When I finished my post yesterday, I wasn’t entirely satisfied with the conclusion. I had started with a rather bold statement – “Stop thinking of marketing as a cost center!” – but then ended on a decidedly squishy note – “We really need to think of marketing as something else! I just don’t know what.”
Long story short, it was eating at me.
So, to finally make the pain go away, I thought of something. Here it is:
Marketing is neither a cost center nor a profit center. Marketing is a value center.
What do I mean by this?
Let me just say up front, I’m fairly allergic to binary oppositions. Yes, our digital world privileges them and, in point of fact, one can do some pretty spectacular things based solely on either/or logic (have you played the new Black Ops DLC?).
But, when I hear that there are only two options, I tend to think that we’re missing something (and not only because, any choice between x and y always includes a third element – the chooser – as well as a fourth element – the situation that contains both the chooser and the choices. I’ll leave discussions of the fifth element till later).
So, we have cost centers: functions that we need to cover (like AP), but that don’t generate revenue. We also have profit centers, which generate revenue despite their concomitant costs.
Can it really be true that there is no third option? Particularly given the fact, as I’ve argued, that marketing doesn’t neatly fit into either category?
Enter the Value Center
I would like to suggest that marketing occupies a special area I call the “value center.” A value center has a cost (you have to pay for marketing activities, from research and product development to packaging, pricing, and placement) and it produces revenue (although not always in a an unmediated way).
But a value center also has something more: value. The value center is the place where the value of your goods or services are first imagined. It’s where that value is articulated so it can be shared with the world. It’s also where, as your goods and services are purchased and employed by your customers, that real value is captured (through research, among other things) and used to improve your offering or even develop new offerings to bring to market.
Value ≠ Money
There is, of course, a relationship between value and revenue. As a CEO I once knew used to say, “The fact that customers give us money for our services shows that our services have value.”
I always bridled at this statement, in part because I don’t like to reduce “value” to “money,” but I have to admit that it is basically correct: while the value of a product should not be reduced to the money someone is willing to pay for it, the fact that they are willing to pay does indicate that they see some value in it.
The issue is that “value” has at least two sides to it. The money side is what Marx called “exchange value,” and refers to the cash value of something, given current market conditions. The other side is what Marx called “use value,” and that refers to the value someone derives from using a product.
A value center like marketing has to attend to both sides. Yes, marketing should be “driving revenue” using all the means at its disposal. But marketing must also ensure that products and services have a real, practical value to the people who purchase and use them.
This latter value – which comes closer to something like “customer experience” or even “user experience,” depending on how you define that – is not captured by revenue figures (except, perhaps, in the case of things like renewals and upgrades). Instead, it is captured in things like case studies, reviews, and testimonials; it’s also captured in metrics like customer retention rate, NPS score, customer referrals, and so on.
The Value of Marketing is Real
I’m not arguing here that marketing success should be judged on “mindshare” or “brand equity” or anything that feels squishy.
I am arguing that marketing produces measurable value, which, although it may not be an unmediated financial value, is in fact the value upon which all financial value rests.
Image Source (Creative Commons): wetwebwork.