It’s time to show marketing leadership

Depressing as it was to read the stark details of the COI cuts this week, the news didn’t exactly come as an unexpected shock. The Coalition Government has promised to reduce the deficit and will win plaudits with any tough move it can make, even if it only scratches away at the UK’s £163bn shortfall.

Nobody doubts the necessity of such moves, but equally, nobody will want the misery in their own back yard. With far more emotive cuts to frontline services to come, few will have the appetite to argue against the slashing of the Government’s marketing budget.

But there’s a wider problem here. I do not believe the Coalition Government paused to measure the value or success of recent COI campaigns making it necessary for the COI to shrink its capability.

Those responsible for the Government’s marketing and advertising freeze are more concerned with “getting to the right number” and less concerned with trying to understand the value of marketing.

They are not the only ones. Regular readers will know that Marketing Week has been working with research analysts and other figures in the City who wanted to build their knowledge of what marketers do, in order to provide more information to their clients.

But broadly, the City is disinterested in marketing. Outside of new product launches, it is a subject rarely examined with any scrutiny in the financial pages.

There is certainly little understanding of how effective marketing is linked to growth in demand for products and services, or how marketing can represent value-creation for a company.

The bankers I met were only really interested in identifying an easy formula for success that they could pin to a company’s advertising and promotion spend. They weren’t looking for a deeper understanding of the importance of what we do.

Responsibility

The onus is now on us to prove ourselves. I speak all the time about marketers as customer experts, leading their businesses. About the need for CEOs to view marketing as their ’growth department’. That is a pipe dream unless marketers start taking responsibility for building the status of their function within their businesses. Your marketing strategy, your innovation lab, your database and the tools it provides you with: why are they not assets on your balance sheet? The answer is probably that they have never been on the balance sheet before. Nobody expects to see them there and nobody has to try therefore, to measure their value.

Marketing myopia

There is a frustrating ’marketing myopia’ that appears to exist within government and financial circles that flies in the face of so much hard evidence.

Take HMV as an example. In August last year HMV’s share price was hovering around the 120p mark. Since then it has continued to fall. As I write it sits at just 60p. Quite a crash in value, and all because the City is worried about HMV’s core business.

According to reports in June, HMV Group was the most ’shorted’ retail stock in Europe. It emerged that almost a quarter of the firm’s stock was held by investors betting on a fall in the share price.

Kate Calvert, at broker Shore Capital, was quoted by the This Is Money website as saying: “The share price indicates that investors fear the company won’t be around in three years’ time. The outlook is not clear and if there are structural problems in HMV’s markets, you never know how quickly things might unravel.’

The customer view

But as far as the HMV customer is concerned, the outlook is perfectly clear. Let’s put aside the hyperbole for a moment, let’s ignore the assertions made by us, the marketing trade press, that under the leadership of chief executive Simon Fox and marketing director Graham Sim, HMV is remoulding itself into an entertainment superbrand.

The basic fact is, HMV’s customers understand plenty about the HMV Group business model and new brand positioning that the City experts don’t.

That is reflected in the most recent full year results and business performance. If you get bored of reading the bullet points, skip down to the next paragraph!

  • For the 52 weeks ending April 24th, total HMV Group sales were up 3.1%, in excess of £2bn.
  • Profit before tax and exceptionals was up 17.7% to £74.2m.
  • Adjusted earnings per share was up 13.8% to 12.7p.
  • It is reflected in the number of customers that chose to begin a relationship with the HMV brand across a number of new platforms that have transaction and purchase at the very heart of them.
  • Customers already know that HMV’s revitalised stores can no longer be described simply as music retail oultets. HMV has diversified so that its shops are destinations for people wanting to buy games, books, films, hi-fi equipment and a host of other merchandise.
  • HMV reported strong trading in some of the country’s best concert venues that it now owns through the purchase of the MAMA Group, sealing the start of a shrewd move into the fast-growing live music market.
  • Music fans might not know it but six of the highest profiles summer music festivals that took place this summer were owned and run by HMV.
  • The business is now a genuine market player in the live event ticketing industry with several high profile exclusive deals already under its belt.
  • The growth of the PureHMV loyalty scheme to more than 1.3m members has far exceeded the expectations the business harboured when it launched the CRM scheme into 33 stores in October 2008.
  • Beyond the PureHMV scheme, the data that the Group holds across all its brands is rich. HMV Group has accumulated four million loyalty card holders across the HMV and Waterstone’s brands.
  • While Waterstone’s was the one area within the business that didn’t exceed expectations, there is a strategy in place to improve its fortunes. The supply chain has undergone some restructure under a new management team and the newly-launched e-books scheme at Waterstones.com was nearing one million downloads when the full year results were reported.
  • Last week the HMV Group launched HMVdigital, a new music downloads portal that Fox believes can compete against iTunes in the long term.
  • By taking a 50% stake in 7digital, a digital media company in September 2009, HMV executives believe they have made a long-term strategic investment. In the short term HMV now has an in-house digital expertise to ensure that all its propositions and communications are properly integrated to enable the customer to do more.

So what?

So my point is, with a simple look at HMV’s recent trading statements and perhaps a chat with the company’s top management team, (the least you would expect of research analysts who have the task of examining the entirety of a business to try and assess its value for their investor clients), how can it be said that “the outlook isn’t clear”?

I spoke to members of the marketing team last week. And I looked at the trading statement mentioned above, which includes a full outline of the strategic overview put in place.

You might not find yourself agreeing with the strategy but it is perfectly clear. Certainly there is some significant change and overhaul taking place within the business but that reflects the markets that HMV Group plays in.

Surely, in such a fast-changing retail environment where HMV Group is suddenly competing with new rivals such as Amazon for book sales, O2 for concert ticket sales and Barclaycard for music downloads, business transformation (based of course on relevant data and strong customer insight) is a positive, not a negative!

The City worries about the decline of HMV’s ’core business’ markets – the selling of CDs. But for me, it is wonderful to watch HMV prove it isn’t just the plain old music retailer of old. None of its traditional stores incorporated a cinema like some of its stores do now for example.

Marketing leadership

Many of these new moves for HMV Group have been led and managed by the marketing department. So here is my question for marketers. If your customerbase is onside and seems to be coming with you on your journey towards growth, does it matter that others – the City, the politicians, the markets – don’t understand the power of marketing to transform a business and achieve its objectives?

I would argue that it does. The perceived value of your companies, the perceived value of your work, and most importantly, the perceived value of you and your skills, depend on it.

Your knowledge of that design tweak that will drive greater commercial success; your instinct for the customer’s dream new product before they have even articulated it; your ability to drive more revenue from each customer by building their loyalty to your brand and utilising the data you have to identify their needs. It all counts but it should count for much more.

We have to step up. Marketing budget is currently far too disposable. Far too easy to cut. There is more to your jobs than creating ads to sell products and shift volumes. If you were at the Marketing Week Engage Awards ceremony in May, you will have heard me describe marketing as the beating heart, the lifeblood and the brains of any economy. We have the tools to be directing from the top. It’s time we started demonstrating it.

What are your thoughts?

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