Dusty Dean is a former production manager and co-founder of BITCADET. He is a member of the businessroundups.org 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 cut. To safeguard their department’s financial resources and protect their own positions, CMOs must take a strategic approach to quantifying the impact of marketing activities and proving their value to the organization.
Think and speak like a CFO.
Developing a comprehensive understanding of financial statistics is key to overcoming this challenge. Key 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 importance and the relationship between these metrics, CMOs can strengthen their marketing investment case and demonstrate the value generated by their department.
For example, by demonstrating that CLV significantly exceeds CAC, CMOs can demonstrate the long-term profitability of marketing efforts. Likewise, by presenting a strong ROAS, they can illustrate how efficient their advertising campaigns are at driving sales. To further strengthen their case, CMOs could also introduce metrics such as the marketing-generated customer rate (MOCP), which measures the proportion of new customers acquired through marketing efforts, and the marketing-influenced customer rate (MICP), which measures the percentage of customers that every interaction with marketing along their journey.
It is essential to take a data-driven approach, focusing on the metrics that resonate with key decision makers in the business. By thinking and speaking like a CFO, CMOs can present a compelling case for marketing investments and demonstrate their department’s positive impact on the 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 insight into how different marketing channels and campaigns contribute to the company’s overall sales and revenue. By using attribution models, CMOs can allocate resources effectively to the most profitable channels and make informed decisions about their marketing mix.
An example of a marketing attribution model is the multi-touch attribution model. This model assigns credit to multiple touch points throughout the customer journey, providing 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 gives more credit to touchpoints closer to conversion, highlighting the importance of recent interactions.
Tell a compelling story.
In addition, CMOs should focus on creating compelling, data-driven stories to convince CEOs and CFOs of the value of their marketing investments. By showing real-world examples of successful marketing campaigns, CMOs can provide concrete evidence of the impact their department is having on the company’s growth and profitability.
An essential aspect of creating these compelling stories is aligning marketing goals with the overall goals of the organization. By demonstrating how their department’s efforts contribute to the company’s strategic objectives, CMOs can secure the support of top executives and ensure continued support for their initiatives.
CMOs must take a proactive approach to proving the value of their department by effectively communicating key financial metrics, implementing data-driven attribution models, and presenting compelling data-driven stories. 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.