Demonstrating the Financial Impact of Marketing Actions

Paul Magill, Christine Moorman and Nikita Avdiushko raise a major problem in marketing. As they say: ‘When we asked over 300 marketing leaders in the U.S. to identify the activities they find most challenging, the number one thing they reported, by a wide margin, was “demonstrating the impact of marketing actions on financial outcomes.”’ (Magill, Moorman and Avdiushko, 2019)

This is very familiar, marketers feel they are doing a good job (and many even are). The challenge is that many of the successes are hard to show in financial terms. This is partly because marketing often has long term impact that is tricky to demonstrate in the short term. This is also partly because accountants often are not trying very hard to capture the value marketing creates.

The advice this trio give is good (although a tad generic in parts). Much of it is about good communication. You must ‘know your own metrics’ to be able to explain them to anyone else. You must tailor what you say to your audience. For example, talk to finance people differently than you talk to sales people. Have a budget story that explains the logic behind your marketing spending. If you know what you are doing and can explain it this tends to inspire more confidence in other people.

Meeting one-on-one makes sense. It is a lot easier to have a decent conversation with two people than in big meetings. There will be less point scoring and people will be more willing to ask when they don’t understand.

One of the most interesting comments is to ‘Emphasis validity over precision’ (Magill, Moorman and Avdiushko, 2019). Marketers can note that metrics can be useful for the purpose at hand but not necessarily precise to the decimal point. We can be confident that a test increased sales, even if there is some question whether it was a 16%, 17%, or 18% increase. The confidence that the test worked is good enough for much decision making.

Imprecision can be a challenge when talking to finance people who might worry that imprecise means the numbers are ‘wrong’ but marketing (and pretty much all other) numbers can be imprecise. You may as well be prepared for that.

Read: Paul Magill, Christine Moorman, and Nikita Avdiushko (2019) 8 Ways Marketers Can Show Their Work’s Financial Results, Harvard Business Review Blog, July 31, 2019