Christine Moorman and Jennifer Veenstra have a piece in the Harvard Business Review explaining how to make a business case for marketing budgets. It contains very sensible advice that CMOs and other senior marketers should heed.
Working With Finance
Perhaps one of the most important themes in this work is the idea that marketers need to collaborate with the CFO and other c-suite leaders. Collaborate is the right word as many marketers see finance as the enemy. But Moorman and Veenstra are surely right to emphasize that working with others is the key to success.
Marketers need to help the CFO and the rest of the C-suite think beyond the short term. How can CMOs build the business case with their CFO (and other financially driven peers) that creates the patience, trust, and confidence that longer-term growth and value are on the horizon?Moorman and Veenstra (2021)
When You Can’t Win, Don’t Fight
Too many marketers seem to see finance’s failure to understand the value of long-term investments in marketing as finance’s problem. As the authors note, you need a partnership with the CFO. Even if the CFO is an awful person, they have the money. They can hold your plans hostage. People deal with hostage-takers all the time. I’ve watched enough movies to know that you listen to hostage-takers and try to give them what they want. Send them some pizzas is usually a good way to start.
The point is that in a fight between marketing and finance I’m betting on finance. So my message is to marketers is simple. It is your job to make sure a fight doesn’t happen.
Make friends with finance. Many marketers think finance people don’t have many friends. If this stereotype is true, the finance people will be especially grateful for your friendship. Get them involved in your thinking. They should buy your logic before they ever see a number.
The idea is to make finance an advisor and stakeholder in the effort, so its buy-in is baked in from the beginning.Moorman and Veenstra (2021)
Metrics And Experiments Matter
Too often marketers don’t bring evidence. They bring common sense ideas. The ideas are likely right a lot of the time but if the listener doesn’t share your idea of common sense this isn’t going to be very persuasive. Non-marketers often want numbers.
How many consistently measure their brand’s value? 3%. The value of customers gets a more impressive 8%. These numbers are not evidence of marketers being serious about their use of, well, evidence. If marketers don’t take their metrics seriously then why would finance people take their arguments seriously? I think more work needs to be done on improving both brand valuation (here) and customer lifetime value/equity (here and here). Yet, if marketers aren’t even trying to estimate the value created by investments in customers and brand why would finance people see these as investments?
Marketing leaders need up-to-date knowledge to drive conversations about budgets.Moorman and Veenstra (2021)
A Business Case For Marketing Budgets
The authors leave us with a central message, that marketers must make a business case for marketing budgets. It is a message worth repeating.
Read: Christine Moorman and Jennifer Veenstra (2021) Making the Business Case for Your Marketing Budget, Harvard Business Review, November 12, 2021