Construction Ahead - I hope!
Warning - The road ahead could be long and bumpy (and I'm not referencing our current economic situation). According to a new study summarized in Ad Age, we still haven't made a lot of progress in bridging the expanse between Marketing and Finance.
The ANA and Financial Executives International have just published and presented a new study at the ANA 2008 Marketing Accountability Conference on a topic near and dear to my heart.
So, which do you want first? The good news? Or the bad news?
Personally, I like to get bad news out of the way first, so I can look forward optimistically to good news. So, we'll start with that.
The bad news:
60% of financial execs don't think that their companies' marketing department understands financial controls
70% of them don't use the inputs and forecasts provided by marketing in any financial guidance
90% of them don't use any type of ROI metrics for budgeting exercises concerning marketing.
Only 1/3 of marketing execs say that their marketing goals are aligned with the overall corporate goals
Another 1/3 say there are no written goals for their marketing department
Wow - there's alot of opportunity for improvement there!
And, now, on to the good news:
60% of marketers are trying to measure their impact on sales
33% of marketing execs report that, in their company, marketing and finance are jointly working on establishing metrics and methodologies for evaluating marketing ROI. (This is up from only 22% last year, so we're going in the right direction! And hopefully, these projects will start to change the numbers above in the 'bad news' section.)
Another 50% are at least experiencing some cooperation between marketing and finance
More than half of marketers use their analyses as evidence to maintain or increase their budgets
Personally, I'm really glad to see that the tide is changing, and collaboration is increasing! The collaboration is advantageous for many reasons:
Credibility - If the finance deptment is involved in the development of programs, processes, analyses on marketing effectiveness and efficiency, then it is much more likely to both believe and utilize the results that come out the other end. (Honestly, in my own experience, there is nothing more frustrating than completing and in-depth analysis of how marketing or advertising is working and what it is producing, only to have c-level higher-ups poo-poo it as biased and irrelevant!)
Funding - Let's face it - analytics people, projects, and processes (like marketing mix modeling, marketing dashboards, etc.) of the caliber that can optimize marketing expenditures, provide scenario analysis and truly read ROI, aren't cheap. And the bigger catch-22 is, the marketing department often doesn't have the budget to cover them. They don't want to take it out of the market research budget, and I have yet to see alot of 'accountability', analytics, or ROI budgets. So, for many, the only option is to take it out of the media or ad budgets. As you might expect, clients loathe to take away money from active communications with prospects and customers, in order to analyze how they are spending their ad/marketing budgets. So, if the finance team is involved, maybe it will be more likely that they will offer up some budget to fund these kinds of analyses.
Knowledge - By undertaking a project like this, both departments will gain important knowledge about what works and how to do it even better. In my experience, once these projects really get some traction and produce results, other departments (like sales, distrubution, customer service, etc.) tend to jump on the band wagon and get involved, which means more available budget, broader analyses and results, and more impact!
Growth - Of course the ultimate goal of understanding how marketing and advertising work is to figure out how to optimize it and drive overall growth for the company. So, by leveraging the items above (Credibility, Funding, Knowledge, and the cross-functional involvement of Finance and Marketing, along with a rigorous anlaytical and measurement effort), the company should see growth.
So, I'm hoping that you are in the group of companies whose finance and marketing departments have already started construction (i.e. are jointly trying to measure marketing ROI). And if not, it's never too late to start the conversation. Believe me, if you can prove the actual monetary results of your marketing and advertising, your CFO will be all ears. And your marketing budget will probably be growing, rather than stabilized, or worse yet, shrinking.
Given the economy this year, I think that the issue of accountability is going to be very hot in '08 and '09. Hopefully, there will be big movement in these types of efforts this year. I can't wait 'till next year to see how much the 'bad' numbers go down and the 'good' numbers go up...keep on building!
