Welcome

1. Welcome Sara Shipton Innovation & Development CIMA Return on ideas : Better results from finance and marketing working together

2. About Me • Production/Distribution of Beer (Allied Breweries plc) • Operational audit (Scottish & Newcastle plc) • Breakdowns/Recoveries (RAC) • Leisure – Hotels/Leisure group – FC for SME • Pub Retailing (Allied Domecq) • Pub Wholesaling/Leased Model (Punch Taverns) • Consultancy Business – incl Freelance work for CIMA Return on ideas : Better results from finance and marketing working together

3. Agenda Return on ideas : Better results from finance and marketing working together Why now? Case for change – the relationship between finance and marketing - measuring marketing’s return - marketing’s influence in business The Infinity Model. Checklist 1 – Good practice guidelines, do we know what we have to do? Checklist 2 – Key Players, do we know who should do what, and do they know how? Checklist 3 – Conditions for success Steps to implementation Summary and close

4. Why important now? Economic Downturn Value of Marketing to the Bottom Line Ideas Numbers Marketer Management Accountant “Marketing looks like the easiest and most logical [budget] to cut because companies don’t know how to measure its productivity.” Sharan Jagpal, Professor of Marketing Rutgers Business School, New Jersey Return on ideas : Better results from finance and marketing working together

5. Return On Ideas – Case for change “Half the money I spend on marketing is wasted. The trouble is I don’t know which half” Lord Leverhulme, founder Lever Bros, first president CIMA, former President of CIM “ There is growing pressure from shareholders to make marketing more accountable. Investors are becoming more active in analysing and questioning marketing expenditures.”Sir Dominic CadburyChairman Cadbury-Schweppes , May 2000 “Many traditional marketing models employed by CMOs today are being severely challenged and they foresee the day when these rules of thumb will no longer work. A more rigorous and pragmatic approach – treating marketing expenditures as investments – is warranted. The pressure, therefore, to demonstrate tangible ROI on your marketing and branding strategies, has never been more intense.”Stuart Green, Managing Director, Interbrand SingaporeMalaysian Marketing and Strategy Forum, Kuala Lumpur 2006 Return on ideas : Better results from finance and marketing working together

6. The Evolving Management Accountant “..the historical development of accounting - viewed primarily as a technical and instrumental activity carried out by a functionary whose role was to control and thereby, indirectly to oppress”Fisher and Murphy (1995) “The common stereotype of the accountant –portrayed as male, introverted, cautious, methodical, systematic, anti-social and above all boring “ (Bougen, 1994; Cory 1992) “The role of the ‘beancounter’ is being replaced by the demands for accountants to add value in terms of competency in financial analysis and strategic decision-making skills(Parker, 2000). Numbers “Balancing the tyranny of Accountants” “ Financial Management has failed to bridge the marketing-finance interface..” (Doyle , Value Based Marketing, 2000) Return on ideas : Better results from finance and marketing working together

7. The Management Accountant – of the Marketer “Finance thinks marketers spend like drunken sailors.” “ Finance asks for ROI; marketers give them “brand value” and “unaided awareness””“Marketing’s spend forecasts are never right”Pat Murray, Marketing Management Analytics “Management accountants were naturally cautious and untrusting of predictions from marketing; citing marketing’stendency to adopt implausible assumptions and ignoreevidence in order to support favoured ideas”Return on Ideas, Robert Shaw “..many marketing professionals lack the financial know-how to read and understand balance sheets and P&L statements, and so struggle to understand how their work affects the company’s financial performance.” Herbert Ortner, CMO and interim CFO, Palfinger, an Austrian crane manufacturer Return on ideas : Better results from finance and marketing working together

8. Finance v Marketing “Whilst both marketing and financial professionals believe marketing is delivering ROI, they can’t show it. Without being able to demonstrate it, it’s an uphill struggle to argue the case for increasing the marketing budget – and perhaps help to fund more measurement.” Peter Romaine, Director and General Manager, Xerox Global Services, Xerox UK. Return on ideas : Better results from finance and marketing working together

9. When the Management Accountant metthe Marketer The Management Accountant Comfort ZoneCautious and methodicalLoves History, and the past Relishes indisputable solid fact Happy to provide the post completion critique Like the safe position of told you so, rather than risky business of forecasting The Marketers Virtual Reality Full of ideas Impulsive and un-disciplined Excited by the future and the unknown Un-willing to recognise risk and potential of failure Rather not measure if it might not look good… Like to be in a position to be selective about what results to present Reluctant to be set targets, preferring the ‘freedom’ to find out along the way Return on ideas : Better results from finance and marketing working together

10. Marketing’s Lost Influence – Doyle’s Paradox* • Marketing is important for 3 reasons - Companies need to understand and adapt to rapidly changing markets. - It is marketing rather than production skills which have long proven the key to competitive advantage - Marketing performance is the root source of shareholder valueHowever…. • Study** found, just 12 of chief execs in top 100 companies had experience in a marketing role. • Only 57% of larger companies have marketing represented on the board • Whilst all boards will discuss profit, only a third consider customer attitudes and brands as part of the agenda.Why? Return on ideas : Better results from finance and marketing working together * Source Doyle. P. (2000) Value-Based Marketing, John Wiley & Sons Ltd ** Source Stephen Callender 1999

11. Marketing ‘marginalised’ in many board rooms* • Failure to incorporate the concept of shareholder value • No clear view of what success looks like • No use of current strategic valuation techniques. • No framework for engaging in the strategic debate. • Professional education not highly regarded. “The main problem seems to be measurement – and communicating the right marketing knowledge to the Board – CMOs simply don’t have the right tools to do the job well…this is making it increasingly difficult to justify expenditure.” Ian Parkes, Coleman Parkes Research Marketing Success Survey 2008 Return on ideas : Better results from finance and marketing working together * Source Doyle. P. (2000) Value-Based Marketing, John Wiley & Sons Ltd

12. Marketing success – are accountants helping?* • Maximising profits does not always lead to maximising shareholdervalue • Financial management steers many boards away from examiningmarketing strategy. • Financial reporting focuses top management on company accountswhich show the historical value of assets, where internally developed brands, and other intangibles are often omitted. “With increasing pressure from management and shareholders to deliver results, marketers often resort to short-term sales tactics over long-term brand building because they are quantifiable.” Ms Shauna Li Roolvink, MD, BrandHub. (Singapore) May 2007 Return on ideas : Better results from finance and marketing working together * Source Doyle. P. (2000) Value-Based Marketing, John Wiley & Sons Ltd

13. The Evolving Management Accountant ‘Financial management is evolving from an uninspiring, albeit necessary, function of doing business to one of the most promising levers of business transformation. In fact, without support from the finance function in improving strategy and operations, companies face an uphill and often losing battle in transforming their business’(Deloitte Study, “Finance Masters: How Finance is Quietly Emerging as a Key to Business Transformation, Deloitte, 2008) “Finance business partnering is not so much a new role as an extension or rebalancing of the finance function’s traditional responsibilities so that finance is not just an overhead but helps to create value. This requires a change in culture whereby the finance professional’s objectives and the business manager’s objectives are seen to be aligned, and finance’s contribution to management decision making is expected and valued. “(Toby Wilson, FD, Microsoft UK)* Numbers Return on ideas : Better results from finance and marketing working together * Source: Improving decision making in organisations – The opportunity to reinvent business partners. CIMA 2009

14. Summary so far… • Marketing spends ££££££s • Done well it creates sales, profit, and real share holder return • Done badly it is incredibly wasteful. • Poor or even just arms lengthrelationship between the marketer and finance is a mandate for this. • With better engagement, and common goals, and applying the findings of this new CIMA report, this needn’t be the case Numbers Return on ideas : Better results from finance and marketing working together

15. The relationship MUST be more productive Numbers Return on ideas : Better results from finance and marketing working together

16. Return On Ideas • This report is the product of a partnership between • CIMA, the Chartered Institute of Management Accountants • The Direct Marketing Association (DMA) • The Chartered Institute of Marketing (CIM) Return on ideas : Better results from finance and marketing working together

17. Professor Robert Shaw • Honorary Professor of Marketing at Cass Business School and Director of the Value Based marketing Forum • Veteran observer of marketing and finance, with over 25 years of experience. Return on ideas : Better results from finance and marketing working together

18. Background • An Investigative research programme from 1997 to 2007 • 100 Companies Surveyed • Shared working practices, internal meetings, plan, budget, models and tools • Review of published case study papers • Examined academic literature • Demonstrating marketing’s contribution to the organisation; how to predict it; and how to find ideas to improve it. New FRAMEWORK Return on ideas : Better results from finance and marketing working together

19. Included in the Document… • Key questions for discussion • Checklists dealing with:The fundamental requirements for affordable marketingDepartmental good practices The right conditions to ensure success Case Study examples New FRAMEWORK Return on ideas : Better results from finance and marketing working together

20. Good Practice Guidelines Worst Case Marketing Practices The infinity model of marketingvalue creation Return on ideas : Better results from finance and marketing working together

21. Checklist One: Good Practice Guidelines1. IMAGINATION • Can we really afford NEW STUFF? • Are we hunting for AFFORDABLE ALTERNATIVES? • Are we doing TOO MANY marketing activities or TOO FEW? • Do we have the right MIX of affordable marketing activities and ideas? • Are we PAYING TOO MUCH for Ideas and have we sought cheaper sources? Return on ideas : Better results from finance and marketing working together

22. Checklist One: Good Practice Guidelines2. PREDICTION • Do we insist on rigorous predictions of the financial contributions of all new marketing ideas? • When we predict, do we do enough: • Historical analysis • Testing and experimenting? • Observing customers? • Searching for analogies with existing situations to provide • clues about how the future will unfold? Return on ideas : Better results from finance and marketing working together

23. Checklist One: Good Practice Guidelines3. DEMONSTRATION • Do we insist on post-implementation reviews of every marketing prediction? • Are we using good practice analysis methods to link marketing activity to customer activity? • Do we have financial models linking customer activity to sales and profit figures? • Do we investigate cost-efficiency and drive down waste, scrap and re-work? Return on ideas : Better results from finance and marketing working together

24. Good Practice Guidelines - Imagining Value • Creation of New Ideas, requires a certain obsession ! • Can be a lonely ‘exposed’ place, • But – can create opportunity for building team spirit • Imagination is used at three levels: 1. Strategic Portfolio 2. Value Proposition 3. Marketing Mix Return on ideas : Better results from finance and marketing working together

25. Good Practice Guidelines - Imagining Value - Strategic Portfolio • Classify and categorise marketing ideas . • Invest cash where it will generate maximum cash inflow. • Do not allocate budget based on current level of sales • Assess ideas using cost-benefit predictions and apply consistent risk-reward criteria. Case Study: IBM CEO, Lou Gerstner in the 90s repositionedthe business alongside being provider of hardwareand software, as a group of service businesses. Return on ideas : Better results from finance and marketing working together

26. Good Practice Guidelines - Imagining Value - Value Propositions • Use market research. • Address both negative comments, and, exploit positive ones imaginatively. • Keep appeal by stream of additional practical ideas • Monitor from emergence through prediction and post-launch. • Use predictive tests and demonstrate post launch sustainable value. • Implement a shared plan and schedule activities. Case Study: Heinz – 2003 invested in a massive research programmeinto customer attitudes, discovering their dissatisfaction with theplastic bottle. The Top-Down Bottle was born. Return on ideas : Better results from finance and marketing working together

27. Good Practice Guidelines - Imagining Value - Marketing Mix • Review evidence of mix effectiveness. • Rethink, based on reviews. • Switch budgets on a rolling monthly basis where appropriate • Base future marketing activities on ideas translated from the mix. • Monitor mix ideas from emergence through prediction and post-launch. • Subject ideas to predictive tests before launch, and demonstrate value add, after launch. • Guard against proliferation of un-scrutinised ideas. • Plan and schedule mix activities. Innocent Drinks used many innovative mix ideas, including eye catchingpromotions; woolly hats for Innocent bottles, distribution of excess stock to the homeless, a health tips book, Fruitstock festivals, free eventsfor retail staff. From 2002 to 2007 turnover grew from £6.5m to £100m. Return on ideas : Better results from finance and marketing working together

28. Good Practice Guidelines - Predicting Value • Analogies, substitutes and scenarios • Customer Insight and foresight • Tests and experiments • Extrapolations from the past Return on ideas : Better results from finance and marketing working together

29. Good Practice Guidelines - Demonstrating Value • It is important to pre-plan how you are going to demonstrate the • effect of every new marketing idea when put into action. • Look for a chain of evidence that links marketing activity and expenditure to its financial benefits. Return on ideas : Better results from finance and marketing working together

30. The Key Players – Checklist Two “ Increasingly information-age Companies are shifting from vertical hierarchies to horizontal cross-functional teams……responsible for key processes that add value for customer NOT for functional inputs.” Peter Doyle: Value Based Marketing Return on ideas : Better results from finance and marketing working together

31. Conditions for Success Return on ideas : Better results from finance and marketing working together

32. Conditions for Success: points to consider – Checklist three Return on ideas : Better results from finance and marketing working together

33. Steps to implementation Return on ideas : Better results from finance and marketing working together

34. Steps to implementation – in practice • ONE DAY • ONE WEEK • ONE MONTH • Workshop • Detailed review • Data collection • Model development • Tool implementation Return on ideas : Better results from finance and marketing working together

35. Summary of key points • Finance and marketing have a disjointed relationship. • Finance focuses too much on budget and not enough on performance, whereas marketing concentrates of brand awareness/image but not on sales or profit. • The best organisations strike a balance between financial rigour and marketing imagination. • Progress can be made by holding marketing/finance workshops and ensuring both sides ask the right questions. “Engaging with the CEO, Finance and IT departments..understandingthe CFO’s expectations from marketers…meeting and exceeding CEO’smarketing objectives… boosts competitive advantage in the market.”Ramesh Natarajan, Deputy Country Manager, DHL Express, Malaysia, CMO Conference KL 2006 Return on ideas : Better results from finance and marketing working together

36. 10 benefits to your organisation • Making the marketing budget work harder. • Holding agencies rigorously to account for results. • Eliminating production wastage and its causes. • Making marketing assets and collateral (images, video, text) work harder. • Maintaining media effectiveness while reducing costs. • Getting agencies to do a better job in less time. • Avoiding surprises in budget commitments. • Wasting less time on budgetary bureaucracy. • Faster marketing approvals with fewer errors. • Forecasting more accurately. Return on ideas : Better results from finance and marketing working together

37. Return on Ideas Questions? “The quest to create more money from marketing is a team effort.”Professor Robert Shaw Finance and Marketing working better together www.cimaglobal.com/ideas Return on ideas : Better results from finance and marketing working together