- What are the specific goals for our marketing spending and how should we expect to connect that spending to incremental revenue and/or margins?
- What would be the short and long-term impacts on revenue and margins if we spent 20% more/less on marketing overall in the next 12 months?
- Compared to relevant benchmarks (historical, competitive, and marketplace), how effective are we at transforming marketing investments into profit growth?
- What are appropriate targets for improving our marketing leverage ($’s of profit per $ of marketing spend) in the next 1/3/5 year horizons, and what key initiatives are we counting on to get us there?
- What are the priority questions we need to answer with respect to informing our knowledge of the payback on marketing investments and what are we doing to close those knowledge gaps?
How you answer these five questions will get you promoted, fired, or worse - marginalized.
If you tend to answer in a dizzying array of highly conceptual (e.g., brand strength rankings compared to 100 other companies) and/or excruciatingly tactical (e.g., cost per conversion on website leads) “evidence”, stop. Preponderance of evidence doesn’t win in the court of business. Credible, structured attempts to answer the underlying financial questions does.
The five questions are all answerable, even in the most data-challenged environments. Provided, of course, that you build acceptance of the need for some substantial assumptions to be made in deriving the answers – much the same way as you would in building a business case for a new plant, or deploying a new IT infrastructure project. The key is to make the assumptions explicit and clearly define the boundaries of facts, anecdotes, opinions, and guesses. Think in terms of:
- Clarifying links between the company’s strategic plan and the role marketing plays in realizing it;
- Connecting every tactical initiative back to one or more of the strategic thrusts in a way that makes every expenditure transparent in its intended outcome, thereby promoting accountability for results at even the most junior levels of management;
- Defining the right metrics to gauge success, diagnose progress, and better forecast outcomes;
- Developing a more methodical (not “robotic”) learning process in which experiments, research, and analytics are used to triangulate on the very types of elusive insights which create competitive advantage; and
- Establishing a culture of continuous improvement that seeks to achieve quantifiably higher goals year after year.
As you evaluate push boldly into 2010, remember that 2011 is just around the corner. You may not have been asked these hard questions this year, but who knows who your CFO might talk to next year (me, perhaps??) that will ratchet up his/her expectations. You can prepare by using these five questions as a framework to benchmark where your marketing organization is starting from; as a guide to ensure that sufficient resources are being allocated to promote continuous learning and improvement; and as a means of monitoring the performance of your marketing organization.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on measuring payback on marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.