Cost References for Marketing, Sales and Communications

Pierre Ferrer, consultant UDA Interview with Pierre FERRER, UDA* consultant - Cost References for Marketing, Sales and Communications departments.

By Hubert TESTE
Director of Customer Relations Branch

 CH - What changes do you foresee in the marketing field and its various components?

 PF - Companies still have difficulties defining the roles and responsibilities of their marketing organization. First, prerogatives of marketing and sales organizations must be clearly differentiated. Second, companies must separate marketing and communication functions. It is a 3 foot entity: sales, marketing and communication; it is great for stability but it can slow down the progression!

 CH - What was your motivation to support a reference Activity Based Costing model dedicated to marketing, sales and communication?

 PF - UDA members always ask me what I thinK is the right price for various services used in communication and marketing campaigns. How much should I pay for a TV commercial, a page in a newspaper, the services of a singer, printing a booklet? This knowledge of standard costs for micro services helps to micro-manage purchasing activities. But I believe we lacked a more standardized, holistic approach of costs, which can help make strategic decisions. This is where Activity Based Costing and a marketing oriented model come in very handy.

CH – What in your opinion are the key benefits to implementing Activity Based Costing in marketing organizations?

PF - I believe numbers must have a meaning: the more complete costs are (including internal resources), the more sense you can make of campaigns you manage, the easier it is to choose between projects. With a more sensible allocation of costs to marketing operations, ABC allows to figure which operations are profitable and which are not. Brand value, brand recognition and a company’s reputation can be greatly improved when you know where to spend your budget. It does not mean that non profitable operations must be stopped. Such operations can bring value from a non-economic perspective, such as community contribution, environmental impact, etc. Only now you know how much these operations really cost, and you need to make sure that the non-economic value is in line with the company’s strategy.

CH – You are now half way through the ABC project. Have you seen some changes since you started?

PF - Before the project started I only had an intuition. I knew we needed to provide companies with a cost-oriented tool to better manage the marketing, communication and sales organization. When we started it became obvious that the task was complex: for one, the marketing vocabulary has very different meanings from one company to another. These words and concepts can be deceiving and do not integrate easily in the rigid accounting environment. In addition, it is tricky to develop a model to suit a great variety of companies. Even if they have the same goals in the end, companies are all unique because of their history, their culture.

CH - How do you plan to roll out this new model in marketing organizations in 09 and 10?

PF - First it is the Federation’s responsibility to raise awareness about the model and its many advantages among our members. We must make sure a great number will find interest and value in this new approach, so that they actually implement it in their organizations. It would be particularly interesting to support the first candidates in order to guide them past the first difficulties.

CH - What other developments do you foresee in the field of marketing when it comes to value and return on investment?

PF - This is a much debated issue in the marketing world nowadays. You can find a myriad of modeling tools and KPI scoreboards which compute company-wide data to monitor projects and operations. I think nonetheless that marketing tools will never completely predict market behavior and evolutions. There will always be unforeseen events with more or less effects over an undetermined environment. Marketing environment is one where past does not determine the future. Marketing executives must have strong intuitions and solid analysis tools to convince the rest of the company to go after certain opportunities. It is their mission to present opportunities based on the company’s strategy and properly allocated resources. The rest is an entrepreneur’s approach to risk taking. After all, marketing and management are no exact sciences.

* UDA is the French Federation of Advertisers, a founding member of the World Federation of Advertisers. UDA engages directly with international bodies on issues of direct relevance to marketers. UDA facilitates partnerships across the advertising industry and help its 250+ members champion time and cost-efficiency of their marketing investments.