I spoke recently to a senior finance exec in a large organization about measuring marketing’s return on investment. He said:
We know it’s hard to calculate the ROI on all expenditures, and we’re not looking for Marketing to do that. We know that they have to invest in brand equity and market research — and we don‘t expect them to be able to link those investments directly to sales. That’s not what we want from them.”
Then what does finance want from marketing? There are four questions CFOs would like the CMO to answer:
- How do you know you’re making the right level of investment by LOB/product/market? (the alignment question)
- How are your marketing efforts integrated across channels, media, and other marketing expenditures? (the integration question)
- How does marketing’s results compare with how its performed in the past, and against our competition? (the context question)
- In which customers/markets/products should we be investing our marketing dollars? (the vision question)
Simple questions with no easy answers. But marketing execs looking to raise marketing’s profile within their firm should be able to:
- Address these questions qualitatively. Despite their own quantitative bent, smart financial execs know that marketing can’t answer all those questions to the 3rd decimal place. But they do want the CMO to have defensible theories and explanations to address those questions.
- Demonstrate a plan to answer these questions. It’s understandable if marketing can’t answer these questions. But it’s a dereliction of duty if it can’t show what actions it plans to take over the next 12-24 months to fill in the gaps in their measurement knowledge. What models will marketing develop to help answer some of these questions? What competitive benchmarks are available?