Make your marketing team a revenue center

Thomas Barta TryThisBlog
By Thomas Barta
Last updated: October 29, 2016

Marketing leaders must constantly show that marketing delivers financial returns. Why? If the organization knows your work delivers a return, the decision makers will give you the resources and support you need for your important marketing projects.

But proving marketing returns is a struggle. In our research, Patrick Barwise and I found delivering returns was a big driver of marketers’ business impact (12% contribution) and also contributed, at the margin, to their career success (three percent). But only two-thirds (67%) of the marketing leaders in our study said they had a strong return orientation. Most CEOs and CFOs would say that that’s an overestimate: for instance, over 50% of C-suite executives in a recent study didn’t think that the company’s marketing expenditure was even significantly driving top-line revenue, never mind bottom-line profits.

In other words: your CEO may not trust that you’re spending the money well.

If you take your boss’s perspective, you’ll immediately see why demonstrating your return is essential.

In a nutshell, CEOs are concerned with strategy (where to take the company), organization (people, skills, etc.), revenue (the current and future top line), and cost (the other determinant of the bottom line). You should aim to be associated with revenue.

What happens if your boss doesn’t associate you with revenue? Well, in that case, you’re just a cost—and, in the words of Andy Duncan, CEO of UK national lottery operator Camelot, “Marketing can . . . be seen as a cost rather than an investment, which is cut when businesses face difficult times.”

Of course you can’t prove the financial return on all marketing investments, but here are three proven ideas for how you can get into the revenue camp.

Align on how marketing works

It’s your job to ensure people understand what marketing does and how it’s driving the business.

Keep it simple. A simple marketing model that everyone under stands is worth ten times more (for this purpose) than a complex one that no one gets. As a sophisticated marketer, the simplification we sug- gest here may make your heart bleed. Get over it.

One example of a simple model is the marketing funnel. Using it allows you to say things like, “Only 20% of people prefer our brand. We need to increase brand preference, because 40% of all who prefer us end up buying us.”

By showing how, in the eyes of others, marketing concepts like brand preference have a big impact on sales, you’ll significantly increase the leadership’s understanding of your work and how marketing helps drive business performance.

Make sure you build these marketing models together with people from outside of marketing (especially people in finance and sales) to give the models validity, credibility, and supporters.

Once you have an agreed-upon model, share it widely. Don’t shy away from taking comments or having a debat

Open the books

Opening your books is among the most powerful things you can do to demonstrate returns.

There’s no shortage of tools and books on how to measure marketing returns. But many marketers struggle to install a sensible return measurement system (and most CEOs complain about it). What can you do?

Measure what’s big. Measuring the return on some smaller items may cost you more than it’s worth. Take a look at your overall budget. Identify the big and critical items. Focus on these first.

Get finance involved. Work with your finance experts to jointly define and agree how you want to measure returns. You’ll find that most finance professionals understand very well that not everything can (or should) be measured. But problem solving this jointly will greatly increase the credibility of your numbers.

Take an 80/20 approach. Marketing measurement isn’t about getting every penny right. Some activities, like brand PR for example, are impossible to evaluate precisely (or rely on many assumptions). Some people use sophisticated econometric models alongside more behavioral measures, considering short- and long-term effects and measures of changes in brand strength. Others do very well with a simple quarterly spreadsheet that has marketing spend and sales. If you’re unsure, invite three agencies or experts to present how they would set up your marketing measurement system. Get a simple one to work first—and expand it later.

Show your returns frequently. This can feel scary, but sharing your estimated marketing returns with top management is one of your best ways to build credibility as a leader. Crucially, sharing returns includes sharing the failures.

In our experience, marketing leaders who open the books get more support from the top..

Get involved in the most important marketing instruments

In a recent University of Mannheim study, top executives rated pricing, product development, and strategy as the most important business functions. Unfortunately, marketers weren’t seen as very involved in these.

Our study paints a similar picture: just 32% of senior marketers claimed to have a stake in pricing, 56% in product development, and 39% in strategy. They were more likely to be involved in activities such as communication (77%), seen as less important by the Mannheim top executives. That’s perhaps unfair (and incorrect). But perception is reality. If people think your work isn’t important, you won’t be seen as important.

What can you do?

  • Find the companys biggest growth levers. If you help the company grow profitably, you’ll be in the game.
  • Throw the biggest stone. Once you know the big growth levers, go where you can make the biggest difference.
  • Start small, think big. As a marketing leader, when you engage in a new field, take small steps but have the end in mind: long-term profitable growth.

Your influence and contribution as a marketing leader go up when you work on the company’s biggest issues, so it’s critical to get involved in what matters.

By making your work more transparent, estimating returns, and picking the right marketing instruments, you will position marketing as a revenue source that generates returns instead of a cost. When you spend your money well to attract profitable customers, the business grows. And when you produce visible returns, you are more likely to get more support and more resources—which in turn creates even more revenue and profit. It’s a pretty simple equation.

(This is a version of my article for Chief Marketer)