Cash, Lies and ROI, Redux: 3 Signs Your Marketing Budget Is A Flight Risk

Are you cleared for takeoff or grounded?

3018536-poster-p-1-cash-lies-and-roi-redux-3-signs-your-marketing-budget-is-a-flight-risk
In my previous post,
I discussed the reasons why marketing budgets are growing, and what
marketing leaders need to consider as they build their 2014 marketing
“flight plan.” As the new year approaches, my intention is to showcase
the framework, skills, and expertise needed to build a financially sound
marketing powerhouse.

Once marketing leaders recognize these growth opportunities, support
an increasing number of strategic programs, and measure marketing on a
much broader scale, what happens next? Most leaders will typically forge
ahead, confidently navigating across departmental lines and engaging
customers in their new initiatives. Yet expanded authority does not give
marketing leaders license to fly at unsafe speeds or altitudes.

Strategic, mindful leaders need to first anticipate what obstacles
they may encounter in their flight path, and create a strategy to
address them swiftly. Here are the most common obstacles I have seen
with my clients:

1. Underestimating potential turf battles. Recently,
the CEO of a fast growth technology company told me that she has
repeatedly witnessed the growing tensions between CMOs and IT within her
customer accounts. The CEO shared that “we are seeing increasingly
where Marketing owns the budget…many IT departments are feeling left
out, and less influential.”

She then explained how this tension plays out in their customer
accounts. “In one of our largest accounts, a multi-billion dollar
industrial company, our primary buyer is the VP of Marketing. The IT
department was never consulted during the evaluation and selection
processes. Now, they are behaving badly.

Marketing originally paid for our product. My account team participated
on a call with both IT and Marketing, and the IT dept. said ‘you are not
allowed to install the tool because it had not yet been vetted.’ In
other words, Marketing had not performed the proper security checks. The
customer’s IT manager said this in front of my team. We were just
polite and said ‘we will do what you want us to do.’”

Imagine how many weeks of productivity were forever lost due to this turf battle within the customer’s business!

2. Lack of clear attribution. Some companies lack clear metrics attribution, especially between Sales and Marketing. In a recent Forbes article,
Dominique Hanssens, Professor of Marketing at the UCLA Anderson
Graduate School of Management, posits that “attribution can sometimes
cause double accounting, particularly with TV ads and follow-up sales.”

3. Short-term mindsets. In the United States,
Accounting standards do not allow Marketing to be put on the balance
sheet as an asset. Marketing is usually treated as an expense, even
though some Marketing initiatives impact long-term brand repute, a
customers’ propensity to buy more products from you, and a company’s
cultural and community clout. Forbes columnist and MarketShare Director Daniel Kehrer
observed
that “marketing expenditures are technically an expense, as opposed to
an investment, and that’s an issue here. In finance-speak, marketing
costs are a P&L item, not a balance sheet item.”

Hanssens also reveals that most companies focus too much on flow metrics,
which can include weekly sales and comparisons of revenues over time
and lead conversion rates. He recommends companies also consider stock metrics
in their performance management systems. These can include future
income streams such as brand repute and value, the value of inventory,
and the quality of the customers you are attracting.

What about your company? Are you selling to buyers who are going to
be loyal, long-term customers, or to transactional buyers who, like
Groupon and LivingSocial have demonstrated, chase daily deals? These
online discount sites exemplify an obsession with flow metrics.

It’s time to create marketing budgeting models that will not only boost
your credibility in the boardroom, but will also expand your value
vocabulary (hint: it’s time to think beyond a number of leads required to drive $X in sales).
My future posts will explore ways to achieve that. This expanded view
will help you define your organization’s value in a whole—and
holistic—new light. Every captain needs a 360-degree view of their
surroundings before enjoying a smooth landing.

Related posts:

Why Today’s Marketing Planning Models Fail To Deliver In The C-Suite

Nine Common Obstacles That Derail Growth

Cash, Lies, And ROI: Are Your Marketing Budgets A Flight Risk?

[Image: Flickr user Amrit Patel]

This post originally appeared in FastCompany.

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