CFOs…They’re Just Not That into You

It is often said that those in the finance department and those in the marketing department come from two different planets! Because of long standing accounting principles and practices, marketing is often relegated to being just a cost line item rather than a value-generating activity.

Natalie Mizik, former Associate Professor of Marketing at Columbia Business School, now at Kenan-Flagler Business School, and Doron Nissim, Professor of Accounting and Finance at Columbia Business School, took a closer look at the implications of current accounting models and their representation of marketing activities. In their article, Accounting for Marketing Activities: Implications for Marketing Research and Practice, Mizik and Nissim found that common accounting principles and practices have led to distortions of marketing contributions in financial reporting. In addition, some experts feel that marketers don’t adequately communicate how their expenditures benefit the bottom line. Together these factors affect perceptions of marketing’s value, which can impact everything from marketing budgets to influence and practice.

To mitigate the negative light financial reporting can cast on the perception of marketing, Mizik and Nissim recommend marketers play a more active role in the financial reporting debate. According to them, providing “consistent, observable, quantifiable and verifiable information” on marketing spend and its results, and sharing financially-based performance metrics can improve the process of evaluating marketing efforts and lessen the conflict between the finance and marketing worlds.

A recent study released by the Center on Global Brand Leadership and the New York American Marketing Association (NYAMA) confirmed the need for a robust set of ROI measures to improve  marketing’s standing within a company. The BRITE-NYAMA Marketing Measurement in Transition Study, Marketing ROI in the Era of Big Data, found that 70% percent of marketers say that their marketing efforts are under greater scrutiny than in the past. ROI metrics are critical to addressing the concerns about the contributions of marketing initiatives. However, more work is needed to develop a common understanding of ROI metrics even within marketing departments. The study revealed that although marketers see the value of ROI measures, there is confusion about the meaning and significance of ROI among marketers.

Marketers will need to continue to refine their understanding of ROI and develop consistent metrics, often specific to their own organization, in order to get CFO’s turned on to the results of marketing efforts.

BY KIM SHIFRIN

Research: The Cost of a Queue

It may surprise some frustrated shoppers waiting on a long line that much thought has been put into the design of a store to manage such waits. “Queueing theory” has been a topic of study for over a century, however most research has focused on balancing operating costs against the level of service offered to the customers. Until now, there has been little work done to identify how the length of a line affects a customer’s purchasing behavior.

Columbia professor Marcelo Olivares and Columbia doctoral candidate Yina Lu, along with Duke professor Andres Musalem and Scopix Solutions’ Ariel Schilkrut, examined how the length of a line impacts purchase decisions. Combining novel digital imaging technology and customer transaction data, they created models that quantify the effects of queues on purchase incidence, switching behavior and sales.  For a queue length of 15 customers or more, purchase incidence reduces from 30% to 27%, corresponding to a 10% drop in sales.

The researchers also found that it is the queue length and not the anticipated waiting time that affects customer behavior. In addition, they discovered that waiting is negatively correlated with price sensitivity.

Read more from Columbia’s Ideas at Work research summary, which includes a link to the full paper.

BY KIM SHIFRIN

Why Bob Garfield Is Channeling Shakespeare

Not just a famous Shakespearian quote, “To thine own self be true,” according to Ad Age editor, Bob Garfield, is a maxim to which marketers should adhere.

Garfield, host of NPR’s On The Media and author of the forthcoming The Human Element, explains that in this new “Relationship Era,” it’s critical to “look inward” rather than mold your business to the public’s “often fickle, shortsighted tastes.

In a recent Ad Age article, Ignore the Human Element of Marketing at Your Own Peril, Garfield claims that marketers in the “Consumer Era” strove to get into the heads and hearts of consumers by asking them what they wanted, attempting to deliver it, and seducing the target audience to buy it through advertising. However, in today’s world, companies need to continually communicate their “essential self” or brand purpose via relationships with all stakeholders.

Garfield calls these relationships the “human element.” In this new era, customers (as well as vendors, stockholders, and employees) are not “conquests” but rather members of a community, looking to a company’s inner reason to decide if it merits adoration (or, potentially, hatred). The digital revolution has ushered in an age in which consumers are evaluating companies all the time across numerous conversations that go well beyond the latest advertising slogan. According to Garfield, these conversations “are about your brand’s essential self—which behooves you to think very hard about your essential self.”

See Bob Garfield speak about the Relationship Era and the Human Element at our BRITE ’12 Conference (March 5-6, NYC).

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BY KIM SHIFRIN

Relevance Over Reach, says GE Digital Chief

Many marketers are singularly focused on collecting impressions. Not so for Linda Boff, Executive Director of Global Digital Marketing at GE. In an interview with Fast Company’s 30 Second MBA she explained that brand building is not about getting the most number of eyeballs, but about talking “to people in the most relevant way possible.”

Boff, named BtoB magazine’s “Top Digital Marketer of the Year” for 2011, looks beyond pageviews to measure campaign success. In a co-authored blog post on Harvard Business Review, Boff writes that a more useful metric “would be actively engaging” with a specific subset of relevant potential customers. She explains, “[digital tools] have enabled focusing on smaller, more meaningful segments,” a practice GE calls “micro-relevancy”—content that is delivered to the right audience, not just the biggest.

Boff acknowledges that GE “think[s] really hard about who [they] want to talk to.” This careful consideration of the target, in combination with digital technology, has allowed GE to reach “the right audience with the right offer at exactly the right time.” Something that has far more impact on business results than solely accumulating impressions.

See Linda Boff speak about building relationships with customers at our BRITE ’12 Conference (March 5-6, NYC).

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BY KIM SHIFRIN

The Seesaw of Internet Freedom and Regulation

Author Jeff Jarvis is torn. In his most recent book, Public Parts: How Sharing in the Digital Age Improves the Way We Work and Live, Jarvis argues against internet regulation.  At the same time, he advocates government enforcement of net neutrality, itself a form of regulation.  It’s not only Jarvis who struggles with what level of regulation, if any, is needed and for what purpose.

Secretary of State Hillary Clinton delivered a speech in 2010 defending internet freedom.  She called for “a single internet where all of humanity has equal access to knowledge and ideas.” The following year she delivered another speech which simultaneously condemned censorship and attacked WikiLeaks for its release of government data.

On his blog, Jarvis looks at the tension between freedom and regulation, the need for open exchange and the right to privacy and protection. In a recent post, “We Are the Lobbyists,” Jarvis further explores the consequence of these frictions:

The proposed SOPA-PIPA bill is designed to fight online trafficking of copyrighted intellectual property. The proposed bill, and resulting protest, brought many issues to the fore including the dramatically changing natures of media business models, the evolution in the value of content, the undermining of institutions’ previous unchallenged power.

It also created an environment where millions of consumers became lobbyists, using the net to defend internet freedom. The internet provided a platform in which users could make an impact without using “influence peddlers” or political commercials.  The movement only “needed citizens who give a shit. Democracy.” It is up to the internet public to protect the “tool of publicness.”

See Jeff Jarvis speak about the balance of internet privacy and publicness at the BRITE ’12 Conference (March 5-6, NYC).

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BY KIM SHIFRIN