Archive for June, 2009

Technology: Keeping Cash Flowing

June 23, 2009

As every business has come to realize over the last few years, cash flow is the heart and soul of any enterprise.  CEOs and CFOs face difficult decisions when tightening the belt to protect their continuing functions.  Routinely, one of the first expenses to look at cutting is the seemingly “discretionary” expense of advertising and marketing; after all, the relatively fixed costs of human resources and production are reluctant expenditures to put on the chopping block unless necessary.

What does this mean for marketers?

Recessionary times put immense pressure on marketers to justify budgets and prove how they contribute to the enterprise’s bottom line.  At the strategic level, many executives view marketing from the GAAP point of view – as an expense, rather than an investment.  CMOs and marketing leaders are generally quick to point out that business professors like Roger Graham at Oregon State University have demonstrated that in the five recessionary periods since 1971, advertising spending contributed to increased earnings for up to three years.

Consider Hyundai Motor America – this company launched a new campaign to promote its “Hyundai Assurance” program which has seen Hyundai increase market share when the automotive industry has declined 38%.  John Quelch, a professor at Harvard Business School, points out that brands that increase advertising while their competitors cutback improve market share and ROI.

What to do when money is tight?

While Hyundai has taken a risk that has seemingly paid off, executives must also recognize that for every Hyundai, there are five other companies that have failed.  Regardless of strategy, the number one goal of every enterprise should be to look to cut wasteful spending.  Although at a high level waste may be hidden behind a murky veil of seemingly innocent contractor fees, the truth is that for all organizations, technology is the number one solution to cut costs while maintaining or growing advertising efforts.

If you advertise, you have an expensive team of people assembling the final “production ready” materials that your customers see and respond to (hopefully!).  Today, you probably accept this as an unchanging fact of doing business – but why?  You would never think of hiring a team of typists to put together a memo for you, yet you, or your creative agency, have a team of production associates who put together all aspects of your advertising – from newspaper to television to digital.  Your word processing software on your computer and your email on your phone has replaced the typists – but why is the large team not relegated to history?

Ultimately, the answer is that organizations either cut budgets or assume they have the most efficiency available.

DO NOT BE DELUDED!

Unless you have full automation of your marketing implementation process, you can spend the same amount of money and get 7x to 12x more output or realize savings of 13% to 17% of your advertising costs.  Think of this sample advertising budget of $100 million split up as follows:

$80 million = media purchasing
$20 million = production of materials/creative

Technology can reduce the latter to $5 million comfortably saving $15 million for this organization.

Make your CFO happy in a challenging time – look into what technology can do for you and your organization!