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Lessons From Warren Buffett:

Getting the CEO to (Willingly) Write Checks for Marketing

Article by:  Paul Barsch (MarketinggProfs.com - March 2007)

Love them or hate them, the GEICO cavemen, along with the GEICO gecko advertisements, and the silly celebrity commercials featuring actor Verne Troyer and singer Little Richard, are here to stay. These commercials have staying power not only because they're creating awareness, driving sales, and generating internet buzz but also because Warren Buffett, CEO of Berkshire-Hathaway, loves them! (GEICO is a subsidiary of Berkshire Hathaway).

Notoriously private, Warren Buffett doesn't have a lot to say publicly, except for his annual letter to shareholders that usually makes the rounds of the Wall Street Journal, Business Week and other top publications. However, for his marketing programs, and specifically GEICO commercials, Buffett has an open checkbook.

In a Wall Street Journal article titled "How a Gecko Shook Up Insurance Programs" (January 2, 2007), Buffett is quoted as saying, "I love the advertising. (The ad growth is) sustainable as long as I am willing to write the checks. And I love writing them."

You might want to reread that last sentence. It's profound for many reasons.

CEOs around the globe lament that marketers simply don't understand their most pressing and strategic issues. Nirmalya Kumar, in his book Marketing as Strategy, writes, "Today, many CEO's of major companies are disappointed by marketing's inability to produce measurable results. Increasingly they view their marketing department as an expense, rather than an investment." In addition, Kumar notes a study of 545 U.K. companies which revealed that just 18% of them rated marketing's effectiveness as better than good, whereas 36% rated it as fair to poor.

Let's argue that many CEOs see marketing as an expense, not an investment, and that the overall CEO perception of marketing isn't compelling.

Enter Warren Buffett, regarded by his peers as one of the brightest and most savvy minds in investment, business strategy, and CEO leadership. Buffett is known for the autonomy he gives to his managers, the ability to think "long term," and unparalleled skill in evaluating talent. He's also a CEO who spends a lot of money on marketing.

Realizing that advertising is just one of many ways to spend marketing dollars, GEICO fills the promotional mix with direct marketing, tele-sales, community events, internet marketing, PR, and events. Even the Gecko has his own blog! It's probably a fair assumption that Buffett likes the entire marketing mix, yet it is the memorable and impactful advertising and messaging that helps keep Buffett's checkbook open.

Want to get your CEO to open his or her checkbook more often for marketing? Here are three lessons learned from GEICO and Buffett:

1. Marketing must have a visible financial impact. The most obvious impact for marketing should be revenue growth. In two years, GEICO has gone from 6 million to 7 million subscribers, putting it right behind industry giants like Allstate and State Farm. Is GEICO's subscriber growth solely due to marketing? To assume so would be silly. In addition to a great product, competitive pricing, and nationwide coverage, GEICO pays higher wages for customer service agents. But there's no denying, based on Buffet's statements, that he ties marketing to sales growth.

2. Marketing must have a visible impact on the CEO. Does Buffett approve of cavemen in commercials, or minor celebrities dancing on tables pitching his product? It's hard to say; but the one thing we can be sure of is that Buffett has seen the commercials, probably laughed out loud, and seen the revenue impact. Buffett, if surveyed, would not be one of the CEO's concerned with the lack of marketing effectiveness at his company.

3. Marketing must be memorable. Dan and Chip Heath in their book Made to Stick say for an idea to stick it must be simple, unexpected, clear, credible, and emotional and must also tell a story. Though GEICO marketing doesn't share all these attributes, it would be hard to argue with the simple and clear message of a "15-minute phone call could save you 15% or more on car insurance"—just as it would be tough to argue that the concept of a caveman insulted by GEICO advertising isn't pretty unexpected and doesn't break through the clutter. Moreover, the buzz from cavemen, geckos and minor celebrities pitching car insurance has reached every corner of the Internet, including the blogosphere.

Does your CEO see a measurable financial impact from your marketing budget? Are you putting the right processes, tools, and technology in place to effectively measure the impact of marketing? Does your CEO believe that for every dollar he spends on marketing he will get two or three in return? Are your marketing efforts memorable and "sticky" with your customers?

Getting CEOs to open their checkbook to fund marketing is a whole lot harder than it sounds. If most CEO's are "disappointed by marketing's inability to produce measurable results," it is time to change that perception.

One company, at least, is getting it right; GEICO's marketing is highly memorable, well known, and lauded by the CEO, and it is a contributing factor to strong top-line growth. While marketing is critical to GEICO's success, the company has also assembled the right package of strategy, employees, technology, and processes to win in the marketplace.

If only it were so easy that a caveman could do it.