Operational Marketing Excellence - MRMLOGIQ 2011

The real value of

Operational Marketing Excellence

Concepts from our forthcoming publication “Operational Marketing Excellence”

Jansen & Riemersma, © www.mrmlogiq.com 2004-2011

Half of your marketing operations budget is wasted

We can tell you which half

© www.mrmlogiq.com 2004-2011

It’s the half which keeps you busy with the wrong things

Things which are executed inefficiently

Things which don’t serve any strategic purpose

Basically, things which prevent you from investing resources in

happy customers, better results and creating value


While strategy is the differentiator for

creating competitive advantage,

operational efficiency is a prerequisite

Michael Porter

Many marketers focus on marketing strategy

- branding, positioning, segmentation, tone of voice -

neglecting operational marketing efficiency


You need to develop

A Strategic view on Marketing Operations!

That’s why we’d like to share 3 things with you

#1. The way to position Operational Marketing Excellence

#2. The way to create Operational Marketing Excellence

#3. The way to calculate Operational Marketing Excellence


#1The way to position Operational Marketing Excellence


Do you consider your marketing operations to be...


An expense?


A justified expense?


An investment?


If you believe marketing operations is an investment,

position it like an investment and answer these four questions;

What are the returns?

When are they expected?

What is the investment?

What are the risks?


For investors, managing risks is often

more important than managing returns

For many marketers, managing risks is

... well, they never really thought about it

It is one of the reasons why marketers

always get slaughtered in the cost cutting massacre


The first rule of business,

protect your investment

Etiquette of the Banker, 1775


Operational Marketing Excellencecomes to the rescue…



It Creates Efficiency

� Lowering the investment



It Facilitates Effectiveness

� Increasing the return



It Embeds Compliancy

� Lowering the risk


#2The way to create Operational Marketing Excellence


Where to start


To become more efficient and effectiveyou need to see where your processesare weak or broken and need to be fixed


With the Capability Maturity Model you can assess processesand map them to...

5Maturity Levels


Maturity level 1

Ad hoc, undocumented and reactive;

not capturing results and not fitted to learn.


Maturity level 2

Repeatable, described but not enforced;

usage of documents is optional and offers limited

guidance and benefit


Maturity level 3

Well defined, standardized and mandatory;

results are consistent and coherent


Maturity level 4

Adjustable, flexible whilst maintaining quality standards;

initiated by internal management


Maturity level 5

Integrated, continuously improved and measurable;

initiated by customer requests


Becoming more maturemeans climbing up the maturity ladder

step by steplevel by level

Lower the riskLower the investment

Increase returnsCreate sustainable value


#3The way to calculate Operational Marketing Excellence


This is the point where your CFO begins to understandhow you create value through Operational Marketing Excellence


There are 3 ways to calculate results:

ROI Break even NPV

Return on Investment

Returns

Investments

Risks/Cost of Capital

Payback Time

Returns

Investments

Risks/Cost of Capital

Net Present Value

Returns

Investments

Risks/Cost of Capital��

��

��

��

��

x

x


result =return - investment

1 + cost of capital(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)


Let’s go back to the drawing board. The basic NPV formula looks like this...

The cost of capital bit of the equation requires some explanation...

The best things in life are free, but money is not one of them.

Investors want to have their money back, plus a bonus.

The bonus is the “cost of capital”.

The cost of capital contains a risk free “interest rate”

- let’s say 6%, close to what the banks ask -, plus...

- a “risk premium”, reflecting the risk element of the investment

The higher the risk, the higher the premium requested

Marketing investments are risky investments

Companies that calculate a risk premium for marketing have it set at least at...

20%© www.mrmlogiq.com 2004-2011


1 + cost of capital

resourcesresourcesresourcesresourcesorganizationorganizationorganizationorganization

(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)

customercustomercustomercustomer

checkscheckscheckschecks


Let’s go back and add some operational marketing keywords to the

elements in the formula...


1 + cost of capital





Increase legal compliancyIncrease legal compliancyIncrease legal compliancyIncrease legal compliancy

And let’s add some operational excellence objectives to this formula too...



1 + cost of capital





Increase legal compliancyIncrease legal compliancyIncrease legal compliancyIncrease legal compliancy

What are the dynamics if your processes “become more mature”?



1 + cost of capital(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)

Let’s add our 2011 Survey benchmark figures to the equation...


Using the discounted cashflow method, and based on the 20% risk

premium and our survey benchmark...


Marketing is the least efficient

process in business today, while

at the same time being one of

the most important

Robert Shaw & Philip Kotler

The business case for Operational Marketing Excellence can be enormous

If you use the right arguments, metrics & calculation


Operational Marketing Excellence

#1. Creates Efficiency. Facilitates Effectiveness. Embeds Compliancy

#2. Can be assessed using the Capability Maturity Model

#3. Can be calculated using the NPV calculation, showing sustainable value


Contact

[email protected]

www.mrmlogiq.com

[email protected]

www.MarketingGovernance.com


Operational Marketing Excellence - MRMLOGIQ 2011

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