Marketing Performance
This edition first published 2016
© 2016 McKinsey & Company, Inc.
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Introduction: Smart Money
If your marketing department were publicly traded, would you buy a share? If the new campaign were a pay-TV channel, would you subscribe to it? If next year's media plan were a business proposition, would you invest in it? If you hesitate even for a split second – and we would not be surprised – this book is for you. To take its proper place among its fellow functions, marketing needs to evolve from a cost centre to a profit centre. As the CMO, or as an aspiring marketing leader, you don't want to ask the members of the board or the shareholders of your company for budget clearance. You want to present them with an investment opportunity. You don't want your marketing plan to be perceived as a necessary evil, but as a good business proposition. You want marketing to advance the performance of your company in predictable and sustainable ways. You rightfully aspire to generate returns on marketing investment, be it in terms of sales, profit, market share, or brand equity. Make it happen, and you will never have to justify a budgetary line item to the CFO again – or smile and listen patiently as your fellow executives praise a competitor's creative campaign, asking why you never come up with something as clever as that, despite the fortune you are spending on all those hot-shot agencies. Sounds tempting? Then read on.
This is not a textbook for students of marketing theory. There are more than enough of those already. This a performance handbook for marketing practitioners. With trademark clarity, McKinsey's Marvin Bower defined performance as follows: “By performance, I do not mean just profits. Rather, I mean achieving the goals and objectives of any type of organization in an effective and efficient manner, with profits being one measure of the success of a business firm. Responsible decision makers all seek to improve the performance of their organizations.” In this spirit, we aspire to provide marketing executives with hands-on decision support across all major performance levers, from budgeting and mix optimization to vendor management and organization. In contrast, we will not explore the underlying theory in more detail than is necessary for the practical purposes of this book. If you want to know more, please refer to the more comprehensive discussion of many of the concepts presented here in PowerBrands, now in its third edition, and Retail Marketing and Branding, now in its second edition.
This is not even primarily a book about marketing. It is a book about return on investment, focused on how an ROI mindset will help you transform the marketing function into a profit centre. Our primary objective is to empower you to open up new areas of growth for your company. Of course we don't have all the answers. But we are confident that the success factors we have derived from our work with leading marketers will help you plan, measure, and optimize the contribution of the marketing function to corporate performance. We encourage you to initiate a conversation about strategic priorities, even if that is the last thing some executives expect from the CMO. Don't hesitate to take on the big issues: What, exactly, are our goals and objectives as a company? Top- or bottom-line growth? Market share or profit margins? Short-term sales or long-term loyalty? Defend the home turf or conquer new segments, categories, and territories? This book will help you explain to your fellow executives how their answers affect your decisions: Which investments do I focus on? What messages do I send to customers? Which marketing instruments take priority? What kinds of tools do I need?
This is not a scholarly treatise. You will find that this is a straightforward book, down to its clean-cut structure and accessible language. It reflects our belief that simple things can make a big difference, even in a complex world obsessed with ever more data, ever more elaborate algorithms, and ever more intricate processes. Complexity is the enemy of agility, a key asset in a changing environment. Big data and advanced analytics are not ends in themselves, but means to an end, and that end is better marketing performance. We advocate data-driven decision making not for its own sake, but because we are convinced that quantified metrics are indispensable complements of experience and common sense. We explore topics like systematic insight generation and advanced analytics not because they are fashionable, but because we have found that they help companies establish a culture of evidence-based performance management. This is also why we have included dozens of application examples and case studies from a wide range of industries and countries. These examples provide both proof of principle and inspiration for your own agenda.
This book is based on our experience as consultants to senior marketers worldwide. It is anchored, quite simply, by the things that work: concepts, tools, and success factors that we have helped develop and apply in our work with clients. In this book, we set out to help you advance marketing performance with every dollar you spend, every decision you make, every person you hire, every service provider you buy from, and every ad you put on the air. We are acutely aware that your time and resources are scarce, and that you cannot possibly pull all levers at once. To help you pick your battles, we have arranged our material along the lines of five fundamental questions about marketing performance, reflecting the decisions you face in your work as a marketing executive:
• How much should I invest?
• How should