I recently wrote an article about CEOs and CMOs needing to be more aligned. The article focused on CEOs applying more pressure on CMOs to prove their value. I made some suggestions for CMOs to get into the driver’s seat by leveraging consumer information as a precious asset. I’d like to expand upon the thought and focus on the defining value from a fiscal perspective. After all, CMOs should not just be following the money supply chain, they should be directly affecting it.
The great debate now is marketing ROI. In its most simplistic definition, ROI is a resulting percentage of the gain minus the investment, divided by the investment. The challenge we see is that many marketers tend to focus less on the gain as an incremental difference; rather, they often report on the costs associated with generating sales.
A question in our recent survey of G3000 marketers asked how they define marketing ROI. Shockingly, only 16% actually thought of the incremental difference. This leads us to believe that many more marketers are still stuck on the “I” of ROI, and less on the “R”. And frankly, if you can’t do either, then you are still a cost.
Yes, I understand marketing is an expense on the P&L. So I recently polled CFOs whether they believe marketing is an investment or a cost, and they went to a place that I believe we would all appreciate. Outside classic GAAP rules, they all believe marketing is an investment, insofar as the incremental gain can be measured.
So now the opportunity for CMOs is to partner with your Office of Finance/CFO and develop a relationship centered on how to define “value” and “return” through the eyes of finance, not marketing.