At DTC Marketing Group this week, we are diving into the difference between revenue and profit and why so many consumer marketers get this wrong.
So first, let’s get the housekeeping out of the way. According to Investopedia revenue is the total amount of income generated by the sale of goods or services related to the company’s primary operations. Investopedia goes on to say that profit is the amount of income that remains after accounting for all expenses, debts, additional income streams, and operating costs. So, while we are at it let’s look at one last definition Investopedia says marketing is, “activities a company undertakes to promote the buying or selling of a product or service.”
In fact, in a recent McKinsey survey, CEOs feel “that marketing metrics clearly tie to business impact less than 60 percent of the time.”
Ok so now that we have all of that out of the way the question really is, who cares? And the answer is not enough marketers. Marketers prance around talking about how data-driven they are, and in many cases, the metrics they report on don’t appear on the company’s income statement, also known as the profit and loss statement (PL), and most marketers can’t tell you how their campaigns have affected the balance sheet or the company’s liquidity.
The metrics that marketers rely on are just too shallow. Marketers need to gain a deeper understanding of the impacts of marketing activities on the company’s overall financial health and change their marketing key performance indicators to be the exact same metrics on the income statement, balance sheet, and cash flow analyses.
Otherwise, we will continue to see household consumer brand names release earnings with total net income losses. It’s how companies can get into a situation where revenue is growing and profits aren’t. Marketers are celebrating their campaigns, pontificating on the return on investment of their media dollars; meanwhile, the firm is losing money. Why have we let marketers get away with this for so long?
DTC Marketing Group is here to help consumer brands grow profitably by adding deeper analysis to consumer brands’ marketing campaigns with meaningful metrics that tie to the company’s financial statements. Need our help? Call us today at 561-806-0055. And check back this week as we dig deeper into the solutions we propose for consumer brands to dig deeper and generate meaningful metrics and profitability.