As a person whose native language is spoken by a tiny percentage of the world’s population (Dutch!), I learned other tongues as a child and am used to being able to shift into English, French or German when need be. I’m amused by the trend towards apps like Babbel and Duolingo that make learning a language as easy as talking to your phone. At Analytic Partners I’m continually struck by what different languages CFOs and CMOs speak and the challenges this presents. The average tenure of a CMO is just 44 months. Are CMOs in need of an app to better communicate their value?
For the sake of argument, let’s call our analytics focused app: “Marke-lingo” and put it to work. Most CFOs have a very clear picture of what the company is spending on marketing but are generally unable to quantify the return on these investments. Concepts like NPV, WACC, Opportunity Costs and EBITDA do not resonate with the world CMOs live in. CMOs typically communicate in terms of Brand Awareness, Website Traffic, Net Promoter Scores, CPMs and Customer Journey, but these terms don’t resonate with the average CFO.
CMOs suffer from an excess of inconsistent vocabulary (represented by data) and can have difficulty measuring the holistic impact of marketing. As a result, they struggle to gain influence in their companies because there isn’t a clear understanding of the commercial value of marketing.
Marketing drives 15-30% of the business
In the absence of a common language, CFOs can overlook the fact that marketing is crucial to virtually every company. It is not uncommon that marketing directly drives 15% to 30% of total sales! We have seen that in industries such as automotive, retail and electronics. Typically, this is even 50% to 100% more if we consider the long-term brand impact of marketing on sales.
Today’s analytic solutions enable companies to better measure, predict and dramatically improve marketing’s impact on revenue and deliver “found Euros” to the bottom line. With the vast amounts of data, advanced analytics and easy to use optimization tools, marketing is now perfectly able to demonstrate how their investments contribute to a company’s revenue streams and where growth opportunities lie ahead.
Break down the silos for 3% to 4% topline growth
In data-driven organizations, partnerships between marketing, finance and analytics have helped deliver better business insights and significantly better decision making. We’ve seen how building the capability of “data driven decision making” typically improves marketing effectiveness by 20 to 30%. As a result, a sustainable impact of 3% to 4% on top line revenue is not uncommon at all. If 15% of sales is driven by marketing and we improve effectiveness by 20% this will result in a 3% topline growth with the same budgets. For a 1B company with a 15% gross margin, this structurally quickly delivers an additional 45M in the P&L. Want to talk ROI now?
Don’t get left behind
The role of professional marketing analytics is crucial in bringing value to the CMO and CFO relationship and helping them speak a common language.
At companies that embrace marketing analytics, the C-level conversation has completely been reframed. Usually, it requires a bit of change management so that marketing and finance are more closely aligned. Forrester, in writing about this challenge suggests that every marketing department has a finance-focused measurement person imbedded. What will this person do? Accountability and confidence are their mantras. With the return on each marketing investment being crystal clear, marketing budgets typically go up to focus on the most optimal business scenarios.
Companies that fail to update their marketing approach and continue to use antiquated siloed measurement solutions are leaving money on the table and are at risk of being left behind. With our wonderful “Marke-lingo” app, fueled by data and guided by analytics, CFOs and CMOs can indeed speak the same language and go forward in harmony.
– Lucien van der Hoeven, General Manager – EMEA