A host of professional accountants and students at a forum held in Dubai acknowledged the importance of finance and marketing departments working in tandem to achieve 'return on ideas'.
Encouraged by the Chartered Institute of Management Accountants (CIMA), the concept of 'return on ideas' recognises a model to overcome the opposing philosophies of finance and marketing teams.
Marketing executives are often seen complaining that finance teams tend to cut down on marketing budget in times of crises, despite their arguments that long-term brand building exercises help companies survive and grow faster when economic conditions improve.
Ray Perry, Executive Director, Brand, Profile and Marketing, CIMA, said: "A scientific system that measures confidence levels regarding product costs, consumer testing and competitor index can bring up success indicators that combine financial concepts and marketing aspirations."
He told Emirates Business that the said scientific method could predict an advertising-sales ratio that shows how a product would perform and what marketing ideas could improve its performance. Perry said this ratio was 15 per cent, but varied slightly according to the specifics of each industry.
He told the forum the 'return on ideas' concept was a process that required results of each marketing campaign to be fed back into the system to learn and improve future planning.
Perry said traditional understanding of an accountant's job was to look backwards at past figures. However, accountants prefer to be involved in strategic planning. "In crises, they are encouraged to cut down budgets while facing the choice between a finite reduction of budgets and an infinite horizon for successful investment opportunities."
Perry presented the findings of a report by CIMA that explored better results from finance and marketing teams working together. The report is the first-of-its-kind to tap into the theme and is expected to become a regular report, said Perry.
He said: "You will be surprised at the number of companies that overlook the feedback process. We are encouraging a philosophy based on a three-step model called the infinity model. It includes imagining, predicting and demonstrating value. Prediction presents a challenge when information such as prior experience, market research, consumer reactions to certain products among others are not available.
"Multinational companies often omit the third step, which is essential in providing feedback and recording the successes and failures of campaigns. Once this happens, prediction becomes difficult. The report included 100 companies from different industries, and disasters appeared to have taken place mainly in multinational companies."
The report also highlighted worst-case practices. "There are two things that could go wrong in terms of 'return on ideas'," said Perry. "The first is the failure to test thoroughly, and the second is the lack of recording in the system, which, if available, helps in the learning process and in making better decisions while cutting the risks."
"From a financial perspective, recording the feedback from campaigns helps reduce risk in the long run by providing insights to what works and what doesn't.
"It helps because the marketing industry often witnesses a faster employee turnover. Thus, information is lost and strategies are discontinued to be replaced by new strategies."
Perry said market testing was equivalent to risk management in the world of finance. "Narrowing it down, it doesn't matter from which perspective you handle it. It is just different terminology," he said.
"Finance people don't get along with marketing executives because marketing believes in long-term brand awareness rather than short-term sales. Finance departments are more
concerned about quarter sales. Yet, focusing on short-term sales might result in giving up on investment opportunities."
According to the report, the 'return on ideas' concept, combined with feeding back results into the system, will allow marketers to come up with alternative ideas based on experiences.
Perry said the report did not include local companies.
He said the CIMA was in the process of addressing the region to gradually embed those concepts in the mindset of the local businesses and their financial teams. "We hope to include local companies in our future reports," said Perry.
The CIMA report titled 'Return on Ideas: Better Results from Finance and Marketing Working Together' concluded that marketing could derive value that far exceeded cost.
The report reached at this conclusion by identifying working practices that could be widely adopted to demonstrate and drive marketing value.
It said finance and marketing teams should be imaginative about creating value for business. Predicting value was also important to test the financial contribution of the new ideas. Those predictions should be jointly owned by the marketing and finance teams and should avoid being based on guestimates, authority and wish fulfillment.
Demonstrating value, the third step in the model conceptualised by the report, was a way to test the ideas and predictions while showing marketing costs, ways to be less wasteful and more effective, the consumers' response and the impact on the future financial performance.
The CIMA report included case studies from 100 companies from different industries, said Ray Perry, CIMA.
"Finance teams are not keen on revealing data and figures that would expose them to competition, this is why the report appears to be more of a generic nature," he said.
"We might consider replacing those figures with fake ones for the sake of demonstration to enrich our future reports," he said.
The companies included in the report included Unilever, Proctor and Gamble, Shell, HSBC, British Airways, Kraft, IBM, Nokia, Disney, Intel and Vodafone.
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