I define Marketing Finance to refer to any effort to quantify the contribution of marketing to increased business value.
This is because I am interested in marketing in its broadest and most strategic sense, namely as the “creation, communication and delivery of customer value.” The focus of Marketing Finance is therefore the quantitative measurement of any action designed to increase customer value.
I am aware that this is a broader definition than others use where the term refers to the economic and financial modeling of marketing actions. The problem with this narrow focus is that it restricts the field of study to those marketing activities that can be explicitly modeled in terms of a supply and demand curve or directly linked to specific transactions. It excludes activities that are indirect in their impact (for example, investments in customer service) and/or take time to have an impact (for example, a change of corporate identity).
Much of the focus of marketing performance measurement is on the near term. This is not because that is where the impact of marketing is greatest – but simply because this is the time frame over which our measurement approaches are most developed. In that sense, I think of marketers’ fascination with ROI in much the same way as drunkards who have lost their keys think of lampposts.
I see a clear business need for the articulation of the contribution of marketing to business value over the longer term, and via a coherent set of activities rather than just a single activity in isolation. In other words, the quantification of the contribution of marketing strategy to business value. From a Finance perspective, anything that causes a change in the profit, risk or growth profile of a business necessarily has an impact on business value.
The focus of this blog is on the linkage between customer value and business value. That’s what I mean by Marketing Finance.