Why marketing teams need to change the way they report on ROIs

A while ago, I wrote about what CEOs think of their marketing teams - how they seem to have lost trust in them, don't rate the quality of their work or their ability to deliver quantifiable growth.¹ For many marketers, this was a tough read, especially for those with aspirations for a place in the 'C' suite.

It looks, however, that this view of marketing runs deeper; there is a similar disconnect with how the finance division views the marketing team. A recent survey of more than 170 senior finance executives² raised major concerns for marketing:

• the majority said that, in practice, marketers have little influence on their business;

• well over half didn't have confidence in marketing's ability to make good commercial decisions; and

• less than ten percent knew the return on investment (ROI) that marketing actually produced.

In short, senior finance staff seem to believe that marketing is fluffy and weak. There is little understanding of the commercial value marketing creates, despite knowing exactly how much is being spent.

Marketing's view of finance isn't much better, according to the same research project. The majority believe that finance make poor decisions over marketing budgets and don't really understand how to measure marketing's success.

A natural tension

For those who work in professional services management, these views aren't particularly surprising. In many professional services businesses, there is a natural tension between marketing and finance. Much of this is due to the inherent difficulties finance teams have in measuring the results of marketing's efforts.

In most cases, marketing will argue that it does have a plan that is measurable and that it has a well-developed set of metrics that demonstrate both long and short-term progress. Marketing will be the first to admit, however, that many of the individual elements don't have a directly-quantifiable ROI but that, when they are combined, the whole is considerably greater than the sum of their parts, as different components complement and build on each other.

Finance have a similar issue with business development. The ROI from many of BD's activities, including relationship planning and key account management, are difficult to measure. The exception is tendering, which is easier to quantify, particularly where it is for volumes of fixed-price work.

The discipline that does much better in finance's eyes and is often lumped in with marketing and BD in many commercial organisations is sales, with the results being both easy to measure and directly attributable. However, many professional services businesses (and law firms in particular) haven't grasped this opportunity and are definitely missing a trick.

The fundamental difficulty that finance has with evaluating marketing and BD comes from how these two functions have been set up and organised to report their 'activity'. This draws a parallel with how many lawyers and other professionals still measure and equate their value and success, namely time billed, rather than the results they have created and produced for clients.

Yes, both marketing and BD can show a significant contribution to the development of their business and manage the costs involved. But, what finance want to know plain and simple is the new revenue the business will be getting from the investment being made in marketing.

Changing language

There is hope for marketing and BD, but what they need to do is to put themselves in the audiences position and better help finance to understand exactly what they do and why.

An important part of this, and a stumbling block for many, is to use a language that the business understands, rather than technical marketing terms and acronyms. This is where marketing and BD need to change their mindset and where some empathy and creative thought is required.

Few finance teams can see the link between many of the measures that marketing frequently use to show the results of their efforts and how these produce ROI. Market perception, share of voice, customer/client satisfaction, website pages viewed, emails opened, e-newsletters read, podcasts listened to, YouTube videos watched, number of tweets/retweets and Facebook 'likes' all fail finance's 'so what?' test.

At the heart of getting finance to understand marketing ROIs better is spending more time with finance and explaining how the marketing team are trying to help the business - doing more of the good things that benefit the organisation and less of the things that don't. Marketing also need to be very clear about the metrics they use and explain the importance of them in a way that makes sense to the business.

A long-term view

Many professional services firms' marketing teams would do well to repackage themselves and change the way they think about what they do and how they report on their activities.

Given that finance and, indeed, the board is focused on ROI, marketing and BD should structure how they operate in this way. In practice, this means reporting in terms of campaigns, project or plans to produce new work from new clients and new work from existing clients in the longer term.

For most teams, this shouldn't be a problem, but it does require a long-term view, as well as an acceptance that activities will change with some degree of fluidity over time. There also has to be a recognition that some activities will fall outside of this reporting structure, as their contribution to ROI can't be measured.

However, this way of reporting, combined with increased discussion of the reasons for each of the elements of marketing and BD's plans and their link to the organisation's success, will grow finance's confidence. This is half the battle won and will improve the relationship on both sides. It will also go some way to address marketing's standing with the CEO and help to deal with some of the trust and quality issues that exist.

Few marketers would turn down the opportunity of having finance and the CFO as an ally rather than an adversary. Maybe, then, a place in the 'C' suite won't be that far off for marketing?

References

1. See 'Marketing is dead. Long live marketing', Paul Brent, Managing Partner, 12 June 2013

2. See The Value of Marketing, Econsultancy, November 2014