A few years back, a young Marketing VP confided, “My first year on the job, I lowered our production costs, reduced our dependence on outside services, improved our mail and email response rates, and turned around a departmental morale problem, only to be chided by the CEO, at my year-end review…”
I was dumbfounded – until she finished, “He said Linda, you don’t get it. I didn’t hire you to save the organization money, I hired you to increase revenue. If you keep this up, I’ll have to find another VP.”
That comment rang a familiar note to me. Years earlier, I had been hired to turn around a company, and after cutting payroll by 35% and lowering non-labor-related manufacturing costs by 12%, the CEO of the parent company delivered the same message.
Unfortunately, marketers aren’t taught that in college. We’re taught how to segment markets, map messages, launch products, manage campaigns, and tighten performance through metrics, but we’re not taught how to drive revenue – and that’s what matters most.
The challenge is this: Savings, no matter how dramatic, can only improve profits marginally. Dramatic growth in profits comes from increased revenue.
An old mentor of mine put it differently. “If you’re CEO of a $10 Million company, what’s the most profit you can generate by eliminating costs? You guessed it, ten million dollars. But if you want to generate more than $10 Million in profits, you have to increase revenues.”
In the final analysis, that’s why all business people are hired – no matter whether you’re in sales or marketing or customer service or finance or manufacturing or even human resources. One way or another, we’re expected to improve profits. And the best way to do that is by driving sales.