Managing Marketing: The need for the commercial management of marketing

Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

Peter Rowe is a commercial and marketing professional who chats with Darren on his role as a commercial manager within marketing and the importance of applying commercial management disciplines to the marketing function as a way of proving performance and value. He shares some of the challenges and issues for procurement, marketing and the organisation in making the transition.

Peter Rowe
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Transcription:

Darren:

Welcome to Managing Marketing. We come this week from the U.K. where I’m attending the ProcureCon Marketing Conference here in London and just had a terrific presentation from Peter Rowe who is a marketing professional with a particular focus on the commercialisation and the commercial management of marketing. So, welcome, Peter.

Peter:

Thanks, lovely to see you.

The opportunities for marketers

Darren:

Thank you. The presentation you just did with this idea of the transformation that’s happening in marketing but also the increased opportunity for commercial management and focus being brought to marketing.

What do you think, Peter, are the really big opportunities here for marketers and businesses?

Peter:

So, I think the general topic of conversation has always been to make marketing be seen as an investment by the chief finance officer and not as a cost to a business. So that’s the goal. It’s very difficult to achieve and to set out you really need to understand where you are today. So, I break my marketing down into three areas of spend.

First is non-working capital.

Darren:

Yeah.

Peter:

So I want to get rid of as much of that as possible.

Darren:

Yeah.

Peter:

That’s never going to be a return on an investment. The second area is committed spend. Stuff that I can’t address, I can’t get out of it.

Darren:

Non-addressable?

Peter:

Non-addressable spend. I want that to work as hard as it can. Because if I’m spending it I’m going to focus all of my effort on the outcomes of that investment. The third area, which is hopefully the biggest area, is your discretionary working capital. And that’s the spend area that you’re going to focus on increasing its effectiveness and its measurability.

Darren:

Which is driving value for the business isn’t it?

Peter:

Yeah.

Darren:

What you have just described there is not an unusual commercial approach to any sort of business or commercial enterprise is it?

Peter:

No, it’s 101 Commercial.

Marketers and measurement

Darren:

But it’s not a discipline that we typically see in many marketing functions or organisations because my experience, and please correct me if I’m wrong, is that marketers seem to be obsessed with strategy and implementation but not necessarily performance measurement and learnings. As a general statement.

Peter:

As a general statement to the industry you would say that marketing, historically, has been about brand building and the conversation with finance and with the chief executive around brand building has traditionally been about, ‘how much money can I have?’

Darren:

Yeah! And my problem with that is that brand, for most organisations, doesn’t sit on the balance sheet.

Peter:

Correct.

Darren:

Right? And so I hear marketers saying to me all the time, “well they need to change the accounting system so that brand sits on the balance sheet.” And it’s almost like well it’s not going to happen so how can you build brand and deliver tangible commercial growth through your marketing?

Isn’t that really the challenge?

Peter:

Well, that is the challenge, and the opportunity is in the data.

Darren:

Yeah.

Data could be the answer

Peter:

Because, we’re now in a world where our data capability will enable us to build our brand, and it will enable us to measure that brand build exercise. And if you look at the balance sheet of a company or more specifically the share price of a company what you’ll find over time is that more companies’ share price will be dictated to by how well they manage their data.

Because the value of the company is in the use of its data, really.

Darren:

Well we saw a presentation this morning, there was a Yale professor that said, “the 5% of companies that use data really well will be the ones that are 6% more likely to succeed in business”, and all that means is understanding your customer better so that you’re able to maximize the commercial value of those customers isn’t it?

Peter:

Exactly. You know before we had data it was human relationships. That was what built the knowledge of the customer. It was that face to face interaction. All we’re doing is adding the face to face experience with non-face to face experiences. They touch our brands in all of the other points of presence.

Darren:

Absolutely. Yet, there is still a lot of confusion isn’t there around the role of data and how to use it? And I’m talking generally here because there are some categories that are better at it than others.

I think businesses where there’s already a direct customer relationship and a huge amount of data about those customers have probably been early into the thing. But consumer goods for instance, really struggle with the idea of customer data because they don’t have that direct relationship.

Peter:

Exactly. And that’s a challenge for the consumer goods industry. Without first-party data how are you driving marketing return on investment when your customer is not the consumer?

Darren:

Yeah, and that’s a really interesting one isn’t it? Customer is the retailer or distributor; consumer is the end user.

Peter:

Well if you take a chocolate bar. The person who buys it from the supermarket is probably a parent, and the consumer is the child. So you can split it down…

Darren:

Even further.

Peter:

To the nth degree to make it more complicated. So what exactly are you going to do as a marketing department on a consumer brand? Build activity content that is relevant to your consumer segment or your audience segment. And that’s the best way to drive your brand and your corporate character, your higher purpose. So your higher purpose isn’t to make chocolate.

Darren:

Well, you’d hope not.

Peter:

You’d hope not, no.

Darren:

The only reason I wake up in the morning and go to work is to make chocolate. Maybe there are some people that for whom that’s enough but in fact the Cadbury component of Mondelez was something about, “joy to life”, that was their purpose.

Peter:

Yeah, their purpose is bringing joy, which is nice.

Darren:

They were talking about getting a DMP and the idea of first, second and third-party data and I kept thinking I wonder where Cadbury Mondelez gets their first-party data because a banker, Telco, any services company, a utility has information about customers and what they do with the product but consumer goods?

Peter:

Well what you’ve got is data soup, which is a mix of first, second and third-party data. And the data soup of a Telco or a bank is rich in first-party data, and the data soup of a consumer goods brand is rich in third-party data. So, it’s still data and you can still use it, and it will still make your marketing more measurable and more effective.

Darren:

More insightful.

Peter:

Yeah. It’s just soup.

Privacy and data

Darren:

One of the issues though is obviously privacy with data. I notice the EU especially, and who knows after Brexit it might be irrelevant here in the U.K.

Peter:

It’s not happening.

Darren:

The EU, there are big issues around privacy. It’s an interesting conundrum isn’t it? Because, as a marketer, you need to be able to understand your customers through data but the customers largely through the EU and through government are trying to limit the amount of data and how you use it.

Peter:

Yeah. And I would say that there’s a healthy amount of suspicion as to the motives of what we are able to achieve now. So algorithmic copy can take a person’s and an individual’s tone of voice from skimming their internet presence, and algorithmically write you copy that is written in your own tone of voice, and that sounds like magic but it’s completely feasible.

So, I think that good data protection is designed to make sure that a customer or a potential customer or any member of any audience understands what we’re doing.

Darren:

Yeah.

Peter:

That’s what data protection should be. It should be saying, “you are safe and you understand how these messages are getting to you and we’re not pulling the wool over anybody’s eyes.” That’s good data protection.

Darren:

Yeah, that it’s not some clandestine service like the CIA pulling strings behind the scene. It’s actually legitimately trying to understand the customer better so you can do better service.

Peter:

Well the people who want to interrogate the data the most are exactly those services.

Darren:

Or the NSA isn’t it in America?

Peter:

Yeah, all of those.

Darren:

Yeah, they collect huge amounts, every phone call, there is no privacy. The idea of actually having privacy is actually a bit anachronistic.

Peter:

It totally is, yeah, yeah.

Darren:

I don’t know. What’s your online presence? If I went in and googled Peter Rowe would I get a lot of information or are you fairly careful about what you share?

Peter:

Pretty careful. Yeah. Mainly because I don’t want people to misinterpret that. I speak on behalf of my employer.

Darren:

Of course.

Peter:

I want my content to be driven by me, and me as a human being, so from a corporate perspective, from a professional perspective I’m very quiet on what I put out there.

Darren:

And that’s completely understandable because there’s commercial considerations in regards to the things that everyone is privy to with their own organisations that shouldn’t be in the common place. But I think the conversation here is more about general trends that we’ve both observed as professionals in the marketplace.

Peter:

Yeah.

Darren:

The only reason that I talk about online presence is that I made a decision a long time ago that I have no privacy so I would rather curate and populate with what I want people to know and withhold the bits that I don’t want them to know because I think ultimately that’s better than trying to hide everything because in trying to hide it you actually create an opportunity for people to misinterpret it.

Peter:

And people have an appetite for that. Consumers have a huge appetite for that. That’s why reality television is so popular.

Why do marketers struggle with data?

Darren:

Yeah. One of the things, going back to data, and I’ve had marketers really have trouble with it, and I tell them about an office I have in Melbourne, in Australia that had a coffee shop downstairs with an Italian guy, and the first time I went into his coffee shop he realised I’d never been in there before and he introduced himself and he asked my name, asked me about what I wanted, made my coffee.

The next day he remembered my name and my coffee order, and even on my birthday gave me a cake. And he did this with all his customers, and there was always people lining up. And someone bought the business off him and the business disappeared because they didn’t have any of that.

Now, I say to my marketing clients, “this guy had a database in his head.” He had a customer data base that he used to increase our experience of his shop and his brand. And all technology allows us to do is to actually do that at scale.

Peter:

Correct.

Darren:

So why is it that people are really struggling with that concept, both on a consumer basis, a government basis, and a marketing basis?

Peter:

I think they’re struggling because of the pace of change.

Darren:

OK.

Peter:

You’re absolutely right. All of our activity and the data that we use is designed to enhance customer experience because better customer experience results in better business results. And all we’re doing is we are adding to the human experience with non-human experience.

Darren:

Yeah.

Peter:

So, that’s fine if the world moved at a slow pace but we’ve had consumers move from early internet to full internet to mobile first within fifteen years and that pace is really difficult to get your head around.

If you’re trying to deliver customer experience and you don’t know how your target audience is consuming media, and you don’t know what the next thing is going to be then that’s why a lot of people are struggling with it, I think.

Darren:

It’s also perhaps the volume of data?

Peter:

There is a volume aspect to it. I think, on volume, all you need to do is build your own confidence. Take a little bit of something and do a little bit of activity, test and learn, measure it. Build it, knock it down, build it and knock it down, and just do it that way. You don’t have to solve your marketing data capability at an enterprise level.

Darren:

No.

Test and learn

Peter:

You know on a three-month programme with all these people looking at it, it’s not the way you do it. You do little bits, test and learn, roll it out. The good stuff you build, the stuff that doesn’t work doesn’t matter, drop it and carry on.

Darren:

It’s interesting the idea of iteration because that actually talks directly to my background as a scientist. The scientific method is observe, hypothesize, test, learn, hypothesize, test, learn, hypothesize, test, learn.

Peter:

Yeah.

Darren:

You’re basically saying the same thing but in a commercial aspect not a scientific aspect.

Peter:

Exactly. The methodology is exactly the same and in technology it’s called AGILE, and that’s all it is. They do scrums and sprints and all these cool things but all they’re doing is test, learn, deploy, test, learn, deploy.

Darren:

Yeah.

Peter:

In lots and lots of small iterations that all point towards an end vision, and that’s the important bit. Because if you’ve got a vision then everyone can point towards the same thing. If you’ve got Agile and it’s all pointing in different directions, it’s not going to get very far.

Darren:

Because you’re not aligned on what the ultimate objective is so you waste a huge amount of time.

Peter:

Yeah.

Darren:

It’s interesting for me when you raise Agile and Scrum and these methodologies because they apply to an always on, always learning system yet marketing has traditionally been insight, ideation, execution, campaign then stop, regroup, start again.

It’s almost military style. You know, tomorrow we’re going to be this far down into the enemy lines, and we marshal our forces and head out and do it.

And extending that battle metaphor the danger is there is success and failure, and when you fail it’s seen as a huge misstep and when you succeed you’re heroes. In moving to always on marketing, always interacting, always learning about your customers and enhancing the customer experience do you think marketers and organisations are going to have to learn that failure is not failure, it’s just another way of learning?

Peter:

Yeah, failure is experience.

Darren:

So how do you set that as a context within an organisation that looks at marketing failure as waste?

Making failure ‘safe’ for marketing

Peter:

So what you need to be able to do is create the boundaries of a safe environment. So, someone said to me recently, “if I’m going to blow a hole in a ship, as long as the hole is above the waterline I can blow as many holes as I like.” If you go below the waterline you’re going to sink the whole ship and that’s not acceptable so that’s the analogy for test and learn.

Do it in a safe place.

Darren:

Yeah, the Plimsoll line. Below the Plimsoll line you’re in trouble.

Peter:

Yeah, so if you shoot a hole under the water you’re out.

Darren:

So that makes me think of the 70:20:10 rule of marketing budgeting. Have you heard of this? I think Ford was one of them, 70% is business as usual, doing the usual marketing programme, 10% is test and learn, and then the 20% is to actually amplify what’s learnt in the 10% so that it can actually eventually become part of the 70%, yeah?

So on a personal level throughout your career have you either heard or been involved in that type of approach? A lot of people talk about it, I haven’t heard from a lot of people who have seen it work.

Peter:

I’ve talked about it a lot. I’ve never implemented it but I have suggested previously to marketing departments that they take 10% of their budget and ring fence it for innovation but I’ve never seen that being built in to a company’s DNA or its approach.

Darren:

It’s interesting. It’s one of those business ideas that everyone talks about but there must be something about it that’s incredibly difficult for people to get their heads around or to make the commitment to 10% innovative learning.

Peter:

I think what happens is because marketing, in most companies in the general perspective marketing is still seen as a cost and it has a budget, which is mainly discretionary. If the business is having a bad year they knock on your door and take some money away.

If they have a good year you might get a bit more but it’s that hand-to-mouth existence that I think stop you from saying, “right, I’m going to commit x percentage of this budget to pure innovation.” I think it’s not marketing’s problem to answer, it’s the chief executive’s.

Darren:

And the CFO. I mean I think one of the ways the CFO’s and commercial people can help marketers is actually help them understand the value and power of the budget that they have and actually encourage them, and in a way create and protect that safe environment within the organisation to do these things.

Service, price and innovation

Peter:

Every business sits somewhere on a triangle. And the three points of the triangle are service, price, and innovation. And you can plot any business in the world towards one point of that triangle.

So if your business is innovation, and you would think of companies like Dyson, Tesla, you know those kinds of businesses then if that’s part of your corporate culture innovation is never going to be a problem. And I haven’t worked in those businesses.

Darren:

Neither have I.

Peter:

I have worked in a price one. I have worked in a service one but I have never worked in an innovation one. So, maybe if we went to those businesses we’d find this approach to innovation budgeting.

Darren:

It’s interesting you say that because I reflect on my own career and even the clients, the range of clients we work with, innovation is the hot topic that business is talking about and everyone’s saying, “innovate, innovate”.

The Australian government has even put $1.1 billion for the ideas boom, which I just think is a ridiculously small drop in the ocean, but anyway everyone’s hot on innovation and technology innovation yet most businesses are, to your point, in the service or price positioning on the triangle.

I think it’s tangible and it’s seen as low risk. Yet everything we hear about innovation is that if you don’t innovate that’s high risk because you’ll be disrupted.

Peter:

Yeah, yeah, your outward facing proposition to your audience is service, price or innovation. So, if it is innovation people need to know you for that. The question is are you investing your marketing in innovation or are you investing your marketing in just communicating that you’re innovating, which is different.

Darren:

The big consulting firms, the Deloitte, the IBM, the Baines, the Boston Consulting Group, I think they’ve all got the same slide that shows how many markets or categories have been disrupted, and it’s the Uber, it’s the Airbnb…you’ve seen the slide? You just rolled your eyes; you’ve seen the slide, yeah?

Peter:

Yeah, yeah, seen it a million times.

Is disruption about technology or customer experience?

Darren:

We’ve all seen that slide, o.k.? Here’s the thing no one talks about. They’ve disrupted it using technology to actually enhance the customer experience.

Peter:

Yes.

Darren:

Right? Yet they just reduce that down to the word, you have to innovate to disrupt. But it’s not about disruption, and it’s not about technology; it’s actually about customer.

Peter:

Yes.

Why is marketing not at the forefront of disruption?

Darren:

So why is it they’re talking about technology and they’re not talking about marketing and sales, which is where the customer interface for all of these business, price and service exist?

Why is it that marketing is not at the forefront of this discussion around disruption? In your mind. This is generally speaking. I’m not asking you to make comments about any company that you’ve worked for now or in the past.

But as an observer, an astute commercial person, what is it that we need to do as marketing as a category that puts it at the forefront of this innovation change?

Peter:

The reason why established businesses don’t focus on disruption is because they have legacy and they already exist at scale. And I don’t even want to say them but the Ubers, the Airbnb’s they’re brand new.

Darren:

They’ve started from nothing.

Peter:

They have no legacy, no one, no shareholders, no one’s telling them what to do, just there with a cool bit of software and they just put it out there and if it scales up, amazing and if it doesn’t it doesn’t, you try something else.

And you need to try and mirror that culture in an organisation that is not used to doing that because they’ve got a lot of customers and a lot of stakeholders, and a lot of audiences who already know them for what they do, which makes disruption a lot more difficult.

But you can completely accept a brand new app that’s going to revolutionise the taxi industry because it’s brand new, it’s a new brand, new proposition, new everything and it’s on your new Smartphone so it’s all new, therefore in the customer’s eyes what could possibly go wrong?

If you were established, if you were Hertz for example and you wanted to move into the taxi business you’d get a lot of resistance if you did the same proposition because the brand association they have with something like a car rental company doesn’t correlate to an Uber, and it wouldn’t work as well even if you had the same proposition.

Darren:

Except, I think that’s about brand elasticity because does the Avis brand translate to being a taxi service or a new form of taxi service? I think my concern is, and in what you said is they start with nothing and they come up with a bit of software.

The really smart companies come up with a piece of software because they’ve observed a consumer opportunity that they think they can solve, and that to me is a marketing role. That’s what marketing is at its core.

Marketing is not just promotions it is creating products and services, pricing them at the right amount, delivering them in the formats required. You know the great marketers of the world, Henry Ford said, “if I’d asked consumers what they’d wanted they would have said faster horses”, the Steve Jobs who’s always thrown up errors, you know the guy who said no one would have told him to create the iPhone or the iPod.

Peter:

The iPhone.

Darren:

The iPod, the idea of having 100,000 songs in your pocket was not something anyone could contemplate because they couldn’t even imagine it but he observed people doing things and thought.

I’m just wondering why it’s become a technology drive you know like it’s the techs that are driving it and not the marketing fraternity, the marketing profession that should be the ones that are in touch with customers?

Have they become dislocated from the business in a way that they’ve become a service provider in a lot of cases, not all companies but in a lot of cases?

Peter:

It’s a very good challenge isn’t it? Your innovators, the well-known innovators aren’t from a marketing background. They’re from a technology background but it’s easy to innovate with software.

Darren:

It’s cheap.

Peter:

It’s cheap, yeah.

Darren:

Relatively cheap, fast and easy.

Peter:

There are loads of environments that are built to accelerate that, and harness it, and develop it and nurture it. You know in Israel…

Darren:

The start-up mentality.

Peter:

Silicon Valley, you know all these hubs, and everyone’s excited about it, a little bit like multi-millionaire sportsmen, they’re only the 1% of the 1%.

Darren:

But see it annoys the hell out of me, Peter, because the one thing that I hear all the time is that start-ups, who at the core, to me, had a great marketing idea, i.e. they came up with a product, software (software is a service, software is a product) that solved a consumer problem yet they are apparently, everyone says, particularly poor at marketing themselves.

That to me is a huge conundrum. How can you be the type of person that can create a disruptive product in a way that goes to the core, you know to make it successful it has to go to the core of a human insight and yet you’re hopeless at marketing?

Any observations? Any thoughts? Because I sit there contemplating why the world has ended up like this.

Peter:

It’s a fascinating spectrum of human behaviour and characteristics that someone who is good at innovating or a technologist isn’t a very good communicator. And someone who is brilliant at communicating can’t invent anything.

You need that complementary skill set. It’s a little bit like having a marketing brand skill set to mix with a data skill set to mix with a commercial mind set. They don’t always exist in the same brain.

Darren:

Thank you.

Peter:

I’ve just robbed your summary.

Darren:

No, because that’s what I was going to say to you, and that’s why when we’ve been talking and in your presentation today, the exciting thing for me is that if marketers embrace commercial reality and embrace commercial management as a way of underpinning marketing, marketing comes back into being a business driver, not a service provider.

So that to me is the opportunity that having more commercial people, perhaps in procurement, perhaps in other parts of the business, aligned and more involved in marketing, it will actually help move that forward.

Peter:

Yeah. The way that the industry is moving, marketing if it isn’t already, will be the place for proposition development. And the data will be telling you what it is. And if there isn’t data then there’s an insight or a qualitative element that’s telling you what it could be as well.

So I love the mix of intuition and data-informed decision making, and it’s that mix…

Darren:

The combination of the two. I’ve got marketers that go, “Oh, I go on gut instinct,” and I go, “well don’t reject data because that’ll just make a more informed gut”. Also when it isn’t right you’ve got at least something to go back to work out where you went wrong.

Peter:

Yeah.

Darren:

Well, Peter, that’s fantastic. I’ve really enjoyed catching up and having the conversation.

Peter:

Yeah, me too. It’s nice that you came over to the U.K.

Darren:

And good luck with the future. Let’s stay in touch.

Peter:

Thanks very much.

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About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com

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