Measure and Manage the Numbers
Making money is what a company is all about and it is where marketing makes its most important contribution. Only marketing directly fuels growth. Other board functions fuel efficiency so combining both leads to more profit. It is in achieving and beating profit forecasts that the whole board will be measured upon. That means that all marketing key performance indicators (KPIs) must be profit related.
Shareholders require better returns than they would otherwise be able to get from putting their money in a building society. Total shareholders return (TSR) is the combination of capital growth in the value of the share, plus the dividend yield (the amount of profit paid back to shareholders in return for lending their capital to a business). As a benchmark and target to aim for, the most successful organisations deliver returns in excess of 20%.
Measuring, making marketing decisions on and delivering economic profit (profit after tax, less a charge for the capital tied up in the business) should be at the forefront of what you do. This is a concept invented by British economist Alfred Marshall. If these measures don’t exist you will need to institute them.
Successful profit management also requires a strong commercial awareness and commercial leadership skills. You will need to be a crystal ball gazer, and streetwise to where profitable opportunities lie in the marketplace and how to realise them. It also requires a close relationship with the chief executive and the financial director. To ensure influence, those relationships must be based on respect and speaking the same commercial and financial language. It is here that the marketing plan and activities must be aligned to the targets set by the business as a whole. The marketing plan should also be continuously updated showing what you are spending, what is committed and what is left. Understanding and managing the budgetary variances will contribute directly to profit at year end. So always know where you are and aim to give some of your budget back!
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