In the most recent semi-annual CMO Survey sponsored by Duke’s Fuqua School of Business, Deloitte, and the American Marketing Association, CMOs name communicating the ROI of marketing investments among their top ten challenges overall, and the number one C-suite communication challenge. Fewer than one-quarter of CMO respondents to another survey by the CMO Council report that they do a good job of communicating the business value of marketing investments. With Gartner recently reporting that marketing technology spend eclipsed the talent budget in 2018-19, it’s just a matter of time before the CFO and CEO come knocking, and loudly, for the ROI model justifying that spend. C-suite communication and collaboration is critical.
Unfortunately, CEOs feel the same way about the CMO’s ability to communicate value. Respondents to a survey of Fortune 100 CEOs said they view marketing and PR teams as either unwilling or unable to show return on investment for marketing spend.
The solution is not easy, but it is clear: CMOs who want to be seen as a key driver of business growth need to communicate the value of marketing to the business in ways that resonate with the CEO and the rest of the executive leadership team.
Here are three approaches to make progress:
Ally with the CFO
A stronger CMO-CFO relationship has become more of a priority for both sides. The emergence of the digital customer and the resulting rise in status for the CMO has occurred in tandem with increased CFO involvement in strategy and execution, according to research by Ernst & Young (EY). Both C-suite members are increasingly responsible for contributing to growth, and each needs the other to succeed. More than half of C-suite respondents to the EY survey report increased CFO-CMO collaboration in recent years.
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In a June 2019 interview, McKinsey expert Biljana Cvetanovski summarized the need to foster relationships across the C-Suite: “We spoke to over 200 CMOs and over 80 members of the C-suite and the board—CFOs, chief technology officers, and other executives. What we found is that the ability to reach out and influence across the C-suite is becoming increasingly important. The CMO can’t drive the company growth agenda on their own. They really need to build strong working relationships with the rest of the C-suite.
”Yet it remains that marketing and finance have found it hard to get along. The tension goes deeper than the fact that finance controls resources and marketing is a high-cost function. There are also cultural conflicts that arise when the external focus of the marketer clashes with the internal cost and value focus of the CFO.
CMOs need to participate – perhaps even take the lead – to work through these differences. Developing a more sincere collaboration with the CFO gives CMOs the opportunity to present marketing’s view of the world as part of an ongoing and collaborative conversation. It goes both ways, too: CFOs can offer insights and responses in real time, and explain what they see when they look at marketing. Through that back and forth, CMOs can identify effective approaches to communicate value and quantify it in ways that align with the CFO’s idea of positive performance.
The EY study found that 59 percent of CFOs say measuring the ROI of marketing is a high priority.
The need for better collaboration is urgent. The EY study found that 59 percent of CFOs say measuring the ROI of marketing is a high priority. CMOs collaborating with the CFO to define those metrics will be in a better position to realize them.
Steps to take
As a first step toward a stronger CMO-CFO partnership that benefits marketing, offer to work together on a topic marketing owns that is also important to finance. Customer data and insights is one option: EY found that 61 percent of CFOs see customer segmentation and insight as an important driver of business value, yet 53 percent of them feel the contribution they make to that area is low to moderate. More actively engage the CFO with data insights to establish the precedent that a partnership will allow value to flow both ways.
Learn to code switch
When the sales chief reports to the C-suite on new deals closed in the previous year, everyone understands what the corresponding numbers mean for the business. When the CFO reports on net earnings and cash flow, everyone knows what it means for the business. But when CMOs talk about impressions and conversions, peers in the C-suite aren’t sure how they translate to revenue growth, client retention, cash flow, or other concrete metrics.
CMOs need to paint a clearer picture for them. To do that, learn to code switch – or alternate between two languages or modes of communication. In this case, marketers need to switch from traditional marketing dialect into more typical C-suite language.
Many people code-switch continuously, often without knowing it. Think of that colleague whose voice changes dramatically depending on who he’s talking to: On a conference call with a group of senior leaders he pitches low and authoritative; When coaching a direct report who has taken on some new responsibility and feeling unsure about it, his voice goes warm and friendly; When his kid calls the office to say she got home from school he turns silly and makes a dad joke. He needs a different approach to communicate effectively with each of these audiences.
Steps to take
CMOs should develop the same facility to code switch between marketing and general business, and do it consciously. One technique to adopt is to make explicit connections between marketing metrics and general business impact, and communicate those connections in ways that C-suite peers understand. That collaboration with the CFO can help identify the right language to use. Good data also facilitates code switching. Ensure marketing and sales systems are integrated so that data captured on marketing campaigns can follow a prospect up to the point that they make a purchase – then talk about it using the language of sales to show marketing’s value.
Explore new marketing accounting standards
In times of cultural change, it can feel like the only option is to invent a new, custom approach, but that may not be necessary as it applies to translating marketing impact into terms the C-suite can understand.
A number of organizations are already advocating for marketing accountability standards, among them the CMO Council and the Marketing Accountability Standards Board (MASB). For example, the MASB has created the “Marketing Metrics Audit Protocol,” a process that enables marketers to connect typical marketing activities to explicit financial performance metrics. One step of the MMAP asks marketers to inventory cash flow drivers for the business and show how a marketing activity contributes either in fact or in concept to that driver. The protocol can be used to document the value of a marketing activity after the fact, and also to analyze two marketing initiatives based on likely value before the fact.
One step of the MMAP asks marketers to inventory cash flow drivers for the business and show how a marketing activity contributes either in fact or in concept to that driver.
MASB together with Forbes identified six sources of value marketing brings to an organization. These sources include brand value, customer equity, and growth in digital platforms, among others. Each category includes the costs needed to support them and the value they produce. CMOs can leverage this structure to quantify their cost and value and use it consistently over time to communicate performance.
A strong alliance with the CFO, effective code-switching, and standard metrics for communicating impact help spread marketing’s message across the C-suite and keep the needs of the customer at the top of the strategic agenda. CMOs who take these actions set themselves up to move communicating ROI off the list of challenges reported in the next CMO survey.