Connecticut AMA Blog

Remember all those formulas and equations in math class back in high school? Ok, some of you are shaking your heads out there; so let me refresh your memory. Without getting all “quadratic formula” on you, there are these things called equations and formulas. These equations involve numbers, letters and symbols that have a relation to each other and dictate what to do. Are you still with me? Back in the day, it was our duty to SOLVE these equations, given certain parts of the information. This was usually feasible due to certain laws that exist (does the law of distribution ring any bells?)

While the closest thing some of us have come to a formula in the past few years may involve a bottle and a baby, formulas are important in understanding relations. Again, reverting to the math world, we know that to get a radius of a circle we solve using the formula: pi r (squared).

The business world isn’t really all that different. We use math in business all the time, especially to calculate profits, revenue, expenses, and taxes (arggh!). The point is there are cause-and-effect relationships between the variables of a formula. Each component of a formula affects the ENTIRE outcome. One of the most basic equations in business is the P/L statement:

Before we get bogged down in equations, let’s look at the revenue aspect. What drives revenue? Of course SALES is where the rubber meets the road. What drives sales? Hello? Marketing!

We, as marketing professionals know how important marketing is ALL THE TIME. So, why do businesses cut marketing out of the equation during slower economic times? It is like having a hard time walking and deciding to cut your foot off. That’s just absurd.

Personally, I think it is because not everyone understands the impact of marketing (cough cough -and the fact that the world is run by bean counters). Often, it is hard to nail marketing costs to specific returns created. This is the perpetual marketing dilemma most of us have to face. So, it is OUR JOB to show the value of marketing to our prospective employers and clients. It is OUR JOB to show the relationship of marketing to the business equation. Drill down and find ways to show the value of marketing expenses. The more you can quantify the ROI, the better (goes back to the bean counters comment). So, what methods work for you?

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