To prove effectiveness in an uncertain world, marketers must learn CFOs’ language
The only certainty today is uncertainty. So budget squeezes and scrutiny on marketing will continue – and it’s time to speak a language that finance teams understand, says Jaywing’s Hanna Wade.
In times of permacrisis, it's more important than ever to talk the languages of finance and data, says Jaywing / Fabian Blank via Unsplash
In today’s ever-changing macro environment, economic uncertainty has firmly established its grip. That volatility poses a significant challenge for businesses, as unpredictable economic events are difficult to plan for and can have an erratic effect on bottom-line commercial objectives.
For marketing teams, this presents a particular challenge. According to PwC’s 2023 CEO survey, economic downturn indicators influence a staggering 75% of respondents in their marketing budget decisions. One-third of them are considering budget cuts for 2023, with potential repercussions flowing into 2024. This readiness to trim budgets indicates that chief executive officers (CEOs) aren’t perceiving efficient value from marketing endeavors. Shockingly, a meager 8% of metrics in the Data & Marketing Association (DMA) database mirror the business impact CEOs seek from marketing initiatives.
Amid this uncertainty, the industry grapples with an alarming fixation on short-term performance. Investments primarily target the funnel’s lower end, where results can be instantly reported. However, this comes at the expense of longer-term tactics despite repeated proof that prioritizing marketing in times of downturn can reap huge rewards. CMOs are caught in a balancing act, needing to prove the value of longer-term strategies while delivering immediate successes to meet demanding expectations.
The CFO-Marketing nexus
Marketers must forge stronger internal relationships as they look to understand whether their use of data has truly evolved enough to translate the language of marketing to the language of the boardroom. It’s no longer surprising that to continue to secure budget through repeated cycles of economic uncertainty, companies must employ a methodical data-driven approach to prove they are optimizing toward the most valuable outcomes.
Simultaneously, chief financial officers (CFOs) are progressively immersing themselves in marketing decisions, seeking tangible value for every penny invested. It’s pivotal to present a clear marketing strategy to CFOs, aligning it with the company’s financial objectives. Understanding potential market barriers and devising strategies to overcome them using customer insights and research, employing key metrics for assessing effectiveness, driving accountability, and garnering necessary internal resource (such as technology investment) are crucial. The collaboration between chief marketing officers (CMOs) and CFOs is more critical than ever, serving as strategic partners for business growth.
Tying into CFO priorities, the strong correlation between continuing to advertise during periods of inflation and the strength of the brand engendering a better tolerance to changes necessitated by uncertain times (such as price increases to cover margins) is clear. In this context sits the new IPA/Brand Finance Investment Analyst Survey, which describes the last 18 months as one big experiment in how brand strength, influenced by marketing efforts, can impact financial numbers, including share price. 79% of city analysts agreed brand strength was critical to a business’s financial success. As part of its recommendations, the report outlines that marketers must have the capability to make the argument that marketing is an investment in the businesses’ longer-term health, rather than a cost.
However, achieving this commonality demands credible evidence showcasing the value of marketing as a revenue-driving activity. Marketers must communicate fluently in the language of finance, aligning terminology and strategies with financial models and data-driven predictions. This crucial translation of activity into growth ensures that approaches remain appropriate and effective.
Marketing mix models: Proving value in concrete numbers
In pursuit of this common language, measurement techniques have evolved, homing in on revenue and profitability metrics while discarding ‘fluffier’ terms that hold little meaning for the C-suite. We’ve seen a renaissance of marketing mix model approaches, due to their ability to provide a consistent, comparable, and longer-term view of all factors which drive sales. These don’t rely on personally identifiable information (PII) and allow marketers to evidence results in hard-hitting bottom-line numbers, enabling forward-looking trends and outcomes to be predicted to support strategic planning and C-suite decision-making, and showing that the income of cutting marketing spend is generally negative.
By comparing sales across different time periods, sales points, and sales channels and identifying which drivers were present in each, these models mathematically estimate those factors’ effects on key business outcomes. This isn’t confined to marketing channels alone and thus reframes measurement in C-suite terms of overall drivers of business demand (not just marketing); these models embrace external influences like competitor activity, Covid-19, or macroeconomic shocks, along with non-marketing business factors like promotions and pricing changes.
This comprehensive view directly links activity to revenue and growth metrics, thus striking a balance between effectiveness (if the right revenue outcome is being achieved) and efficiency (the cost invested to achieve that outcome). These models typically add between 10-30% to return on investment so even investing less than 10% of your total marketing budget can drive huge returns.
The CMO’s #1 priority
If there’s one key takeaway from current thought leadership in this space, it’s to adopt a technique that is financially focused, showcasing performance in a clear, revenue-centric approach. Bridging this gap between marketing and finance teams is mutually beneficial, providing finance teams insights into the power of robust marketing strategies in driving revenue and aiding marketing teams in aligning with broader business financial objectives in times of economic uncertainty; ultimately protecting future budgets for the long term.
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At Jaywing, we’ve made it our mission to help clients establish concrete foundations in a world of shifting sands. As a data-powered integrated agency, we bring together the best minds in data intelligence, creative engagement and channel performance to uncover unique insights that enable smarter outcomes. The result? Better performing, effective solutions that create certainty, maximise opportunity and eliminate chance.Find out more