Add it up

Posted by on Feb 7, 2012

As the role of marketing continues to evolve in business, one would suppose that the CMO or head of marketing is becoming more accountable to business objectives and corporate growth drivers. Yet most marketers still find their role relegated to traditional marketing functions. Why is that?

A large part of the answer is metrics. Too many companies today still see marketing as a cost center. They still measure its performance not based on goals or definable objectives, but rather on dollars spent year over year, using brute force methodologies like ad to sales ratio, total revenues and in some cases, headcount. The mentality of “hit your sales number at the lowest possible expense” is as far as it goes in many businesses. It is surprising in this day and age that while sales targets are provided to marketers, many of them do not have corresponding profitability and marketing ROI goals.

A marketer in today’s world needs to understand the underlying drivers of the business and how marketing activities affect them. Discerning and interacting with those drivers requires a whole arsenal of metric tools to be at the disposal of the marketing team. A few key metrics and goals that should be part of any marketing function are market share, customer acquisition, customer retention and brand value. Beneath each of those metrics are further refined measures that can allow a marketer to understand the dynamics of the business, formulate plans, fine tune those plans and set realistic expectations of marketing’s contribution to the business strategy and execution thereof.

And yet most marketers simply shrug their shoulders and say, “that’s great, but I’m measured on topline revenue and ad spend.” How can you as a marketer help change the game? Stop playing the victim and take control of the game.

A good place to start is during annual budgeting and goal setting. Don’t accept a topline revenue goal in and of itself; break the revenue goal into distinct driver components. For example, based on your current rates of acquisition and attrition, how much of a net increase in customers will you need to achieve to hit the revenue goal. How will you get to that net increase? By improving your rate of acquisition? Retaining more customers? Stating the baseline and what changes need to occur to make the revenue goal will allow for much more productive planning discussions with your staff and diagnostic measures during implementation.

As for the expense side of the equation, rather than submitting a budget based on last year’s budget, try to show how requested dollars are being applied against specific programs and drivers. An example: if you know your cost of acquiring a new customer and your revenue objective requires a 20% increase in new customers, there’s the justification for the expense, not the over/under on last year’s budget. The more granular you can be in goal setting and expense allocation, the more you’ll help your peers and superiors understand marketing’s role in driving growth versus contributing to overhead.