In a recent conversation with a chief technology officer, he asserted all digital technology changes in his organisation were being led by IT and not by marketing. It made me wonder: How long a marketing function like this could survive?
Marketing leaders who show accountability in terms of performance, market share and effectiveness of marketing programs are more likely to be trusted and gain influence with their executive counterparts.
That’s the finding of new research undertaken at Macquarie University into how marketing departments can improve their strategic position within organisations, as well as what key metrics they need to possess to win the hearts and minds of more financially-driven executives.
The PhD research, which has just been submitted, was based on market research undertaken in two phases by PhD student, Adam Gaskill, and overseen by Dr Hume Winzar (pictured), marketing professor in the university’s Faculty of Business and Economic. Their objective was to understand marketing’s accountability in the eyes of finance leaders in particular, and the extent to which certain metrics contribute to marketing’s position of influence.
The first stage of the research was a qualitative survey of dozens of senior finance leaders from large technology companies mainly in Australia, to find out how these executives understand marketing’s role, as well as measure it.
The research found eight common ways financial teams seek to understand marketing, four of which are tied to financial outcomes, and four of which relate to long-term impact. According to Dr Winzar, a surprising result was that profitability wasn’t a core metric in how financial executives rate marketing’s role.
“Finance people know things like communications, distribution and design are not the responsibility of one organisational group... and to hold marketing accountable for profitability alone is plain silly,” he told CMO.
The four financial-oriented metrics employed are return on marketing investment; revenue per customer; marketing expenditure versus budget; and marketing expenditure as a percentage of revenue. Each of these are ‘after the fact’ measures but vital in getting support for marketing, Dr Winzar commented.
Four non-financial measures considered equally important are brand awareness, both prompted and unprompted; market share in terms of volume and value; website traffic and particularly unique visitor statistics; and customer acquisition and churn.
“Financial executives recognise that some marketing activities don’t have immediate returns and need long-term investment,” Dr Winzar said.
Across the board, just over half of those surveyed said they are getting these results from marketing teams, while the other half were seeing these figures but in varying degrees of quality.
“What we also found was that marketers who delivered good results – not necessarily favourable ones, but honest and straightforward results – gained more support from all different functions across the business, gained approval for any new projects more quickly, and secured resources such as people, funding and so on,” Dr Winzar said.
The second phase of the research project surveyed senior financial officers from more than 200 companies to determine what metrics should be used to gauge marketing’s contribution, and their importance. Of the respondents, about 60 per cent were services-led businesses and about two-thirds were B2B organisations.
According to the research, marketing accountability is the antecedent of marketing’s influence on strategic business decisions and thinking within organisations.
The five key metrics marketing professionals should be using to demonstrate their accountability are performance ratios, such as return on marketing investment and sales growth; cost controls, including operating within agreed expenditure targets; actual versus planned performance of marketing programs; market share, both revenue and volume; and marketing campaign effectiveness, or achieving non-financial objectives of marketing campaigns.
To be able to deliver these and build accountability with financial teams, the marketing function should develop capabilities in data analysis, financial planning and financial analysis.
Dr Winzar claimed these metrics and capabilities will allow marketing departments to demonstrate their accountability through linking their activities to organisational outcomes.
“The people whose job is to do marketing need to be more accountable and that means metrics, at least where financial-oriented executives are concerned,” he said.
The good news is “more than half of the respondents to the second survey had a good relationship and were getting what they wanted”, Dr Winzar added.