Marketing budgets have been severely cut during the economic downturn. A recent study by the Finance Marketing Association in Vienna found that up to 60% of financial marketing departments have responded to the crises by cutting costs. Is this wrong? Not necessarily.
Looking at the dire situation from the point of view of the agencies, they should shoulder some of the blame for this reduction of marketing budgets. Why? Because in economically strong times the agencies sold anything and everything to image-obsessed CMOs and CEOs.
The main consideration seemed to be that the client manager was "happy" at the moment of campaign launch. Concerns about the Return of Investment (ROI) of such campaigns were an afterthought, if at all. Maybe they were eager to win one of the prestigious prizes, but it was not cash they were after.
Insightful is the fact that the only category getting more budget in the crisis is direct marketing. This makes sense, because direct marketing is much more performance oriented and supports the hypothesis that performance was lacking until now.
Also, the explanation that companies cannot "afford" the marketing budgets seems odd. This sounds like marketing is something like luxury, reserved for good times. In fact, marketing needs to be an investment. And like every investment it needs to return the cash plus a profit margin.
Taken it from this angle, the solution is quite simple: rigorous marketing controlling with pre-testing and performance measurement, based on hard data.
However, this is not an entirely new thought and many agencies would offer it to their clients. The only question then is why it was not marketed before?
Showing posts with label long-term vs. short-term. Show all posts
Showing posts with label long-term vs. short-term. Show all posts
08 May 2009
11 February 2009
Leadership for Generations
When a stock trader was asked what his planning horizon was, he answered, "Mostly short-term, but in some cases I am trading long-term." Then he was asked "How much time is long-term for you?" His answer: "With long-term I mean 5 minutes."
Compare this thinking to Felix Montecuccoli´s. He recently presented his views at the Hayek Institute in Vienna. Mr. Montecuccoli is leading the Agriculture & Forest Association, German site. These farm & forest owners are thinking long-term as well, meaning in generations. Not surprisingly, their profit motive is of somewhat lower priority. But on top of their list are values, with which they are managing quite successfully their properties; these values, such as industriousness, creativity, private property, sustainability, long-term profitability, or family traditions have served them well so far.
Family managed enterprises do experience a renaissance, not only for farmers or traditional aristocrats (of which heritage many big land owners still are in Europe). Examples of successful family-led businesses are not only found in the German "Mittelstand", but also in many Asian family companies, see as a famous example Toyota. Even in the US, familiy businesses have survived since 1776 and before, and are a force in the USA today, article (in German).
The keys to success and here in family business are founded on seemingly simple principles. Interestingly, these principles often help the businesses to prosper and survive over the long term. And they seem to have achieved alignment between the interests of the owners and managers better than stock-owned companies.
And this mis-alignment of owners and their agents, like managers and workers (see: agency theory), is one of the core challenges of big, publicly listed companies today. Not only in cases were outright fraud is perpetuated, but also where the managers are paid big bonuses, while the owners need to take losses, see here.
Also, it seems frivolous, when experienced top executives are scolded by twenty-something analysts to not follow any long-term strategy, but to sacrifice it for short-term shareholder value. Even great minds like Peter Drucker have struggled with that problem. It is a genuine leadership issue and needs to be resolved.
Another strong value of family businesses is sustainability, not only of the firm itself, but also for society and ecology; because family leadership thinks of future(s) not only in terms of stock options, but, even more so, of the future of their children and grand-children. That means then leadership for generations.
Updated 12.02.2009
Compare this thinking to Felix Montecuccoli´s. He recently presented his views at the Hayek Institute in Vienna. Mr. Montecuccoli is leading the Agriculture & Forest Association, German site. These farm & forest owners are thinking long-term as well, meaning in generations. Not surprisingly, their profit motive is of somewhat lower priority. But on top of their list are values, with which they are managing quite successfully their properties; these values, such as industriousness, creativity, private property, sustainability, long-term profitability, or family traditions have served them well so far.Family managed enterprises do experience a renaissance, not only for farmers or traditional aristocrats (of which heritage many big land owners still are in Europe). Examples of successful family-led businesses are not only found in the German "Mittelstand", but also in many Asian family companies, see as a famous example Toyota. Even in the US, familiy businesses have survived since 1776 and before, and are a force in the USA today, article (in German).
The keys to success and here in family business are founded on seemingly simple principles. Interestingly, these principles often help the businesses to prosper and survive over the long term. And they seem to have achieved alignment between the interests of the owners and managers better than stock-owned companies.
And this mis-alignment of owners and their agents, like managers and workers (see: agency theory), is one of the core challenges of big, publicly listed companies today. Not only in cases were outright fraud is perpetuated, but also where the managers are paid big bonuses, while the owners need to take losses, see here.
Also, it seems frivolous, when experienced top executives are scolded by twenty-something analysts to not follow any long-term strategy, but to sacrifice it for short-term shareholder value. Even great minds like Peter Drucker have struggled with that problem. It is a genuine leadership issue and needs to be resolved.
Another strong value of family businesses is sustainability, not only of the firm itself, but also for society and ecology; because family leadership thinks of future(s) not only in terms of stock options, but, even more so, of the future of their children and grand-children. That means then leadership for generations.
Updated 12.02.2009
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