Why ‘Open Books’ Give CMOs More Power In The C-Suite
By teaming with the CFO and sharing objectives, CMOs can prove that marketing is relevant and influential and plays an important role in revenue and profit.
The crucial and credible financial data CFOs provide for the CEO ensure they are powerful part of the C-suite. The challenge for CMOs is to make often forward-looking and less precise customer data just as crucial. Why not change the game and open the books?
Less than 50% of C-suite executives in a recent Economist Intelligence Unit study think marketing expenditures are really driving top-line revenue (never mind bottom-line profits). In other words: Your CEO may not trust you’re spending the money well.
Saying CMOs don’t spend money well is partly unfair. Marketing’s impact can be tricky to measure, especially for investments in long-term brand building. Many CMOs we interviewed for our upcoming book (“The 12 Powers Of A Marketing Leader,” McGraw Hill) said CMOs could do a better job showing how marketing drives revenue and profit. But some also shared a big fear, that of a C-suite pushback, as more forward-looking marketing data fails to match the precision offered by backward-looking finance data. If that’s the case, why not change the game and open the books?
One head of marketing recently received this CFO email: “Dear James, Sorry I couldn’t reach you personally. As a proportion of revenue, we spend almost twice as much on advertising than our largest competitor. That’s unacceptable. I’ve decided to cut this year’s advertising budget by 35% and next year’s by a further 10%. I’m sure you’ll understand our need to manage costs. It’s a tough year for us.”
James was outraged. It was tiring to discuss marketing funds each time the company had a bad month. But then he decided to take a different approach. He met the CFO and proposed that the marketing and finance teams jointly produced the numbers on all marketing activities. Open book. No hiding. The project changed everything. The joint team found that most campaigns did, in fact, create a decent return. The few that created poor returns, including two high-profile sponsorships, were cut. Working together the team then developed metrics on how to best measure and report marketing success.
“At first, the process was painful,” he recalled, but opening the books made marketing more relevant and influential. Some of the budget cuts were reversed. More importantly, people in the organisation finally understood how marketing drove the bottom line.
Abigail Coomber, head of customer at British Airways, said: “CMOs need to show the ROI of every penny spent on marketing and how it delivers against the bottom line.” Like many leading marketers, she agrees that opening your books is among the most powerful things you can do to prove returns.
Here are some basic rules for producing powerful C-suite marketing data:
1. 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 measuring these first.
2. Take An 80/20 Approach
Marketing measurement isn’t about getting every penny right. Some people use sophisticated tools, considering short- and long-term effects and brand equity as part of the balance sheet. Others do very well with a simple quarterly spreadsheet that has marketing spending 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.
3. Open The Books—Get Finance Involved
Work with your finance experts to jointly define and agree how you want to measure and report returns. You’ll find that most CFOs understand very well that not everything can (and should) be measured. Problem-solving this jointly will greatly increase the credibility of your numbers. Don’t hide from finance—instead, team up.
4. Show 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.
The most successful CMOs in our study didn’t try to crack marketing measurement on their own. By teaming up with the CFO, these top marketers leverage what I call “the power of open books.”