Talking to your CFO makes Marketing smarter!

The troubled economy is forcing corporate leaders to re-evaluate their spending plans across the board and marketing is not exempt. In reducing marketing budgets, corporate leaders face a difficult set of choices: How much is too much? Are we negatively impacting impacting Revenue producing potential with deep cuts.

Making these choices is particularly difficult if the marketing team lacks a systematic method of measuring the effectiveness and efficiency of marketing spending and a proven method to link marketing spending to business outcomes.

According to Fred,all marketing investments do at least one of three things:

1.    They change customer perceptions in a way that encourages them to buy more.

2.    They provide temporary monetary incentives for customers to buy more.

3.    They make the brand more available so customers can buy more.

While budget cutting and planning for an economic downturn are never enjoyable, they can provide an opportunity for inserting greater rigor, and better capabilities and metrics to make marketing investments more effective in the long run.

See what Fred Geyer and Chiaki Nishino have to say about ‘Making Marketing Smarter Amidst the Cuts’.

http://www.prophet.com/downloads/articles/geyer-nishino-smarter.pdf

Also what this is doing is creating a much greater focus on Marketing accountability. Suddenly the CMO’s are talking to the CFO’s.

 The 2009 Association of National Advertisers (ANA)/Marketing Management Analytics' (MMA) Marketing Accountability Survey, which surveyed 95 senior-level marketers in June, revealed some surprising results. Despite a 75 percent decrease in marketers' marketing budgets this year, as well as 65 percent who said they were expected to drive more sales with the same or lower budget, marketing accountability programs have taken on a greater significance.

Some of those findings include:

1.    An increase in cross-functional marketing accountability teams. Thirty-two percent of respondents said their teams included representation from marketing, finance, and research, up 22 percent from 2008.

2.    An increase in speaking the language of finance. Thirty-eight percent agreed that marketing and finance share common metrics (up significantly from 27 percent).

3.    Use of more sophisticated analytics to determine marketing budgets. Seventeen percent of respondents said they use "what if" scenarios at different budget levels to determine sales and profits--more than double the response from the 2008 survey.

4.    A greater use of predictive modeling. Forty-three percent of respondents said they use customer lifetime value models as an accountability technique, up from 27 percent in the prior year's study.

 My take is the following:

1.    Have you created a set of metrics along with your CFO to measure the effectiveness of your marketing?

2.    Is someone from your Finance team actively measuring your investments in a way that creates joint ownerhip?

3.    Are you measuring both short term and longer term results- as an example a bank may measure short term impact of a promotion on Credit card spending and also evaluate whether in the longer term the credit card customers behaviour changed in terms of increased profitability(larger ticket sizes, more revolve etc)?