Dusty Dean is a former manufacturing executive and co-founder of BITCADET. He is a member of Forbes Business Council. About Dusty Dean
Navigating the complex world of marketing can be challenging for CMOs, especially when it comes to demonstrating the return on investment (ROI) of their efforts. In times of economic uncertainty, marketing budgets are often the first to be reduced. To secure their department’s financial resources and protect their own positions, CMOs must adopt a strategic approach to quantify the impact of marketing activities and prove their value to the organization.
Think and speak like a CFO.
Developing a comprehensive understanding of financial metrics is key to overcoming this challenge. Important financial metrics to communicate to CEOs and CFOs include customer acquisition cost (CAC), customer lifetime value (CLV) and return on ad spend (ROAS). By effectively communicating their significance and the relationship between these metrics, CMOs can strengthen their case for marketing investments and demonstrate the value generated by their department.
For instance, by showing that the CLV significantly exceeds the CAC, CMOs can demonstrate the long-term profitability of marketing efforts. Similarly, by presenting a strong ROAS, they can illustrate the efficiency of their advertising campaigns in driving sales. To further bolster their case, CMOs could also introduce metrics such as marketing originated customer percentage (MOCP), which measures the portion of new customers acquired through marketing efforts, and marketing influenced customer percentage (MICP), which reflects the proportion of customers who had any interaction with marketing during their journey.
Adopting a data-driven approach, focusing on the metrics that resonate with the top decision makers in the company, is essential. By thinking and speaking like a CFO, CMOs can present a compelling argument for marketing investments and demonstrate their department’s positive impact on the company’s bottom line.
Track and present marketing attribution models.
In addition to mastering these financial metrics, CMOs should also consider tracking and presenting marketing attribution models. These models provide insights into how different marketing channels and campaigns contribute to the overall sales and revenue of the company. By using attribution models, CMOs can effectively allocate resources to the most profitable channels and make informed decisions about their marketing mix.
One example of a marketing attribution model is the multi-touch attribution model. This model assigns credit to multiple touchpoints along the customer journey, giving a more holistic view of the marketing efforts that contributed to a sale. By leveraging multi-touch attribution, CMOs can better understand the interplay between different marketing channels and optimize their strategies accordingly. Another useful model is the time decay attribution, which assigns more credit to touchpoints closer to the conversion, emphasizing the importance of recent interactions.
Tell a compelling story.
Moreover, CMOs should focus on creating compelling, data-driven stories to persuade CEOs and CFOs of the value of their marketing investments. By showcasing real-world examples of successful marketing campaigns, CMOs can offer concrete evidence of the impact their department has on the company’s growth and profitability.
An essential aspect of creating these compelling stories is to align marketing goals with the organization’s overall objectives. By demonstrating how their department’s efforts contribute to achieving the company’s strategic targets, CMOs can secure buy-in from top executives and ensure continued support for their initiatives.
CMOs must take a proactive approach to prove their department’s value by effectively communicating key financial metrics, implementing data-driven attribution models and presenting persuasive, data-driven narratives. By doing so, they can successfully demonstrate the ROI of their marketing efforts and secure the resources they need to drive sustainable growth for their organization.
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