In a recent article for dmnews.com, Mike Colombo, the CMO of Cloudwords, argued that many CMOs aren’t ready for a seat at the C-suite table. According to Mr. Colombo, many CMOs aren’t winning a seat at the “grown-up” table because they’re still relying on performance metrics that are inconsequential to company leaders.
Recent research has confirmed that many marketers aren’t doing a great job of communicating the value that marketing contributes to the business. In the 2017 Marketing Performance Management (MPM) Benchmark Study by VisionEdge Marketing, Hive9, and Valid USA, only 23% of survey respondents said their CEO would give marketing a grade of “A” (90 or more on a 100-point scale) on its ability to measure and demonstrate its value and contribution to the business.
A disconnect between marketing and the rest of the C-suite can exist if CMOs don’t clearly communicate the relationship between marketing programs and the business outcomes that matter to other senior executives. Most marketing leaders tend to focus on the programs they’re running and the direct results of those programs (response rates, downloads, pageviews, etc.). The problem arises when these direct program results aren’t linked to the high-level objectives that C-level executives really care about. In other words, the problem occurs when marketing leaders fail to “connect the dots.”
The ultimate mission of marketing is to drive revenue growth. Virtually all companies have a revenue growth goal as one of their top-line strategic business objectives. Many companies also have specific goals for new customer acquisition, customer retention and growth, and market share, but these objectives are all directly related to revenue growth. Therefore, every marketing activity is (or should be) designed to generate (or contribute to the production of) revenue.
To effectively communicate the connection between marketing activities and revenue, marketing leaders must develop a revenue growth strategy, which, at its most basic level, is a hypothesis that describes how the company will grow revenue. A revenue growth strategy is essentially a big if-then statement that says, “If we execute these specific marketing programs, then we will meet our revenue growth objectives.”
However, many marketing activities don’t directly produce revenue. Some marketing activities are several steps removed from the realization of revenue, but they are essential components of the revenue generation process. Therefore, a revenue growth strategy is a set of if-then statements, each of which describes a specific marketing activity and the anticipated results of that activity. These individual if-then statements are then combined to create chains of cause-and-effect relationships that connect individual marketing activities to the realization of revenue.
A simplified version of one of these cause-and-effect chains might look something like this:
- If we publish a blog that offers readers access to compelling content resources, then more potential buyers will identify themselves and consume our content.
- If more potential buyers identify themselves and consume our content, then we will generate more qualified sales leads.
- If we generate more qualified sales leads, then we will create more legitimate sales opportunities.
- If we increase the number of legitimate sales opportunities, then we will close more sales, and that will help us reach our revenue growth objectives.
These cause-and-effect chains not only make the logic of a company’s revenue growth strategy clear, they can also enable marketers to develop a set of marketing performance metrics that will be meaningful to company leaders.
The primary objective of the VisionEdge research mentioned above was to identify the attributes and practices of marketing organizations that excel at measuring and demonstrating marketing’s value and contribution to the business. VisionEdge and its research partners found that best-in-class marketing organizations have marketing performance management systems that include five key components, one of which is metrics chains. The study defines a metrics chain as a sequence of metrics that links marketing activities to strategic business outcomes.
The linked cause-and-effect relationships that form the basis of your revenue growth strategy also dictate what metrics should be included in your metrics chains. And, the combination of a sound revenue growth strategy and related metrics chains will enable marketers to clearly demonstrate the value of marketing to the C-suite.
Note: You can obtain a copy of the 2017 Marketing Performance Management (MPM) Benchmark Study report from VisionEdge Marketing.