At least one area of marketing metrics makes me positive. The future is bright. The area is what we might call management accounting and customer recording. This tends to work best where there are contractual relationships. With contracts or, at least, stable long term connections, we can go a long way to understanding the value of a customer. In effect, armed with this knowledge I’d argue one can improve marketing decision making. This is all about aiding internal decision making about customers. The idea is to make the decision making a bit more scientific.
There Is A Lot Of Opportunity
This area is clearly useful to marketers. It is, also, easy to explain the importance of customer recording to non-marketers. Customers create value for firms. How much value?
This is not a minor question. It needs a lot of work. You need to know the value created to know how much to spend on customers. Similarly, how much should you spend on keeping customers? That depends upon the customer’s value. How much is a firm worth? What does that depend upon? You have guessed it, the customers’ values. What do we need to know when trying to upsell customers? Of course, we need to know the customer’s value. In summary, customer valuation is critical to managers. It therefore should be critical to those aiming to help managers.
A Common Need
The common need suggests a lot of opportunity for management accountants. They can help marketers use and improve measures. Kohsuke Matsuoka has reviewed customer measurement in marketing and management accounting. This, I think, is extremely positive. I would love to encourage more scholars to look at this. It has a lot of potential.
Marketers have data. They also have real management problems to address around customer value. Management accountants have expertise in measurement. They also have a mission. This is to deliver the sort of managerially useful numbers that managers need. (For more on managerial accounting see here and here and here). Marketers require useful numbers to make decisions. Customer value numbers do this. What is more they need the numbers to justify the decisions they make. Customer value numbers do this too.
Management Accounting And Customer Recording
Matsuoka’s work looks at what is happening in this field. He focuses on “…three accounting weaknesses (the lack of revenue milepost information, revenue sustainability measurements, and intangibles capitalization)” (Matsuoka, 2020, page 1).
He then relates these weaknesses to marketing concepts. The connections are a bit mixed but a nice try. The work in general is somewhat of a map. With it marketers can help management accountants tackle the limitations of their craft. In return management accountants can help improve marketing accountability.
The paper then goes on to look at:
- Revenue Accounting,
- Customer Profitability Analysis, and
- Customer Lifetime Value.
These are all ideas of equal importance in managerial accounting and marketing. Or at least they should be important in both disciplines.
Working Together
I can only hope more management accountants and more marketers will work together. I think — as a former management accountant and current marketing professor — we have a lot to offer each other.
*** The fourth edition of our Marketing Metrics book is now out***
Read: Kohsuke Matsuoka (2020) “Exploring the interface between management accounting and marketing: a literature review of customer accounting.” Journal of Management Control, 1-52.