How Marketing Can Learn To Speak The Language Of Finance

Connecting marketing metrics to financial metrics is a common challenge, but marketers can align what they measure with business results everyone can get behind.

Metrics are essential to marketers, and any acronym beginning with a capital C—CPA, CPL, CPC, CPM, and CTR—makes marketers’ ears perk up.

The issue, however, is that while marketers will understand all these metrics, connecting them back to actual business results is a common challenge. The heart of the problem lies with marketing teams not facilitating a connection between their marketing metrics and financial metrics. This issue can be simplified using a process that marketing teams can follow to better align their metrics with the business results the whole company can get behind.

1. Know Your Data

First and foremost, make sure everybody in the company is speaking the same language when discussing business objectives and defining their success. Your CRM or whichever database holds your consumer data holds information which you’ll need to help you measure marketing performance. When looking into your database, check that customer data is tagged with marketing campaign data in order to connect the dots.

Investing in some time and resources on a data hygiene project is crucial. Not only will this save lots of time and energy down the line, it also gets a cross-functional team working collaboratively and speaking the same language. From streamlining to improving lead routing process, follow-up Service Level Agreements, and automated scoring, there’s a multitude of things you can do.

Creating an effective cross-functional team will help everyone understand where shortages exist, what data is possible to get, and what isn’t. Once a good base to work with has been established, agree on the appropriate database to query for which items. Asking and solving these questions at the start will avoid inconsistencies or confusion later on.

2. Align Yourself With Finance

Looking at how few people actually spend the time developing marketing metrics with the finance team, it’s not surprising budget conversations can be difficult ones to have. Get the necessary metrics from finance, which will allow you to build a comprehensive backward-looking ROI model articulating an accurate story:

• NetCustomer Lifetime Value (LTV): Calculate the future profitability of a customer relationship. As you get more sophisticated, you can build out LTV for different customer segments to get a better feel for what business is driving profits.
• 12-month Average Revenue Per User (ARPU): Determine the revenue generated per unit to factor in speed of repayment, and assess which products are generating the most, and least.
• Customer Acquisition Cost (CAC): Include all components and resources involved in acquiring a new customer to fill out your model.

Having obtained these figures, set objectives with finance, and ask yourself: How much new versus existing revenue do you need in order to achieve your operating plan targets?

3. Create A Historical Model

Examine exactly how marketing is driving revenue from customer awareness to conversion by creating a historical model and using the metrics you collated with finance. Begin at the top of the funnel and work your way down. Mark the source of every single piece of data and whether it’s an assumption, or observed. Fill in all the assumptions by using the data you gathered in step two in order to get to revenue contribution. Review this with finance once altogether and you’ll obtain an agreed upon view of what actually happened in a given period of time.

4. Work Your Way Back

Having obtained a historical model illustrating what happened as a result of your marketing investment, you can now reverse it. Starting with how much new revenue you want to generate and working backwards, you can calculate the necessary investment to make to obtain revenue goals. Begin by determining how much more new revenue you want, and this time, work your way up the funnel and you’ll end up with a required budget to hit your targets.

Obviously you can discuss how different assumptions may differ in the future and how you’ll develop marketing efficiency. This conversation is easier to have once you’ve got a model of what happened in the past. Although we can assume various scenarios going ahead, it’s important to stress that the knowledge gathered is based on the historical model, thus it calculates the necessary metrics and budget plans to accomplish next cycle’s revenue targets.

5. Over-Share And Document

Lastly, documenting your plan is necessary to reach revenue targets, all while noting down what the agreed-upon metrics are to monitor and track success. And in order to keep everyone enthusiastic and aligned, be consistent in referring back to the plan and communicating growth and performance.

Underline areas where performance has exceeded expectations, and the methods you used to bring this about when sharing frequent updates on how you’re tracking to schedule. Make sure you also point out areas you might be lagging on, and what you’re doing to improve these.

Always highlight what’s succeeding and what isn’t based on your metrics, to keep people in your team and beyond, actively engaged in your marketing efforts and how they are benefiting the whole business.