These days finance directors understand the importance of brand building better than they did five or ten years ago, just as marketing directors are more accountable and commercially aware. The advances on both sides have done much to bridge the historic gulf between them, and the drivers have been the growing importance of brands (intangibles account for around 70% of the value of a typical FTSE-500 company) and the shareholder value movement, which has united all parties behind the objective of delivering long-term future cash flow.
But big and costly marketing “mistakes” still occur. Among high-profile examples of recent years was the millions of pounds British Airways spent daubing its aircraft tailfins with ethnic designs during a period of plummeting sales and union unrest, apparently ditching the very Britishness that was such an important part of its brand equity. More recently, the Post Office’s change of name to Consignia was lampooned, with the decision to change the name again merely adding fuel to the flames.
And there are plenty of other examples from the mid-1990s. Hoover had to dig deep into its pockets after wildly underestimating the uptake of its free flights promotion, Coca-Cola’s New Coke launch flopped, and Procter & Gamble made great PR capital out of rival Unilever’s much-vaunted Persil Power, which, as P&G pointed out, rotted clothes at high temperatures.
Accountants and marketers are very different people. It’s a generalisation, but the accountant’s stock in trade is hard numbers and factual analysis, while marketers are more comfortable with emotional values and subjective ideas, prizing flair and creativity above rigour and discipline. This makes, of course, for a very powerful combination when things are going well. But when times are tough, both sides can go native, and one of the most tangible manifestations of this is that the marketing director is a convenient scapegoat when there is a “marketing disaster”.
However, just as FDs justifiably share the glory when there are marketplace successes, they must also share the blame for failures. Finance directors are just as capable as marketers of being seduced by the clever ideas and blandishments of agencies, consultants, advisers and other snake-oil salesmen – look at the millions of pounds being poured into the apparently bottomless pit of customer relationship management (CRM) systems, few of which have delivered the promised benefits.
The entire management team is jointly responsible for growing a business – which involves taking risks and controlling those risks within sensible parameters. Marketing may have had the idea and executed it, but without the endorsement of the rest of the board, the idea would never have got off the starting block. We can safely assume that the FDs of BA, Consignia, Coca-Cola and the like didn’t miss the board meetings at which the aforementioned doomed initiatives were given the green light.
Hugh Davidson, author of Even More Offensive Marketing and a visiting professor at Cranfield University School of Management, argues that, rather than sniping and trying to catch the marketing director out, FDs would be better employed encouraging their marketing colleagues to have more ideas and take more risks. He says: “Finance directors want to fiddle and meddle and give advice and be involved, but they never stick their head above the parapet and take responsibility. They are paid a lot of money for taking very few risks. They play safe and shift the blame for anything that goes wrong to the marketers.”
Peter Doyle, professor of marketing and strategic management at Warwick University Business School, agrees, arguing that finance directors’ historic cost-cutting, backward-looking, risk-averse mentality has done more to destroy UK productivity over the past few decades than anything else.
“Growth relies on marketers who understand customers and markets,” he says.
The way to conquer the persistent and lingering distrust between the two sides is to adopt a common language that strips the emotion out of finance/marketing conversations and relationships. “The answer lies in data-driven marketing,” says Tim Ambler, senior fellow at the London Business School. He urges finance directors to “push very hard” for marketers to show quantitative evidence for what they want to do and the targets they want to achieve, and to measure their achievements against those targets.
But if marketers are to frame their marketing proposals in value-based management terms they need to be taught how to do it. Value-based management, which seeks to maximise shareholder value by producing returns in excess of the cost of capital, is not complicated. However, Doyle says: “Most marketers won’t have been trained in it and they need educating.”
But the onus on training doesn’t just lie with marketers. FDs need to understand what marketing is and what it can deliver. “Marketing is far more than the trappings, such as advertising and PR. Real marketing is about providing great customer service and high-quality products – and FDs should focus on helping marketers with that,” says Doyle.
However, there are concerns that the drive to get marketers to quantify what they do in hard financial data is forcing them into the role of glorified project managers – hampering the creative spark and lateral thinking that makes them important.
Peter Shaw, marketing director at design and marketing consultancy Corporate Edge, says: “You can’t judge everything by rigid performance measures because then you would never do anything differently and that would lead to a stagnant business.”
The best finance directors strike a balance between vision and judgement, argues Shaw. “They need to allow marketers space for creativity and entrepreneurialism, while being able to rein them in when necessary,” he says.
Martin Harrison, FD at ICI Paints, is one who tries to strike that balance.
“If you have good marketing people and you trust them, at the end of the day there are some decisions that have to be an act of faith,” he says.
Phil Bentley, group finance director at Centrica, disagrees. He argues that the wealth of sophisticated data available to companies these days means that no decision need be left to chance. “You can always run tests,” he says.
Whether to rely on data or allow space for instinct looks set to be a bone of contention between marketing and finance for some time yet. But the fact remains that for every marketing disaster there are hundreds of risks that pay off. The Pru hatched Egg; Zeneca and Diageo have both lasted, as names and businesses; and, during its launch, Orange was the first mobile phone company not to feature a phone in its advertising, yet its branding was hugely successful.
Doyle says:”It’s hard to think of a modern British industry – other than, perhaps, pharmaceuticals – that leads the world in the way that Microsoft or General Electric do.” For him, the argument is simple: you don’t get marketing successes without taking risks, which means dealing with the possibility of failure – and the UK is too risk averse.