The following is a letter published in the Journal of thre Australian Institute of Company Directors in their December 08 Annual report. http://www.companydirectors.com.au.
Very few businesses make a serious attempt at an audit of the returns from marketing expenditure. Why not? in many comapnies it is one of the largest items on the P&L, and it is certainly amongst the most important.
9th September, 2008.
I refer to the article entitled “Pulling in the belt” in the current issue of the magazine.
Amongst other issues, in the article Mr. Corrigan refers correctly to the temptation for businesses to cut marketing expenditure when things get tight. Generally senior management sees the advertising budget as a fertile field for cutting, and it often is, but the complication is that “marketing” is a far wider question than just the advertising budget, and it goes to the heart of the commercial sustainability of the enterprise.
As directors, we spend substantial and increasing amounts of time managing the shape of the accounts of an enterprise, squeezing out other value adding activities that we should engaging in. We generally spend very little time on any sort of detailed review of the basis for marketing decision making that involves the wide range of resource allocation and management decisions that are driven by the competitive environment.
I speculate that this is because the accounting function is dealing with quantitative data, and therefore relatively easy to measure whilst marketing is more qualitative, and far harder to measure, and further outside the comfort zone of many in senior management and sitting on boards, than are the accounts.
In many businesses, perhaps most businesses, the largest asset class is the intangibles, usually only crystallized on the sale of a business, but nevertheless, the core of the sustainability of the business. Why is it then that we rarely analyse in any depth the building blocks of these intangible assets, the things that will generate success in the future.
As the guardians of shareholder interests, it should be incumbent on directors to spend more time considering the future of the business, not just reacting to the past, and a ‘Marketing Audit” should be on the agenda.