Marketing budgets are often considered “non-essential”
In a year where industries, specialties and people were deemed “essential” and “non-essential”, it quickly became clear that inherent purpose, value and worth were being audited in new and unique ways. Just like lines on a P&L sheet, essential services and products were being invested in and those deemed non-essential were being cut and defunded swiftly and broadly.
“”You ain’t gonna miss your water until your well runs dry.”
Bob Marley
Marketing is often considered non-essential because it is misunderstood and undervalued. Unlike other facets of business, marketing is not linear, it is more abstract. This is especially clear when compared with finance. Marketing is like chess; it involves strategy, psychology and the ability to influence the habits (aka: moves) of your audience in thoughtful, nuanced ways. Budgeting is more like checkers. There is only black and red…with the finance department’s one dimensional end game being to remain in the black.
The problem with budgeting using one dimensional thinking is that it creates disconnects with: objectives, goals, client acquisition and retention, and overall business plan. Disconnects are further enabled when investments in marketing plans, budgets and technology are reduced. Not surprisingly, as a brand cuts its marketing, it diminishes the chance of cultivating new customers, reduces the amount of returning customers and adversely affects revenue. To be blunt, defunding marketing has the potential to end a business entirely because the well (aka: clients/sales) eventually runs dry. This begs the question: if Marketing is so vital, why is this budget often the first to be cut?
(Only) Making dollars makes sense
Any Marketing Director knows what it’s like to butt heads with a Finance Director when it comes time to budget. As a former DOSM myself, these experiences can be due to many reasons, but it usually boils down to ROI. To a Finance Director, proof of a return on investment is paramount because the value is the return…right? Only the black and red matter right? The overarching theme of the conversation becomes clear, “if it don’t make dollars, it don’t make sense.” (And yes that is a DJ Quik reference!)
The reality is the majority of Finance Directors are unable to confidently quantify the ROI that their brand receives from its marketing spend. To further emphasize this, a study was commissioned in which almost 200 Senior Finance Executives were polled, revealing that 76% did not know the financial return generated by their brand’s marketing (reference “The Value of Marketing Study“). The study also found that 61% of Executives do believe marketing is, in fact, critical, but only 39% had confidence in marketers to make quality financial decisions. This clearly creates internal issues.
“…61% of Executives do believe marketing is, in fact, critical, but only 39% had confidence in marketers to make good financial decisions.”
If a brand has such an issue – the dialogue between Finance and Marketing is not collaborative or productive – this rift can be remedied. In fact, it has to be remedied. But an evolved culture will not be cultivated without flexibility, understanding, and mutual respect.
Progressive ways to bring Marketing and Finance heads together
- Finance Directors need to improve their comprehension of marketing functions. As the digital landscape becomes more vital and complex – especially the social media platforms – proving exact ROI becomes increasingly difficult. The Finance Director must understand the needs of marketing in order to provide the proper tools and technology assets, which will also allow for more detailed reporting of revenues, yield, etc.
- The mindsets of the Executives need to adapt as markets, trends, habits and technology evolve. Trust in the Marketing Team is paramount as Marketing is the expert on anticipating, as well as reacting to, client habits and trends. The overall business plan will naturally require some fluidity to keep up with market conditions. Don’t downplay how valuable and vital the Marketers knowledge of the client and current trends is.
- Marketing Directors are guilty of key errors in communicating with Finance Directors. Marketers, like their Sales counterparts, tend to have their own rhetoric (aka: jargon speak) that works well within their ecosystem. It doesn’t always transcend well to “outsiders” in the room, especially when using to prove value or ROI. Marketers need to adapt their vocabulary to their fellow Executive’s acumen. This not only enables better outcomes for Marketers, it also demonstrates competence across multiple facets of the business.
- Stop using “fluffer” marketing metrics. Admittedly, many marketing metrics that were valuable are now obsolete; they just don’t mean much. Basic metrics like: impressions, number of email subscribers, number of social media followers, email open rates*, customer satisfaction measures, and likes are often used but they have no financial relevance.
- *Note: there are valuable metrics measured from basic email interactions like: click-through rates, bounce rates, unsubscribes, calls to action, etc.
- Marketing’s seat at the table. A rift between the Marketing and Finance teams may be partially due to the internal business structure. Is Marketing included at the highest echelons and does it have a recognized position of influence within the hierarchy? Disconnects run rampant when Marketing is considered second class and not included in the overall business discussions.
- *According to “The Value of Marketing Study” “about 40% of Finance Directors believe that the ‘head of marketing has a strategic influence on the business’. The figure contrasts with the 60-65% of Marketers who believe they have an important strategic influence in their organization.”
- Chief Executives play a vital role in bringing marketing and finance teams together. In addition to understanding and investing in the brand’s marketing initiatives, CEOs can create the parameters necessary for the two teams to work in greater unanimity. A CEO often needs to become the “Chief Emotional Officer” to serve as ambassador between the Finance and Marketing teams to articulate the concerns of both sides and produce effective outcomes that keep the brand’s goals, integrity and focus on track
- Invest in marketing technology that tracks revenue. Ultimately using a robust CRM or EDM platform that can audit revenue generated by campaigns solves many of these disconnects by tracking revenue in specific ways. A Marketer who can audit campaigns thoroughly will be armed with enhanced abilities to understand and anticipate client needs and habits. With the proper platform integrated, a brand can increase both yield and client base through more thoughtful and targeted messaging.
It’s always the time to invest in marketing
The past year has been extremely challenging and luxury brands, especially hospitality, have been hit very hard. With massive year over year reductions in travel, events, dining, etc. many businesses have had to make drastic cuts to their balance sheets. As stated earlier, this is not the time to cut marketing spend, rather it is best to maintain, or increase it. Marketing is a vital component of any business for it tells the brand’s story and nurtures the relationship throughout the entire client journey. Thus, an emotional attachment is often formed in this process. When marketing is defunded it risks weakening these relationships and can leave the client base feeling alienated.
Even during a recession, when a brand reduces marketing spend and their digital presence, they not only lose market share, they also make it harder to rebound once market conditions improve. Marketing plays a vital role in allowing a brand to be malleable and adapt with changing circumstances; which has never been more poignant than now. Perhaps most importantly, marketing tells a brand’s story. It allows a brand to reshape and evolve its messaging to keep up with the social climate. Lastly, if a brand defunds its budget and their competition doesn’t, that only makes it that much harder to compete and thrive.
Long story short, marketing is an integral part of the overall business’s success. Therefore don’t underestimate marketing’s value and how paramount it is to success, even when social, economic and global issues strike.
“In many respects, marketing shouldn’t need to justify its existence. It’s there for a well understood reason and good finance departments will understand that it is the custodian of the brand, which in many ways can be more valuable to the company than individual products.”
Stephen Brown, Chief Financial Officer, RFU