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To Prove Marketing’s Value, a CMO Must Learn to Speak Like a CFO 

Christine Crandell | Oct 22, 2015 372 views 2 Comments

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As Rod sat outside the conference room waiting to be called in to present Marketing’s quarterly results to the board of directors of his Fortune 50 public company he reflected on how marketing is changing. What a long strange trip it’s been from the Grateful Dead song “Truckin’” keeps popping into his head.

Rightly so, Marketing has become overly complicated and just a bit weird.

Not just because of the myriad of technologies that CMOs like Rod have been buying in an attempt to understand and manage holistic customer lifecycle relationships. But despite the plethora of channels, content and ways to attract-engage-convert customers, ROMI (Return on Marketing Investment) is only slightly more predictable than it was five year ago. “I have lots of analytics and detailed metrics on conversion and performance but consistently accurate predictability of marketing generated revenue? We’re not there yet,” thinks Rod. That lack of predictability is a problem on many levels, not the least of which is that Boards expect it.

Rod is one Chief Marketing Officers (CMO) that participated in a qualitative study on emerging marketing trends funded by Marketo. The marketing leaders interviewed were with B2B or B2B2C companies ranging in size from the Fortune10 to early stage start-ups across financial services, manufacturing, high technology and SaaS industries.

Marketers have abandoned educating the rest of their organizations on the importance of marketing specific metrics and have dropped using terms such as TOFU, MOFU, MQL, etc. in conversations with Sales, Finance or other parts of the organization. By talking about marketing programs and investments in financial terms, CMOs have seen an unprecedented level of alignment occur across the organization. With Sales the conversation is not about leads but pipeline, customer engagement, conversion and close rates.

In an ideal world CMOs would like to have more strategic conversations with their CEOs and Boards about the value of activities and the impact of investments that are not directly tied to revenue. Reputation, awareness, customer experience, tracking cohort customer groups, pipeline by channel, influence of communities/digital properties, and how to drive growth are a few of the topics CMO would like to talk about. But having been burned in the past, CMOs keep the conversation strictly on revenue.

Rod knows his CEO and board expects him to routinely report out revenue forecasts based on current and alternative marketing spend scenarios as part of evaluating business strategies that management is considering. He needs a data science team, help from the CIO and strategic MarTech vendors to build a predictable model that includes all the channels, programs, conversion rates, target industries and customer segments.

Having spoken with a handful of progressive CMOs that have built credible market models, Rod knows it’ll enable his team to focus on where the strong and weak points are in the marketing stack, understand why and whether it’s an execution issue or a customer/market shift. The team would be able to spot market shifts – buyer, industry, competition, economic – and respond faster by changing attraction, retention and product programs.

Rod’s longer term vision is to do historical benchmarking as well as against competitors. Being able to model, in detail, LTV of customer lifecycles would enable his team to un-complicate marketing and increase their precision in forecasting revenue by defining and aligning touchpoints, content and offers to customer journeys.

Marketing has the real, hard data to prove its contribution to the topline – as long the language the CMO speaks is financial. The rising sophistication and transparency of marketing ROI is enabling every CMO to have a credible seat at the board table. The real power of the market model lies in its ability to link metrics and programs to what the Board and his CEO cares about – leads, pipeline, wins and market share.

As the CEO comes out of the conference room to call him in to present, Rod stands up confident his conversation with the board can go to a new level and that he can demonstrate, tangibly, the importance of what marketing is and can do.

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2 Responses to To Prove Marketing’s Value, a CMO Must Learn to Speak Like a CFO

  1. Andrew Rudin October 23, 2015 at 10:17 am (861 comments) #

    When it comes to his ability to provide “consistently accurate predictability of marketing generated revenue,” Rod’s going to feel nearly faded as his jeans (to quote the lyrics of another song popularized by the Grateful Dead – thanks for the mention!).

    Accurate predictability means forecast equals actual, an impossible goal. Rod should give up on the idea. I discuss this idea in detail in my upcoming November column about revenue forecasting.

    My recommendation for Rod and his management is to abandon the myopia that marketing spend must always lead to increases in revenue, and to recognize that every company’s marketing spend is a cost of risk – that is, the risk that a prospect might not purchase. If companies operated in a risk-free selling environment, marketing would not be needed at all. But that’s not the case. That’s never been the case. Companies incur many expenses to cover that cost of risk, from HR to Legal, to Operations, and yes, Marketing.

    The main purpose of doing anything in marketing – lead gen, advertising, social media campaigns, promotions, etc. – is to diminish the volatility between planned revenue and actual revenue. To the extent that marketing spend cuts the spread or gap, it’s likely that it’s effective. When it consistently doesn’t, then it’s a waste.

    I agree that a CMO must not only speak like a CFO, he or she must think like a CFO. CFO’s live and breathe risk management. It’s time for CMO’s to make the logical extension from being simply revenue drivers to risk managers. After all, what is a pipeline multiplier if it’s not a representation of risk and how a company believes it should be managed?

  2. Brett McAteer November 13, 2015 at 9:16 am (1 comment) #

    Point, Andrew, and I blame technology. Thanks to technology, the CMO is the new “certainty” savior/scapegoat. About time, too. All the other C-suiters have taken their haircuts over the past 20 or 30 years, each of them marching a promise of certainty to be delivered by technology into the boardroom, each of them retreating when the promise has gone unfulfilled. As you say, the best we can do is narrow the gap… and that’s no small beer.

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