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Why Marketers Need a Revenue Growth Theory

By on Jun 30, 2013 Editor's Pick No Comments

For the past several years, marketers have faced growing pressures to prove the value of their activities and programs. In a 2011 survey of CMO’s by IBM, nearly two-thirds of respondents said that return on investment will be the primary measure of the marketing function’s effectiveness by 2015.

Despite all the recent focus on measuring and quantifying the performance of marketing, it is clear that marketers still have work to do to build credibility in the C-suite. A study conducted earlier this year by ITSMA, VisionEdge Marketing, and Forrester revealed that only 9% of CEO’s and 6% of CFO’s use marketing data, metrics, and analyses to make business decisions. In a study last year by The Fournaise Marketing Group, 80% of CEO’s said they do not really trust marketers. According to Fournaise, most CEO’s believe that marketers are disconnected from the financial realities of their companies.

This lack of credibility exists primarily because marketers don’t typically demonstrate the connection between marketing programs and important business outcomes. Most marketers focus instead on measuring marketing activities, spending, and the immediate results of marketing programs (response rates, etc.).

The principal mission of marketing is to drive revenue growth. As Sergio Zyman, the former CMO of The Coca Cola Company, wrote more than a decade ago, “The sole purpose of marketing is to get more people to buy more of your product, more often, for more money.” (The End of Marketing As We Know It, 1999)

Every marketing activity or program is (or should be) designed to generate revenue either directly or indirectly. It’s up to marketers to explain the links between marketing activities and revenue growth and make those links visible and understandable to the CEO and other senior company leaders.

To effectively demonstrate the connection between marketing activities and revenues, marketers need a revenue growth theory. I know from experience that many business and marketing leaders have a deep-seated aversion to anything that’s “theoretical,” but in this case, a theory is essential.

At the most basic level, a marketing strategy is a theory or a hypothesis about revenue growth. It’s a big if-then statement that essentially says, “If we do A, B, and C, then our revenues will grow.”

More specifically, a marketing strategy is a collection of if-then hypotheses that collectively describe a company’s theory for growing revenues. The individual if-then statements are combined to create chains of cause-and-effect relationships that connect individual marketing activities to revenue generation. A simplified version of one of these cause-and-effect chains might look something like this:

  • If we publish an effective blog that offers readers access to compelling content resources, then more potential buyers will identify themselves and consume our content.
  • If more potential buyers identify themselves and consume our content, then we will generate more sales leads.
  • If we generate more sales leads, then we will also generate more qualified sales opportunities.
  • If we increase the number of qualified sales opportunities, then we will close more sales.
  • If we close more sales, then we will produce higher revenues.

With a clear understanding of how individual marketing activities fit into an overall revenue growth theory and the right metrics in place, it becomes relatively easy to demonstrate how individual marketing tactics contribute to revenue growth.

Republished with author's permission from original post.

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