What should you tell your CFO about your marketing spend? Return on marketing investment?

Justifying marketing spend is a daily activity for many CMOs. Shrinking budgets and accountability are two common themes. In a recent study, CMOs cited shrinking budgets as one of the biggest challenges.¹

Which brings up an important question: Are return on investment (ROI) or return on marketing investment (ROMI) the most important metrics to share with your CFO and CEO to garner continued support for your marketing budget? It turns out that many organizations don’t really value return on investment or return on marketing investment. Outside of the annual budgeting process, many organizations are driven by “making their numbers,” which is generally topline revenue-oriented.

So the real question becomes: What metrics or key performance indicators does your organization value? It is critical to prioritize those metrics, as sometimes conflicts occur.

In other words, an organization can value return on marketing investment and topline revenue, but when push comes to shove, a prioritization will be necessary for clear decision making. This can help guide decisions such as targeting a wider universe that will have a diluted response or conversion rate versus targeting a more focused universe that will generate a higher response or conversion rate.

Many marketers are turning to more measurable mechanisms for marketing activities. Direct response techniques are now being integrated into many different marketing communication mediums.

The principles of response marketing, such as targeting, delivering relevancy and ensuring a call to action, are all critical to making your marketing work harder. Remember, you can’t generate an action unless you ask.

Increasing spend in measurable media insulates a marketing budget from reductions because you can correlate the impact of a budget change. Our advice to clients is to ensure that CFO has transparency into the marketing/sales forecasts associated with budgets. This will ensure a clear understanding of how marketing spend changes can impact the ability to meet the goals.

In addition to key performance indicators (KPIs) such as return on marketing investment, we have found it useful to showcase how the marketing spend is being managed and continually being invested more wisely. Leveraging the fact that digital and social mediums are capable of providing quick and directional analytics can generate evidence that marketing is providing ongoing value.

Here are two examples of ways that you can showcase marketing’s value in ways outside of traditional metrics:

Unfortunately in today’s marketing world, marketers don’t have complete control over their budgets. Although most organizations say their focus is on return on marketing investment, that isn’t always true.

With this in mind, marketers should use a number of tools to help ensure that the rest of their company’s management team is on board with what the marketing budget will yield in terms of business outcomes and how the marketing ties to the corporate key metrics.

Share information as the year progresses, and celebrate the learnings and the continuous improvement of how completed activities are informing other aspects of the marketing mix. That will demonstrate continuous commitment to improving efficiency and effectiveness on marketing spend. It also helps quantify marketing budgets. And those are points your CFO should definitely know about your marketing spend.

To learn more about optimizing measurable marketing tactics, check out our ebooks: