Marketing is the most important driver of brand growth, and marketing science has now matured to the extent that marketers can report marketing impact clearly and unambiguously. But if chief marketing officers (CMOs) are to prove their worth in the C-suite – if they’re to make the most efficient and effective use of marketing – then they need to be able to communicate this impact in terms that the chief executive (CEO) and chief financial officer (CFO) understand and respect. And this means using arguments, language, and metrics that demonstrate the bottom-line, commercial impact of marketing investment.
The perils of being too soft and too insular
Historically, many marketers have not been taken seriously by the C-suite because the metrics they reported were either too insular or too soft to cut it in the boardroom. By insular, I mean that marketing has for too long reported measures that resonate only with the marketing community, terms like “brand awareness” or “customer affinity”. While meaningful and trackable over time, these kinds of metrics speak their own language and are too far removed from financial performance to command CFO attention. For the CFO to look up from her spreadsheet, the CMO needs to use metrics that connect with, reflect, and predict financial performance.
According to research by Deloitte, CEOs and CFOs believe that CMOs who do their job well and in the most relevant way for the C-suite are those who are able to remove themselves from the silo of marketing. CMOs with board-level relevance are those who can see the bigger picture, and have the conversation at the enterprise level. CMOs need to be able to equate and report the impact of marketing investment on top- and bottom-line performance. This includes using the metrics that matter to the C-suite, such as revenue, profit, margins, and earnings per share.
This demands that CMOs become increasingly data literate to know what causes what and why. But it also demands that they become more skilled at using data to build powerful and persuasive narratives to move their peers in the C-suite to action.
Digital “vanity” metrics haven’t helped
With the advent and growth to prominence of digital channels over the past decade – where everything that could be measured was measured and then reported – marketers did a disservice to both themselves and the impact of the tools at their disposal. Likes, shares, retweets, and favourites may give those running social media accounts warm feelings and a surge of dopamine in the brain’s reward circuitry. But what these metrics don’t show in terms that C-suite can accept is whether the company has sold any more widgets. As the legendary American statistician William Edwards Deming observed, “Just because you can measure everything doesn’t mean that you should.”
Digital vanity metrics gave marketing and marketers a bad name in the C-suite, and many CMOs are making up for lost time and the damage that reporting metrics like these did to the perception of the discipline at board level. As Peter Drucker noted almost 50 years ago, “What gets measured gets improved”. For as long as marketers insisted that the number of Twitter or Instagram followers mattered, that got measured. When these measures failed to prove their worth in terms of financial performance, the message – and the messengers – came to be ignored.
The language of the C-suite
CMOs need to change their language to the language of the C-suite so that the rest of their board-level peers pay due attention to the critical importance of customers and the customer experience. This will help them to understand why they should be interested in what CMOs and their teams do all day. Adopting this new register is fundamentally an act of empathy. CMOs need to put themselves into the minds of the CEO and CFO (aka their internal audience) and understand what it is that their C-suite peers are worried about. This means they need to be less insular, get out of the marketing silo, and focus more on hard commercial metrics.
Joelle Kaufman, CMO of mobile-first company communications platform Dynamic Signal, puts it this way: “The CFO cares about standing up in front of the board or Wall Street analysts and saying, ‘We beat our numbers and our strategy is working.’ So, you talk their language and tell them how you’re going to help them achieve their goals … That’s an argument that makes sense to the CFO.”
In recent months at Ebiquity, we’ve noticed positive signals among some of our bigger clients. In many of the world’s biggest advertisers, senior marketing and finance colleagues are increasingly working together in partnership. As CMOs come to appreciate what improvements in media efficiency and impact mean to overall financial performance, say, they are making efforts to translate outcomes in language and using metrics that CFOs understand. To help this process of transition, we are also involving our own CFO in these client discussions.
Interestingly, some the world’s biggest brands now report the impact they are able to generate when they publish their results. In 2018, Procter & Gamble made headline news by announcing $200m savings in digital ad spend for the previous year. The following year, P&G revealed it had cut a further $350m from its multi-billion dollar marketing budget, while at the same time increasing reach and re-investing some of the savings back into brands and better customer experiences.
Not to be outdone, Unilever’s annual report and accounts for 2018 led with the news that the FMCG giant had secured €500m savings in marketing spend by focusing on maximising returns. Simultaneously, the company has been increasing spend on areas driving growth (digital spend and in-store). Also, PepsiCo increased ad spend by 12% this year. While that impacted earnings in the period, organic revenues were up 4.3% in the last quarter and its share price rose by 3% on the back of their results announcement. The Wall Street Journal quoted PepsiCo’s CFO as saying, “We’re seeing returns on the investment.”
CMOs speaking the language of the C-suite is not yet the new normal. But where some of the world’s biggest brands lead and succeed, the rest of the marketing community typically follows. More dialogue and more mutual understanding between marketing and finance can only be beneficial for all sides. This new spirit of collaboration means that marketing will be increasingly able to do and be seen to be doing what it does best: building and growing brands that consumers love and respect.
This article was featured in The Drum.
First featured on 22/10/2019.