Marketing is great, when it makes financial sense

Exploring the idea of marketing combined with numbers, let me not even go into the situations where marketers clash with the finance guys for delivering the news of budget cuts and requesting that they have to look into their marketing spend and see what they can take out of the planned marketing initiatives. For this article I will focus on marketing spend management as an example of financial thinking in marketing than exploring other concepts.

As a marketer that is in tune with basic financial numbers, one should understand that levels of marketing spend are as a result of sales revenue and profitability of the brand. If sales are lower than planned and high profitability margins are a challenge to achieve, your marketing spend may be reduced. This would be a measure to control costs in the event where it is harder to increase sales volumes or profit margins. When marketers understand this, they will be different from the marketers who just get annoyed and complain about budget cuts - instead of understanding that they need to ensure that any initiative they execute on their brand must do a sales volume or profit margin improvement job.

This may mean that the job focus becomes more internal to the business vs. external to the consumer by focusing on things such as cost-cutting initiatives within factories, but still maintaining brand quality, product re-engineering or supplier refocus for better margin gains amongst other things. Externally it may mean each and every consumer initiative executed must be developed to do a sales job. This is what makes marketing exciting as it is more than just communication.

However as marketers we do not need to re-engineer our brains and thinking into financial gurus, after all we are consumer champions and we have champions of finance in our businesses. But we need to learn basic financial skills needed in marketing to understand how to manage our brands in a way that makes financial sense. What marketers need to understand well in finance, is the Profit & Loss statement (P&L) because the marketing function is one of the functions in business that has direct influence particularly on the top line of the P&L as well the bottom line. I remember when I was a student, I was taught about the Income Statement but when I entered the marketing world, I started to hear about the P&L. They are both the same thing, but I like the P&L definition as it is straight to the point, in that in business, you either make a profit or a loss.

For marketers to have numbers in combination with marketing and for this perspective to be clear in any marketing team, it is important that top management drives such a culture from top to low levels, so that even new professionals to marketing management clearly understand how their role affects the P&L of the brand. This is because financial thinking cuts across all levels of management in the marketing department. You however sometimes find management, on the client side, particularly disregard the importance of junior marketers to be supported and equipped with basic financial knowledge as well as being diligent at the management of the marketing spend. They miss the opportunity to understand that little tasks that junior management execute can adversely affect the financial performance of their business if not managed well.

These include things such as, the importance of writing a communication brief, being able to understand that most agencies work on hourly rates, so the more the hours, the better the income generation for the agencies. If a marketer writes a brief, it ensure they have seriously thought about the business problem and how marketing can be of a solution. This ensures that the problem is stated in a way that is absolutely clear for the agency's interpretation. It also ensures that the scope of the marketing job is well understood and well time managed to ensure costs do not go beyond what is budgeted for. But some junior marketers do not know that their roles also affect the marketing expense line of their brand's P&L, and why it is important for them to keep to the budgeted spend or that poor management of the budget and marketing partners may have negative effects on the profitability of the entire business.

Businesses deal with financial budgeting, disclosure and management in different ways, depending on the nature of their business as well as management levels. But building a marketing management culture that is combined with numbers can lead to better performance by marketing teams to support the total business. Such a perspective can certainly yield the following benefits, but not limited to them:

1. For the marketing team, especially junior management - meaningful understanding of their roles, for an example to understand their role more than just managing the marketing budget without knowing why they do it except that they should not overspend or underspend.

2. For clients marketing partners - Helps clients get better mileage from marketing partners where they get the exciting opportunity to assist the client with work to solve real business problems than just marketing.
3. For the business - You can better hold accountable your marketing team and drive them to have the financial performance of the business in mind of their day to day job of marketing management. This can also help with a clear and better aligned key performance indicators (KPI) system of the business and individuals.

4. For marketers in general - This can help to earn more respect in the total business by displaying to understand the language of business which is numbers beyond the 'pretty' marketing presentations.