FINANCIAL ISSUES remain a low-interest area for many marketers. But while marketers seem to feel that they are a declining influence around the boardroom table, financial metrics over which marketing has prime influence are of huge importance to CFOs and investors. There are remarkably few books occupying this lonely territory. Here is a basic library.
The category killer is Tim Ambler’s Marketing and the Bottom Line. He argues that the management of brand equity is the central purpose of marketing but, acknowledging that brand equity can be an amorphous concept, he prefers a system of metrics that can explain how and why brand equity is changing. The intention is to build a more objective dialogue between marketing and finance and to elevate the credibility of marketing. This book has both a philosophic worldview and plenty of practical advice.
Another hugely influential book for me has been the late Simon Broadbent’s The Advertising Budget, published in 1989, by the IPA to counter the ‘finger in the air’ approach to setting budgets. Broadbent uses this rubric to advance an economic approach based on common-sense analysis of simple cost, volume and profit relationships. Broadbent emphasises pricing as a theme almost as much as advertising since pricing and promotion are the only two ‘Ps’ that the marketer can influence on a day-to-day basis.
The golden coach at this particular ball is The Strategy and Tactics of Pricing by Tom Nagle, John Hogan and Joseph Zale. Starting with the key observation that the product should be designed to a price rather than the other way round, the authors present a comprehensive overview of the generic pricing strategies available, how they influence the bottom line and how the key issue of price sensitivity can be explored and measured.
At the end of the whole process is the investment community and the value that they put on marketing. The definitive work in this area remains to be written, but marketers could do worse than to read Grande Expectations by Karen Blumenthal, a Wall Street Journal writer who wrote an account of a year in the life of Starbucks’ shares. The result is a beautifully readable piece that uses each month of the year to introduce the influences that determine the daily fluctuations in the share price of a blue chip Wall Street stock: the institutional investor, the hedge fund trader, the stock analyst et al.