Giving marketing a seat in the boardroom

AICD
June 13, 2013

A new paper makes a case for marketing’s seat around the boardroom table in the new customer-centric world.

The paper, Marketing’s Role in the Boardroom – An Evaluation Framework for Boards and Directors, notes that Australian boards have been asking the wrong questions of their marketers.

Issued jointly by the Australian Marketing Institute (AMI) and Deloitte, it also suggests that directors would benefit from a better understanding of the marketer’s critical role in contributing to business strategy as well as to its development and execution.

“In an era of major digital disruption, where many Australian businesses are responding too slowly to challenges posed by new, internet-based business models, boards need to respond to the increasing power of the connected customer and focus their business strategy and operations on the customer’s needs,” says Deloitte partner and chief marketing officer David Redhill.

“Our recent Board Effectiveness research with chairmen and CEOs of the ASX 200 indicates that many Australian businesses in all sectors are reacting slowly to digitally disruptive change, and that those adapting their models are generally doing so because a competitor has already beaten them to it.

“It appears that the businesses being most profoundly disrupted are those that know the least about their customers, while the ones succeeding are the ones building their knowledge of their customers, deriving insights from their markets, and improving their marketing effectiveness and audience engagement through a continuous data feedback loop.”

The report notes: “For many organisations, marketing is the fuel that powers business strategy. It is intrinsic to how organisations develop and position their services and offerings, approach and deliver customer service and satisfaction, and to how they connect and communicate with other businesses and the community. Ultimately, marketing is critical to how organisations find and keep customers, make money and grow.

“Yet despite its importance, few organisations have granted marketing a seat at the boardroom table; directors have tended to regard it as a curious mix of art and science, less manageable than other functions that boards discuss and monitor.

“Directors may recognise that non-financial measures, such as customer loyalty and brand recognition, are lead indicators of their organisation’s financial health. And, indeed, academic research demonstrates this quite clearly. Yet, the absence of clear, embedded formulae for marketing effects on business strategy success makes it difficult to factor into board governance and oversight.

“Recent research indicates that board directors cite growth, strategy and talent management as the most critical issues Australian boards are facing. It follows then that a board’s oversight of marketing as a driver of growth, a central thread of corporate strategy and a major factor in talent attraction and retention, is critical. It is time to revisit marketing’s role on the board agenda and how to harness it effectively.”

According to the paper, the role of the board with regards to marketing is to:

• Assess the alignment of marketing strategy with overall corporate planning and financial objectives.
• Ascertain that marketing planning has comprehensively identified all major marketing potential and environmental threats, and optimised this within the opportunity set.
• Ensure the chosen strategy is executable and appropriately resourced and supported. Review results and outcomes on a regular basis.

However, key marketing activities and programs such as market research and promotional campaigns should be understood by the board without a requirement for direct, day-to-day oversight or management.

The paper suggests eight steps a board can take to assess current and future marketing performance:

1.Identify marketing assets. Understand the potential sources of value that can be leveraged from the company’s brand, customer base and collaborative relationships.
2. Identify the metrics being used to measure the health and performance of each marketing asset. Understand the commercial rationale behind the metrics used.
3. Identify changes to these existing metrics and the factors influencing these changes – for example, evolving market dynamics, ongoing competitor actions and shifts in business strategy and operations – relative to the previous period and strategic plan.
4. Assess the value added by marketing in the previous period. Investigate the implications that changes in marketing assets have had on business value, relative to strategic plan and other possible past actions.
5. Identify significant market issues, opportunities and risks and how they can be managed.
6. Assess whether the current marketing plan adequately takes advantage of opportunities available, relative to other feasible alternatives.
7. Evaluate period performance forecast based on planned marketing investment. Establish projected targets for marketing assets at the end of the period.
8.Assess whether the proposed level of investment in marketing assets is appropriate to realising strategic plans.