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


#1
The 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


comes to the rescue…



It Creates Efficiency
Lowering the investment



It Facilitates Effectiveness
Increasing the return



It Embeds Compliancy
Lowering the risk


#2
The way to create Operational Marketing Excellence


Where to start


To become more efficient and effective
you need to see where your processes
are weak or broken and need to be fixed


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

5 Maturity 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 mature
means climbing up the maturity ladder
step by step
level by level

Lower the risk
Lower the investment
Increase returns
Create sustainable value

#3
The way to calculate Operational Marketing Excellence


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


There are 3 ways to calculate results:

ROI Break even NPV

Return on Investment Payback Time Net Present Value

Returns Returns x Returns
Investments Investments Investments
Risks/Cost of Capital x Risks/Cost of Capital Risks/Cost of Capital


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

return - investment
result =
1 + cost of capital
(interest rate + risk premiun)


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

Let’s go back and add some operational marketing keywords to the
elements in the formula...

customer organization
resources
return - investment
result =
1 + cost of capital
checks


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

resources
return - investment
result =
1 + cost of capital
checks

Increase legal compliancy

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

resources
return - investment
result =
1 + cost of capital
checks

Increase legal compliancy

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

return - investment
result =
1 + cost of capital


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



#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

RomekJansen@mrmlogiq.com
www.mrmlogiq.com

Editor@MarketingGovernance.com
www.MarketingGovernance.com


Operational Marketing Excellence - MRMLOGIQ 2011

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