Tools for testing

CMOs are getting the message, especially as companies adjust to the new accounting requirements of the Sarbanes-Oxley Act, which mandates that companies keep more fastidious records as to what they spend and where they spend it.

“Marketing spend is one of the largest non-capital expenses a company makes, and until last year it was generally uncontrolled, with nothing in place to show a CFO what he gets back for a dollar spent,” says Ed See, co president and COO of Marketing Management Analytics Inc. (MMA). For the last three years, MMA, together with the Association of National Advertisers, has surveyed marketers about accountability and their efforts to develop a “success framework.”

What they’ve found is that marketers have traditionally been satisfied with softer metrics, such as brand awareness or market share. But C-level executives in general, and CFOs in particular, are growing intolerant of such amorphous indicators. As See points out, the problem with such metrics is that “brand awareness may demonstrate better perception of a product, but that perception doesn’t necessarily translate into ROI.” Adds Benton, “Consumers don’t buy market share; they buy products and services.”

Marketers need to abandon squishy measurements and develop a common language with the finance department. This will not only ingratiate them to the number crunchers, but will also benefit marketing efforts. “Marketers need to act more like businesspeople and develop a proven track record,” says Benton. “Nobody’s taking these marketing forecasts to the street. Companies use the data on market spend as input [on these forecasts], but they can’t show an impact on the final numbers.”

To start, develop a standard returns document that relates each element of a marketing campaign to the return it generates. See recommends using marketing-mix-analysis data from the previous three years. Compare point-of-sale data with the history of your marketing spend to look for direct results from your efforts.

“This analysis will show when you’ve introduced a stimulus at particular times,” says See, “(such as) every time you’ve upped direct mail or television ads, and (it will) show what sales results you achieved from those efforts. Looking at that data over time, you’ll see the average return for television, radio, direct mail and so on. Once this data is in place, you can have discussions with the CFO to show what’s happening.”

As obvious as this may seem to some, many marketers still haven’t embraced this tactic. For too long, experts say, marketing departments have adopted a spend-and-pray approach to fiscal accountability. Now, with CFOs fed up with such laxity, the tide is changing.

Speaking their language

To determine what the CFO expects, it helps if you’ve walked a mile in his or her shoes. Anthony Rodio, the current CMO at support.com, a remote tech support service for customers, is a former finance professional whose experience includes stints at some major brand name companies. In his view, the biggest failure on the part of marketing people as far as CFOs are concerned is an inability to think strategically. Too few CMOs, he says, think in terms of what’s best for shareholder value as opposed to what’s best for an individual campaign.

His advice for marketers who want to win the trust of the CFO is to start with discrete, quantitative campaigns. Direct response vehicles such as direct mail are more likely to yield measurable ROI. Once the CMO has proven success in more quantitative venues, then he or she can hit the CFO for money for campaigns that might be harder to measure, such as brand awareness.

Rodio also urges marketers to avoid applying metrics loosely. For example, while he was in a finance position at a former employer, he witnessed campaigns that were intended to raise brand awareness. Afterward, he often saw the marketing team cheering over the results of a survey that showed an increase in consumer awareness. But Rodio says “awareness” in many cases was defined too broadly and did not necessarily suggest that a consumer could differentiate your brand from others. “A lot of times marketers increase numbers by broadening the metric, and that violates CFO ethos,” he says.

While he was a member of the finance department, Rodio was wary of budget proposals that attempted to justify a campaign as creative but risky. Rodio, who describes himself as “a little old school,” says that a campaign that is funny or creative without pushing a brand’s message forward is worthless: “If people say a campaign is risky’ to me, that’s an indication you have not done your homework.”