‘Return on ideas’ provides a framework for maximising value from imagination. By Tim Cooper, editor, e-magazines, CIMA.
A groundbreaking new report proposes a framework for maximising the performance of marketing initiatives.
The sponsors of the report, the Direct Marketing Association, the Chartered Institute of Marketing and CIMA, say the report, called ‘Return on ideas’, issues an urgent call for better working practices between finance and marketing.
Organisations around the world are in the middle of a once-in-a-lifetime upheaval. The temptation may be to slash marketing budgets. All three bodies are concerned that many companies do not have the right blend of marketing and accountancy acumen to either establish the value of their marketing campaigns or account to shareholders on the effectiveness of marketing spend or investment. Hence it is vital that marketing and finance work jointly to demonstrate the real value of marketing to the bottom line.
Rigorous framework
Professor Robert Shaw, honorary professor of marketing metrics at Cass Business School and director of the Value Based Marketing Forum, authored the report. Professor Shaw and his team have created a so-called Infinity Model that links imagination, prediction and demonstration of value in a rigorous framework for ensuring that marketing ideas perform well.
The report provides good practice guidelines and checklists for those involved in the process, including marketing, sales, research, management accountants, managers and directors. It also includes case studies showing how these can work in practice, plus a wealth of other guidance.
Wide-ranging research
‘Return on ideas’ is based on a study of what works in over 100 organisations.
The role of different people in the organisation - including management accountants - is laid out clearly.
According to the report: 'Imagination is fundamental to marketing, creating value by finding better ways of spending marketing money. Ideas wear out, markets evolve, customers and competitors change, campaigns slow down, so marketing spending patterns must constantly adapt to drive value. Imagination is the domain of management accountants as well as marketers. Both must be at ease with imaginative, speculative marketing ideas. Imagination is not, however, just about novelty or artistry for its own sake, ideas must create financial value too.'
At the launch of the report, Professor Shaw said: ‘There has been a stand-off between marketing and finance. Both parties speak different languages. They do meet but neither is fully communicating with the other. We wanted to break this log jam and create a better common dialogue.’
Importance of prediction
This challenge needed a framework and methodology to answer it. ‘This is not a 500 page guide to econometrics. Instead we set out checklists that finance and marketing should be answering together,’ said Professor Shaw.
‘As we talked to companies about how they get good value from affordable marketing, we found that very often the ideas are quickly lobbed over the fence and go out to the market. There may be some attempt to demonstrate whether they worked, but very often either no-one knows whether they have worked, and they just continue, or there is some evidence and people go back to imagining.’
The research however found one or two companies where, once they’ve imagined something great, there is an effort to predict whether it adds value. Diageo, for example, have a very simple embodiment of this framework. Whenever a new idea comes into existence, the idea owner has to make a prediction of why it will work before serious budget is allocated.
They have to provide evidence that they have tried to pin down how powerful an idea it will be – not just through to brand awareness or customer satisfaction but all the way to a financial result. Once the idea has been accepted, Diageo then sets aside part of the budget towards measuring whether the idea worked in practice – this is the demonstrating value part of the equation.
The initiative is measured and, if it succeeds, it continues. If not there’s a learning process whereby Diageo gets continuously better at predicting. Thus a crucial part of the Infinity Model is feedback between imagination, prediction and demonstration which lead to continuous improvement.
Working examples
Professor Shaw said: ‘We couldn’t come up with a common set of guidelines for every industry about what to measure because every industry is different.
‘What’s important is that you make the best efforts possible to go through each of those three [ideas, prediction and demonstration]. And you’ll see questions in the check lists to make sure you are doing this.’
He mentioned examples of how this worked or failed in practice. Bic launched some very imaginative products, such as Bic perfume, based on selling to its strength of packaged products near the point of sale in shops and kiosks. But they didn’t cover the predict stage – researching and testing whether people would want to buy perfume in that way - so it didn’t work.
In contrast the Heinz upside down tomato ketchup bottle was launched on sound research, financial cases and predictions. Heinz found out what people didn’t like about the old bottle, did some more research which allowed them to ‘quantify the size of the prize’, put it to the finance department who could see that it made sense, and ‘the rest is history’.
Professor Shaw concluded: ‘This report has a core set of simple, common sense questions that many people are not asking themselves. This will allow a reasonable dialogue between marketing and finance. We’re not talking about hugely complicated techniques that are unaffordable to all but the largest companies [this can be used by any size of company].
‘But once [finance and marketing] are talking together about these questions you will be able to make your marketing more affordable and certainly less wasteful.’
Read the full 'Return on ideas' report on our Resources web page.
May 2009