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March 11, 2016
Plans and planning – an essential waste of time?
“I have always found that plans are useless but planning is indispensable”
So said Dwight Eisenhower, in reference to fighting battles. I’ve heard this quotation repeated several times recently in relation to business planning. Entrepreneurs in particular are being encouraged to dispense with plans – and in support of this argument the second half of the quotation is often omitted – and simply trust their instincts. Usually there are several examples trotted out of start-ups that had no plan but rocketed to success – but there’s no corresponding list of the businesses that failed because they hadn’t done any planning. The idea is that plans are something large, inefficient and bureaucratic organisations do; dynamic businesses, packed with “real guys” (see earlier posting on re-branding and real guys) just get on with things.
Of course, planning can be an excuse for a lack of action – too much thinking, not enough doing, too much theory, not enough reality. And sticking rigidly to plans when circumstances change – or the plan is clearly wrong – is simply idiotic: this surely is the point Eisenhower was making – the world is sufficiently unpredictable to make fixed plans useless. That doesn’t mean the process of planning is useless: it’s a crucial management discipline to set goals and test different scenarios – so when the unexpected does happen, there’s some sense of direction and continuity. Without planning, a business is likely to be constantly reacting to events, rather than managing them.
Marketing planning is no different. A lot of marketing, especially in professional services or institutional financial markets, tends to be ad hoc and purely tactical – reactive, in response to sales demands or competitor activity. This is particularly true of market-led businesses where there is often a view that market movements dictate all activity and therefore any plan becomes obsolete as soon as it’s written. This is a mistake: of course companies can’t completely buck the market cycle, but better planning, underpinned by the foundations of a clear position and good research, will ensure a smoother ride.
So follow Eisenhower’s dictum, and don’t dispense with the planning process. Just make sure it’s clear, as simple as possible, and relatively flexible.
Marketing’s value in creating assets
Lucian Camp - expert in financial services marketing – once commented with his customary wit and insight on the inability of marketers to market themselves or their function internally – highlighting the conflict of right and left brainers within an organisation. (read his latest comments – always worthwhile - http://www.luciancampconsulting.com/luciansblog/)
There are various reasons why this is a perennial problem, not least the multiple definitions of marketing which leave people uncertain as to what they really do (see earlier post), and it got me thinking about how marketers should address it.
A lot of marketing is seen as a way of increasing sales in the short term, but one way to get the attention of senior management is to demonstrate how to increase the value of the company in the long term by taking a more strategic approach to marketing.
The concept of brand equity is usually well established in large organisations but less so in privately owned businesses or partnerships, where valuations may be based purely on multiples of profits or revenues: being able to demonstrate to potential buyers or investors that there are strong business assets driving those profits should increase the value placed on the business.
Many of these assets are, or should be, driven by a marketing function – a strong brand; established processes for product or market launches; client knowledge; client service; extensive and institutionalised networks of contacts.
“Our people are our greatest asset” is quoted as one of the more hackneyed management sayings. But investors are often wary of assets that can walk out of the door each night: much better then, to create some assets that reside in the business, and make the star sales team reliant on the brand, the service and the client database rather than the other way round. And by doing this, there’s also a greater chance that the “people assets” will stick around and even multiply.
So here’s a challenge to marketers frustrated by the “colouring-in” tag: ask the finance director what value they’d put on their brand, or their client database, or their referral network, and offer to work with them to increase its value. It might be a challenging exercise but it ought to get the discussion away from the colour palette.
Bonuses and brands
Around the end of the year there’s the usual talk about bonuses, but I haven’t seen much discussion over the distinctions between bonuses, commission and profit share.
In the old days, salesmen received commission – usually a percentage of the revenue they brought in – and others might receive a share of the profits. Some key executives might also have had some other long term incentive plan. Now, however, almost everyone – especially in the City – expects a bonus as a standard, if variable, part of their remuneration, and it’s considered a cost alongside other personnel costs, eating into profits, with often only a vague correlation to revenues or other KPIs.
Of course, there’s a huge advantage to a business in keeping some flexibility in its remuneration costs – rather that than have to cut productive staff because all costs are fixed. How should the bonus system operate when it comes to sales and marketing staff? For sales staff it’s relatively straightforward – a revenue-based commission system usually works – as long as you can agree how to allocate credit for each sale.
For marketing staff it’s more complex. You can set measurable targets for some activities, but others are tougher – either because they take longer to show up, like brand and reputation, or because there are too many factors other than the marketing team’s input affecting the result.
The danger with relying only on profit sharing for the “bonus” element, of course, is that one part of the business may flourish but overall profits may be down – but if individual business units have their own P&L it should be possible to avoid this problem. As with an earlier posting, it’s when there’s a lack of clarity that problems arise – so when there’s talk of bonuses, let’s be clearer about what’s really meant, and where the money is coming from.
Two other points on this topic are relevant to marketeers. First, the value of a strong brand in keeping costs – particularly sales costs – down: if a business has no presence in the market or even a negative perception in customers’ minds, its sales force has to work much harder, and will consequently demand higher levels of commission – over 50% of revenues in some cases. In contrast, a business whose management has invested in a strong market position – ie a strong brand – can probably afford to pay less in commission – but may make higher profits in which all employees can share.
And secondly: variable remuneration is usually revenue-based. But a lot of what marketeers do is about building assets – creating long term value in a business, whether it’s the overall brand, or intellectual capital, or a client database. Business owners would do well to reward marketeers for this long term activity – and for their role in protecting these assets.
What does marketing mean?
A good starting place for this blog might be a thought on what we actually mean by marketing. Forget business school definitions or even functional job descriptions: the source of most marketing frustration in B2B service businesses is lack of clarity over what is meant by marketing. For some, particularly in the professions, it’s a posh word for selling; for others it’s all to do with the colour of the logo and other brand imagery, or the glamour of sports sponsorship and corporate hospitality. The other work that ought to be classified as marketing – identifying potential clients, analysing client data, developing new services or agreeing a business’s values and core position – is often done, if it’s done at all, in various different departments with little coordination and limited input from the official marketing department, which is usually more of a creative services or communications department. For us, marketing encompasses a range of activities: agreeing a firm’s values and market position; identifying potential clients; acquiring clients and servicing them; delivering new products and services to the market; and maintaining and increasing loyalty among clients. These activities don’t have to be the responsibility of just one “marketing” department – indeed, probably shouldn’t be – but if a marketing strategy is to be effective, there needs to be a clear understanding of who is responsible for each one, and excellent coordination between all of them. By all means call the creative services team “the marketing department”, but make sure everyone understands their remit is creative execution, not business development or strategic positioning, and give them the skills and resources accordingly. Equally, if you want marketing to be seen as a strategic investment, make sure its practitioners are involved in strategic decisions, not confined to data analysis or brochure production. There is no universal definition that will work for every organisation: but what is vital is that everyone in the organisation shares the same definition of marketing and what it means for their business and their role.
I'm busy working on my blog posts. Watch this space!