For the last decade marketers have been told to do something that sounds perfectly reasonable. Learn to speak the language of the CFO. Understand finance. Show ROI. Prove marketing’s value.
There is a steady stream of thoughtful writing on this theme — for example by James Hankins and Jonathan Knowles in Marketing Week. All sensible advice.
And yet it puts marketing in exactly the wrong place. It assumes marketing’s job is to explain itself to finance. That’s not the real task. Marketing’s job is to explain how companies create economic profit in the market. Those are not the same thing.
A few weeks ago a client stopped me mid-conversation and said: “Erich, willingness to pay doesn’t create economic profit.” He was partly right. But the comment revealed a deeper misunderstanding about where value actually comes from. Most marketing frameworks start with brand. Some start with communication. The more ambitious ones start with customer journeys.
But value creation begins earlier than that. It begins with how demand itself is structured. In my experience the chain looks more like this:
Category Meaning → Demand Logic → Brand Strategy → Willingness to Pay → ROIC → Economic Profit
Category meaning explains why the category matters in people’s lives. Demand logic explains when demand actually shows up — the episodes, the moments, the situations where people need something. Brand strategy then shapes the value customers assign within that demand. That value shows up economically as willingness to pay. And willingness to pay determines whether companies achieve pricing power (see comprehensive evidence by Kantar’s: Blueprint for Brand Growth) and superior returns on capital.
Take Costco. Costco runs merchandise margins of roughly 11% — far lower than most retailers. By the usual marketing logic, this should be a difficult business. Yet Costco consistently produces strong returns on capital. Why? Because customers trust the system.
More than 130 million members worldwide willingly pay $60–$120 a year just to shop there. Renewal rates exceed 90% in North America, and membership revenue — roughly $4–5 billion annually — accounts for the majority of operating profit.
In other words, Costco created something customers are willing to pay to enter. Once inside, everything else works. High trust means limited assortment. Limited assortment means enormous purchasing power. Purchasing power means reliable value. The economics follow.
For decades marketing has measured attention: Awareness, reach, engagement. Marketing’s favorite vanity or soft metrics. Lovely numbers for PowerPoint. But attention does not explain value creation. A better question is this: How does our strategy increase willingness to pay within demand?
Because category meaning creates demand. Brand strategy shapes willingness to pay. And willingness to pay is where markets finally turn into economics.
To discuss how these insights apply to your organization, get in touch with our team.