Ambiguous Marketing Budgets lead to… ambiguous results

Have you ever heard the rant of a financial executive who is fuming because marketing ROI is so hard to define? The lament is usually that “branding” is not enough–that some quantifiable return is desired, but no one really pins it down. Some argue that revenues are the only true barometer. Others feel that smaller yardsticks are better–number of new clients, number of proposals made, number of inbound calls, etc. But…what about % of proposals won, % change in inbound calls, etc to provide comparative data?

Yet…”return” still has to be measured in comparison to investment. In many cases, the investment amount is, to quote Churchill, “a riddle, wrapped in a mystery, inside an enigma.” Why is this so? In many privately owned businesses, it is because marketing dollars are enshrouded in expense reimbursements, dues and sponsorships. Actual agency costs, advertising spend, etc are sometimes separate line items on the income statement, but are often rolled up into an aggregate. In order to have credibility with the financial (& equity) folks, we as marketers need to ask for more detail. It is in our best interests to know travel & entertainment, training, and similar expenses that are charged by managers/executives and reimbursed but not clearly demarcated as marketing costs. However, because we are not considered part of the brain trust, we can be excluded from such conversations/communications.

What's Your Measurement?

 

Once we are able to acquire access to the true marketing financials, we can perform an ROI analysis more effectively. (I prefer to describe this as an “ROM.”) Then, tradeoffs can be evaluated. There may be some in the organization who are unwise in their expense management to the point that allowing them to ring up reimbursable costs is not an investment at all, but a distraction from effective, accountable marketing.

Having the frank conversation with the top financial executive/business owner(s) can set the stage for your voice to gain credibility. No longer may you be perceived as the “soft and fuzzy” management team member, but rather a strategic contributor to business performance. If you are savvy enough to learn what your industry standards are for marketing as a percentage of costs/revenues, then you can help set the budget requisite to drive growth and carve out better market share.

As the marketing budget becomes a management accountability tool, results are easier to predict. Sensitivity analysis can then yield insights into the levers that drive revenue performance. Congratulations–you are then on your way to concrete rather than ambiguous conversations and may soon find that the frustration of not being heard begins to fade away…!

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