Marketing Should Be a Profit Center, Not a Cost Center
LinkedIn Article by Tim Williams
February 19, 2013
One of the deep-seated beliefs of the late great Peter Drucker was that “The business enterprise has two -- and only two -- basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
Manufacturing is a cost. Management and administration are costs. Finance, accounting, HR, IT, operations, and legal are all costs. The only function in a company that produces revenues and profits is marketing; that is, marketing defined holistically as product, price, place, and promotion.
Viewed another way, attorneys, accountants, and IT consultants essentially cost the company money. This isn’t to say that the money isn’t well spent, or that these professionals don’t sometimes save corporations a lot of money by preventing lawsuits, keeping things straight with the IRS, or implementing timesaving new software. But none of these functions actually produce revenues for the company. Marketing does.
So why do law firms earn three times the fees of marketing firms? Because they’re accredited? Because law is a “true profession” and marketing isn’t? Perhaps. But it’s more likely the case that it’s because marketing has become the department that produces brochures and ads.
Marketing ≠ Advertising
In the earlier days of marketing, which emphasized all four Ps, marketing was a board-level function in corporations. Today that’s often not the case. Marketing professionals are usually seen as the “advertising people.” Marketing as a profession has allowed itself to be moved downstream, and “business consultants” have come in to fill the void.
When defined as it should be, marketing is a C-level job. It’s by far the most important function in the company, and as Drucker says, the only one that produces results. Because global business has lost sight of this, C-suites are instead filled mostly with executives from finance. Finance exists to support marketing, not the other way around.
Marketing as a growth driver instead of a service provider
Within corporations, the marketing function exists somewhere along the spectrum between:
Marketing as proactive growth driver > < Marketing as reactive service provider
If you’re an advertising agency and you take on clients where the marketing function falls on the “service provider” side of the equation, guess what kind of work you’re likely to be doing?
One of the key objectives for agencies in the 21 century is to do more “magic,” not just “logic.” Magic is the high-value ideation, insights, and problem solving that most agencies do well, but do a poor job of getting paid for it (or worse, give it away). “Magic” work includes helping organizations think though all the dimensions of marketing – from the way the product is named and distributed to how customer service is delivered.
When agencies instead default straight to producing advertising, they are largely engaging in the “logic” side of the business – execution and implementation. “Logic” work, while it must be done well, carries a lower perceived value and keeps agencies mired in the advertising factory model where “marketing” mostly means “advertising.”
Marketing needs a new OS
So how can marketing regain its rightful place? For starters, we can stop using the word “marketing” to describe just one aspect of the marketing mix. If we mean promotion, let’s say promotion, publicity, or even (perish the thought) advertising. This may seem like a small point, but behavioral psychologists have long taught that language is the precursor to behavior change. Change your mind, change your language, change your behavior – in that order.
Then let’s hire and develop people within agencies and marketing organizations who actually know marketing – not just promotion. This isn’t to stay that we don’t still need specialists; writers, designers, developers, project managers and the other functions that help bring ideas to life. But at the planning and strategic level, we need holistic marketing problem solvers who are just as like to recommend a product improvement as they are an ad campaign.
To help recast the marketing function within our organizations, we need to practice more “design thinking” (as practiced by firms like IDEO) and less “advertising” thinking. And as paid media advertising continues to decline in both volume and effectiveness, redefining “marketing” isn’t
Marketing has come to be defined by just one of its four P’s: promotion. Advertising agencies and client marketing organizations alike have been marginalized in the business world by allowing themselves to be boxed into just the business of promoting and advertising the product, rather than marketing it.