COMMENTARY

Treat Marketing As An Asset To Extract Its Value

• by Jose Villa , Columnist, August 16, 2019

Marketing is the one of the most fundamental functions within an organization. When done correctly, it has the ability to rally people around a cause, move people toward a product or service, or change perceptions about an organization. But the uninitiated often misunderstand it. 

Too often, marketing is generalized as an expense and is usually one of the first line items cut by companies when they are facing difficulties and tightening budgets. 

This common view of marketing as an expense permeates the business world, from the board room to the sales team. This is rooted in accounting principles, GAAP rules, and the tax code which categorizes all marketing activity as expenses.

Marketing is also often oversimplified as advertising and affiliated tactics. It is much broader, and strategic to business than mere tactics like advertising, pubic relations, and digital experiences. It is also more than the classic marketing frameworks of company, customers, competitors, collaborators or climate or place, product, promotion and price.

Marketing is much more holistic than any one tactic, and limiting the view to an expense diminishes its relevance. Clarification comes from proper definition. I am partial to two:

“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” — American Marketing Association

“Marketing is the creation of customer-led demand, which is the only sustainable form of business.” — The Marketing Society (UK

This last definition really captures the two critical dimensions of marketing, and its significance to business success. 

The first is that marketing is about the creation of demand. As such, categorizing marketing as a financial asset could be more appropriate. Much like a piece of equipment that can generate a valuable output, marketing generates customer demand, i.e. revenue. 

Every dollar invested in marketing generates some future output of revenue. Also, much like a capital asset, marketing assets depreciate over time. For example, a brand is an asset that depreciates over time if not continually maintained, but it generates value in the ability to charge higher prices (i.e., higher margins). Concepts such as customer lifetime value capture this effectively.

The second is that marketing is at the core of business success. Marketing decisions and investments are usually relegated to tacticians (e.g. advertising, branding or PR professionals). Marketing is rarely represented in boardrooms. When marketing is part of the C-suite — a chief marketing officer (CMO) — it’s usually only for consumer-facing goods companies. 

There have been some promising signs of the growing importance placed on marketing, such as the recent trend of replacing CMO roles with the new chief growth officer (CGO). However, marketing is still broadly misunderstood, and most companies need to elevate its importance.