimisation of the management of marketing. Through marketing governance, the board can ensure that the marketing strategy aligns with the business strategy, that goals and objectives are mapped to quantifiable metrics that can be measured and that there is increased accountability and support from senior management.
Many businesses and boards would benefit from the representation of an independent marketing director with an objective view to ask questions and make logical assessments of the answers provided. Furthermore, the business and/or board should consider an annual or even quarterly marketing meeting with marketing executives to confirm the anticipated timing and level of results from planned growth, receive reassurance of the methods to be deployed to achieve the desired results, and understand the impact of the marketing investment on the business.
Marketing governance is a huge undertaking, but well worth the investment. It reinforces good governance by ensuring that marketing performs a strategic role, so it can fulfil its purpose of improving shareholder value.
If you want to discuss governance, I would love to connect – comment below or contact me.