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Why marketing needs a seat at the Executive table

September 9th, 2013 |

If firms measured growth in the right way, there would be no argument about whether Marketing needs a seat at the Executive table. In this debate Business Development is included in the broadly defined Marketing function.

In an earlier post on Research. Reveal. Doug Johnson, managing director and founder of Catapult Growth Partners (Beaton's US collaborators), argues persuasively that profitable growth is the only metric that counts in marketing and business development. We agree and in this post extend Doug's case.

In his post Doug states:

"The best teams get up early in the morning with a single-minded purpose: Grow revenue. While it seems obvious, it is surprising how many teams fail to have this burned into their psyches. Run-of-the-mill teams are often filled with smart, experienced, hard-working professionals, but they confuse activity with results. They talk about branding, positioning, differentiation, market awareness, social media, etc. They fail, however, to connect those marketing tools and tactics with the ultimate business development goal of growing revenue." Amen, we say.

Job #1: Marketing needs a seat at the Executive table

Profitable growth, not just any growth, is job #1 for all firms. Yet firms focus on the wrong metrics when reporting growth. This post on the dangers inherent in being part of the established mindsets attests to the extent of this folly.

Annual league tables of revenue and profit are the wrong way to assess success. These tables send inappropriate signals and recent commentaries bear witness to the follies of obsession with these tables. The only growth that matters is that which is profitable and client-led; where its clients are rewarding a firm for getting better at serving them.

Six strategic measures to earn a seat at the Executive table

ID-10019120There are six strategic measures of growth relevant to clients and the profitability of the firm.

The first is client retention. Every firm knows its best prospects are its current clients, but how many firms are really good at CRM? Remember, not all clients are great prospects, but those 20% of clients that deliver 80% of a firm’s profit almost always are.

The second metric is share of key client's spend. In other industries share of spend is measured by the number of products purchased by each customer. In professional services the relevant measures are what proportion of the client’s spend goes to a firm and how many service lines this represents.

The proportion of new income is derived from word-of-mouth, i.e. recommendation, by contented clients is third. Recommendation is the sweetest way to earn new clients; the cost of acquisition is zero.

A firm’s addressable market is fourth. This is the market the firm’s brand could serve; that is, those clients giving the firm ‘permission’ to serve them because the firm is trusted. While some of the Big Four and consulting engineering firms are successfully exploiting brand permission, law firms are not.

The remaining two metrics come straight out of the firms’ management reports: direct margin and organic growth. Margin is a reflection, at least in part, of a firm’s ability to charge above commodity rates. And organic growth shows the extent to the firm’s clients are recognising its value, not its predilection for mergers.

These six metrics are those that really count. Influencing their use will prove the case beyond any doubt why Marketing needs a seat at the Executive table.

Further reading on being best in class

+ Be the firm clients can't do without

 + Three reasons why professional services firms need more research

+ Rigour and research on law firms

This post was written by George Beaton, a director of Beaton Capital and Beaton Research + Consulting. George is also at Google+ as +George Beaton.

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