I look at the challenge that marketers often face when it comes to getting their budgets approved by finance and I wonder why does it have to be so hard?
Many financial executives still view marketing as an expense, a.k.a. cost center, rather than viewing it as an asset that creates revenue.
What’s the bottom line?
It’s the numbers. So why not begin with that?
A report by MarketingSherpa shows that marketers need to do a better job capturing and communicating their value. According to their research, “…only 17% of B-to-B marketers we queried were sure their CFOs understood the value of lead generation programs.”
Related post: U.S. Companies Are Severely Mismanaging Lead Generation
Close the loop
Ultimately, if marketers want to win over finance they need to demonstrate that marketing is an asset, not a liability. They need to demonstrate their impact all the way to bottom line sales via “closed loop metrics.”
Related post: Closed Loop Feedback: The Missing Lead Generation Huddle
It was interesting to see that according to MarketingSherpa’s report, marketers complain they don’t have the resources to close the loop on their marketing investments. It seems they would rather spend their budgets on things that drive activity (which is often wasted) over results measurement. A study by the CMO council showed this is a key reason CMOs are losing influence at the executive table.
How about concentrating budget dollars on better measurement tools for sales and marketing, process mapping or outside services to qualify and manage leads and capture and report on results?
I suggest marketers take the following steps:
- Sales and Marketing must collaborate on defining leads and marketing objectives.
- What gets measured gets done. Connect sales and marketing metrics together.
- Focus on the data points you REALLY need to measure in your CRM.
- Close the loop on marketing-generated leads via the lead generation huddle
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Not surprising at all to read an article which addresses the issues financial executives have with marketing spending. I agree with the comments Brian Carroll made about financial executives sitting in on marketing meetings to better understand the process. I can only speak from the experiences of my own industry (which is life insurance), but the best results with marketing campaigns are when the sales and marketing teams are proactive with every qualified lead they get. If for instance, an online campaign attracted a great deal of qualified leads, the sales teams need to proactively follow each of these up. The whole process from initial inquiry through to the closing of the sale must be smooth and consistent for every lead. If the process is not streamlined and smooth, it becomes too hard to manage. Leads become frustrated, staff become frustrated and the campaign itself won’t yield the best results, and that’s when the finance execs will certainly express their disappointment and reluctance to adequately fund such campaigns.
Interesting post, and certainly true that hard numbers are compelling to management, but there are ramifications to this approach. First, if you have to devote substantial resources to closing the loop, these resources are no longer available to drive the business. You in fact become part of the navel-gazing administration of your firm, expending resources to influence each other. Second, not all types of marketing activity lend themselves to such close coupling with revenue. All things being equal, metrics are better than no metrics. However, consider making a case for “fuzzy” metrics and inferential reasoning, then offer doubters the choice of how to allocate the budget.
I think financial executives should invest time to understand how their marketing team works by sitting in on meetings, observing marketing programs in action and participating in the planning process.
Marketing is tough and often financial people (those who haven’t done it) can’t fully appreciate the challenges in a vacuum. They need to get involved especially when they are supporting a more complex sale.
In addition, I think that financial executives should seek to understand how well their sales and marketing teams are working together to generate revenue. I do think that the smartest financial executives realize that friction and poor collaboration costs money. At the same time the CEO sets the tone for collaboration as I point out in this post https://www.markempa.com/why_ceos_must_b_1/
I just wrote a similar post called “Stop being a cost center” (it’s #9 in my series Ten Practical Trends in B2B Marketing). In my opinion, the main reason why other departments view Marketing as a cost center is that the marketers themselves tend to frame the discussion in terms of costs. One common metric, Cost per Lead, focuses exclusively on the cost side, not the value of the lead.
You are right: If Marketing is going to be seen as an asset that drives revenue, the marketers themselves need to do a better job of framing the discussion about marketing spending and activities in terms of hard metrics like revenue. If this means allocating more of the marketing budget to automation tools and measurement programs, so be it.
What steps would you recommend financial executives take to better understand marketing?
Good post … when marketing and finance speak the same language, things can really hum!