Measured Thoughts on Marketing Accountability and Financial Results

Tony Pace thinks that marketing is misunderstood. “Everybody in and around the marketing sphere would benefit if people had a better knowledge of the things that marketing does to not only drive brands, which are exceedingly important, but to drive business, and frankly, when you look at it on a cumulative basis, drive the economy.”

Former Subway CMO Pace, now President and CEO of MASB, the Marketing Accountability Standards Board, called in to the October 23 broadcast of Measured Thoughts on Business Radio powered by The Wharton School (Sirius XM Channel 111), to catch up with his former marketing professor, host David Reibstein. “Not to date either of us,” said Pace, “but I think I was in your first class.”

Pace explained why marketing accountability is a priority business issue. “Good marketing is the tide that lifts all ships, if you will… We’re trying to drive the linkage between marketing activities and financial results so that there can be more appropriate valuation of those efforts, which I think will benefit everybody in the marketing space.”

Reibstein, who serves as a MASB director, related that earlier that day, he had posed this question to Wharton’s Advanced Management Program: “If you increase your spending on marketing, how’s it going to affect your financials?”

“People really struggle trying to draw that graph,” Reibstein noted. “As I spend more, how does that affect my profits?”

“That gets to one of the key metrics, which is Return On Marketing Investment,” replied Pace. “With good marketing, I’ve seen it run from $6 for every $1 invested up to into the $20s. With all of the economic and financial circumstances of the last decade or so, everybody’s been focused on cutting costs. A pretty commonplace thought among marketers is that you can’t necessarily cut your way to growth.”

“If you start cutting back on your marketing spending, what you cut back on are those things that are less effective,” added Reibstein. “As a result, you’re increasing your marketing efficiency, so your return per dollar spend goes up. But your overall profitability goes down.”

“Especially over the longer term,” Pace agreed. “If you’re not constantly looking for new customers to come in at an appropriate cost ratio, you’re going to be in a situation where your audience is getting smaller and smaller. That’s going to hurt your business over a long time frame.

“If I could snap my fingers, most corporations would have a marketing committee like they have an auditing committee, because you can’t leave the CMO fending for herself or himself when it comes to big changes that are going on.”

Pace announced that MASB is partnering with Forbes CMO Practice for The Forbes Marketing Accountability Initiative powered by MASB, which aims to identify best practices and prove the contribution of marketing strategy and investment to the business. “Just like this [radio] channel is ‘powered by the Wharton School,’ we’re going to be the academic measurement and marketer engine that’s powering all that thought… We want to set the agenda for marketing accountability going forward.

“We’ve come to the point of view that marketing accountability is really a journey,” he concluded, “and we have some tools that will help people on that journey.”

Originally aired on Sirius XM Channel 111, Business Radio Powered by The Wharton School