The real value of Operational Marketing Excellence Concepts from our forthcoming publication “Operational Marketing Excellence” Jansen & Riemersma, © www.mrmlogiq.com 2004-2011
May 25, 2015
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
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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
© www.mrmlogiq.com 2004-2011
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
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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
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#1The way to position Operational Marketing Excellence
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Do you consider your marketing operations to be...
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An expense?
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A justified expense?
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An investment?
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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?
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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
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The first rule of business,
protect your investment
Etiquette of the Banker, 1775
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Operational Marketing Excellencecomes to the rescue…
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Operational Marketing Excellencecomes to the rescue…
It Creates Efficiency
� Lowering the investment
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Operational Marketing Excellencecomes to the rescue…
It Facilitates Effectiveness
� Increasing the return
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Operational Marketing Excellencecomes to the rescue…
It Embeds Compliancy
� Lowering the risk
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#2The way to create Operational Marketing Excellence
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Where to start
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To become more efficient and effectiveyou need to see where your processesare weak or broken and need to be fixed
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With the Capability Maturity Model you can assess processesand map them to...
5Maturity Levels
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Maturity level 1
Ad hoc, undocumented and reactive;
not capturing results and not fitted to learn.
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Maturity level 2
Repeatable, described but not enforced;
usage of documents is optional and offers limited
guidance and benefit
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Maturity level 3
Well defined, standardized and mandatory;
results are consistent and coherent
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Maturity level 4
Adjustable, flexible whilst maintaining quality standards;
initiated by internal management
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Maturity level 5
Integrated, continuously improved and measurable;
initiated by customer requests
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Becoming more maturemeans climbing up the maturity ladder
step by steplevel by level
Lower the riskLower the investment
Increase returnsCreate sustainable value
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#3The way to calculate Operational Marketing Excellence
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This is the point where your CFO begins to understandhow you create value through Operational Marketing Excellence
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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����
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x
x
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result =return - investment
1 + cost of capital(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)
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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
result =return - investment
1 + cost of capital
resourcesresourcesresourcesresourcesorganizationorganizationorganizationorganization
(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)
customercustomercustomercustomer
checkscheckscheckschecks
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Let’s go back and add some operational marketing keywords to the
elements in the formula...
result =return - investment
1 + cost of capital
resourcesresourcesresourcesresourcesorganizationorganizationorganizationorganization
(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)
customercustomercustomercustomer
checkscheckscheckschecks
Increase legal compliancyIncrease legal compliancyIncrease legal compliancyIncrease legal compliancy
And let’s add some operational excellence objectives to this formula too...
© www.mrmlogiq.com 2004-2011
result =return - investment
1 + cost of capital
resourcesresourcesresourcesresourcesorganizationorganizationorganizationorganization
(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)(interest rate + risk premiun)
customercustomercustomercustomer
checkscheckscheckschecks
Increase legal compliancyIncrease legal compliancyIncrease legal compliancyIncrease legal compliancy
What are the dynamics if your processes “become more mature”?
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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 add our 2011 Survey benchmark figures to the equation...
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Using the discounted cashflow method, and based on the 20% risk
premium and our survey benchmark...
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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
© www.mrmlogiq.com 2004-2011
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
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