You worked hard on developing your strategy and designing great creative. Now you have to go to the CFO and get his approval to start rolling it out.
But then he axes 25% out of plan, just because he could. You knew a cut was coming, except this time it was 15 percentage points worse than the 10% you were expecting. Now you have to spend all night reworking your plan so you can begin executing in the morning.
How often do marketers face this dilemma? Too often. You develop a great strategic and creative plan—yet can't gain approval for the funding.
So this article will suggest four steps that will help you gain approval on your next great strategy.
Marketers know how to speak the language of their external customers. But they often forget that when selling to their internal customers—the CFO and CEO—they have to speak their language. The CFO and the CEO just want to know how it will drive results to the bottom line. Their top priority—driving tangible results—isn't your top priority, which is delivering great creative.
And this is where many marketers often fail. We seem to forget that selling to internal customers is much different from selling to external customers. Internal customers want the sauce along with the potatoes. They make their decisions not on the content but more on the impact this investment will have on the bottom line. They have to have the numbers.
So, how should we respond?
We have to start speaking the language of our internal customers. We have to stop putting plans in place that simply show how the money is going to be spent. Instead, we need to think the way they think and communicate the way they want to be communicated to.
They like to see five key components to any investment plan. And we need to deliver our marketing investment plan using their outline:
- Develop and put in place a plan showing how our activities will deliver incremental revenue (and profit).
- Execute according to that plan.
- Report on the actual results and compare against plan.
- Report on what we learned from initial results in order to drive better results the next time.
- Go back to step 1, above.
In other words, we have to continuously plan our results, prove them and then improve them.
Ignite the left side of your brain
Marketers are typically very good at developing a plan, as in step one above, especially when it comes to detailing the expenses. But to deliver what CFOs and CEOs require, we also need to deliver on the remaining four actions. This means that marketers who traditionally exercise the right, creative sides of their brains now have to start getting the synapses firing on the left side. (And no—beer only helps after hours.)
Below are four key steps to improving your ability to deliver measurable results in a way that even your CFO will approve.
Step 1: Determine the definition of success and how you will measure whether you have succeeded or not.
Think of defining and measuring success by answering these five questions:
- How you will define success in each of the relevant areas?
- What are the numbers that you will need to collect?
- How will you collect them?
- How accurately will you collect them?
- How often will you collect them?
CFOs and CEOs already spend a lot of the company's resources on the collection of data. They are used to investing in measurement systems and are able to understand the results if the metrics and measurements are properly in place.
Unfortunately for marketers, most of that data has to do with the collection of financial data or production data. But if the CFO can have a great accounting system, why can't the marketing department have the same systematization to measure its effectiveness?
Most marketers would probably argue that generating more revenue is at the heart of success of any company. Yet in terms of measuring marketing's effectiveness, it usually falls at the bottom. Why shouldn't marketing have the same level of resources spent on marketing effectiveness measurement as there is spent on accounting (e.g., cash, receivables, payables, etc.) or operations (inventory, work in process, cost per unit, etc.)?
Step 2: Align your marketing spend to marketing objectives.
Determine your short-term and long-term marketing goals in terms that your CFO and CEO like to hear—numbers!
To win the hearts and minds of your internal customers, your marketing budget must have not only the expense side but also specific objectives tied to them. Lastly, they must be broken down into specific components that they can easily identify with.
The primary components are defined below with specific revenue objectives for each area. Depending on your business, the weighting of each of these areas may differ. For example, a homebuilder may not have to market back to existing customers, nor reduce churn, but will have to market to drive new customer acquisition and increased brand awareness.
On the other hand, a telecommunications company may achieve a bulk of its revenue from existing accounts. For telecommunications, maintaining existing customers (i.e., reducing churn rates), up-selling and cross-selling to them, can be the primary source of incremental revenue.
- Marketing to existing customers. Marketing to existing customers has three primary facets:
- Maintenance—applies mostly to companies with recurring or contractual revenue streams. Here marketers want to market just enough to reduce incremental switch-out versus the cost of the incremental marketing investment.
- Loyalty—applies to companies, such as airlines, or the travel industry, where the consumer may be a customer, but the customer still has a choice of buying from the competition. In this case, continued marketing can drive increasing loyalty and share of wallet.
- Up-selling/cross-selling—assuming that the customer is a customer, then the marketer wants to market to them to increase their share of wallet. This is often done by up-selling and cross-selling additional products and services.
Step 3: Develop a feedback mechanism to help you improve marketing operations based on learning's and results from steps 1 and 2.
Continuous improvement has swept through businesses over the last few years, but has somehow sidestepped the marketing department. Marketing must now start to understand what it takes to learn from results. Marketers are typically the smartest group in the company, but are satisfied driving the car without a map, without headlights and without instrumentation.
Marketers must change their culture from one of operating by the seat of their pants to a culture of defining the right metrics. Then marketing must use those metrics to understand their tactics and to improve their results.
We've found that companies that invest in a culture of continuous improvement can typically deliver a 20% incremental profit to the bottom line of the company. That is, for a company with a marketing budget of $10 million, they can deliver another $2 million in incremental profit.
How many other marketing programs can deliver that amount of incremental profit?
We've also found that marketers who can prove their results typically earn more than marketers who can't. The investment in the improvement of marketing effectiveness can have a huge impact both on the position of the company and on the position of your career.
Step 4: Step four is the simplest step of all but must come before all of the others. Get started!
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Note: To learn more from Guy Powell about how to win your budget battles, attend Thursday's online seminar "CFO vs. CMO Smackdown: How to Win the Budget Battles." You will learn how to monetize your conversation with the CFO and CEO so that you can prove your case, win and expand your budgets and deliver real business impact. Get more information or sign up here.
Continue reading "Four Steps to Winning the Budget Battle With Your CFO" ... Read the full article
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