Hey, Big Spender: How CMOs Are Transforming Marketing from a Cost Center to a Revenue Driver

By Lauren McMenemy on April 13, 2018

All this technology, all this data, all this new thinking-all of it is transforming marketing both operationally and strategically. Whereas once marketing was seen as the fluffy stuff-or, in the case of one company I worked at, the place that sticks a logo on letterheads and merchandise (car phone chargers! headphones!)-now there is a real drive towards proving return on investment. And where there is ROI, there's more clout.

So with all this technology, data, new thinking-marketing transformation-how is it that some CMOs are still trying to prove their worth? As the CMO reaches the top table, they must move away from vanity metrics and begin to think about more robust ways to drive repeatable, predictable, and scalable revenue. The modern marketing leader is in the business of driving revenue, not spending money with no returns.

Businesses are squeezing every last drop from budgets today, operating in lean and streamlined ways. We get told to do more with less in the hope that it will bring more budget-only to be told congratulations, looks like you don't need that budget after all. And in this environment, the CMO no longer has the luxury of ignoring that direct role in revenue generation. They need instead to forge new relationships, to form strategic partnerships with sales, business development, even the CFO. Debbie Qaqish of the Pedowitz Group calls this new marketer the "revenue marketer." Writing for the American Marketing Association, she points to a recent study from Allocadia that found only 14 percent of marketers reported finance as a strategic partner:

"For years, CFOs have been frustrated by the inability of marketing to show return on very substantial investments," she writes. "In many companies, marketing has been the one department that did not have to show financial return or justify spend based on return [. . .] Today marketing is not only showing an ROI but can also forecast their impact on revenue by using marketing automation tools integrated with CRM and being driven by the processes of what we call revenue marketing. It's sweet music to the CFO's spreadsheet to see marketing calculate what another dollar of investment in marketing will mean to revenue."

Man reading business section of newspaper

Image attribution: Olu Eletu

Marketing Must Speak the Language of Business

Think back to the last round of budget negotiations in your company. If your company's performance was good, there will be more spoils to go around-but if your company has hit a rough patch, it's highly likely you found your marketing budget slashed more than any other department. You might need to spend money to make money, but you also need to know whether that spend has actually brought anything tangible back to the business. Marketing is typically one of the first line items to go in a budget when trimming begins.

"The CFO speaks the language of business: cost, revenue, bookings and forecasts. A traditional marketer is speaking the language of creative, impressions and traffic," says Qaqish. "No one cares, especially the C-suite, about the colors of the website. When a marketing organization is focused on revenue marketing, you will find the CMO and the CFO speaking the same language."

And so here's the first lesson in how you can take marketing from a cost center to a revenue driver in your organization: Run marketing based on the numbers, just like every other department. Track your marketing qualified leads (MQLs), look at the rate of conversion from opportunity to close, and map your content to the sales funnel to make sure you've got every angle covered. This will help you to speak a language that translates to the boardroom and that doesn't rely on vanity metrics like impressions-those things don't translate to hard dollars.

Build Strategic Alliances Within the Business for More Clout

Former McKinsey partner and "marketing leadership guru" Thomas Barta has looked into this transformation extensively. He's found that less than half of C-suite executives believe their company's marketing expenditure is significantly contributing to revenue or profitability-“in other words," he says, speaking to Emma Roborgh in advance of the 2018 APAC B2B Marketing Leaders Forum, "your CEO may not trust that you're spending the money well."

Roborgh writes: "That mistrust generally stems from a perception that marketing teams aren't involved in the heavy machinery of any business. Barta says top executives usually rated pricing, strategy and product development as the most important business functions. But his research found fewer than one in three senior marketers had any input on pricing, and just 38 percent on strategy. More than half were involved in product development, but Barta says the overall effect was that the work marketers do is seen as less important by many C-suites."

Barta says a CMO's influence and contribution as a marketing leader goes up when you work on the company's biggest issues, so here's your second lesson in how to transform marketing's perception in your company: Get involved in the wider business strategy.

And, swiftly, here's your third lesson: Make best friends with the finance department. Measuring return on investment for marketing is tricky. Getting finance involved not only helps you find a way to report ROI that the top table understands, but it also saves you from reporting on metrics that just don't matter.

You may have seen a theme emerging here: As marketing transformation gets underway, there is necessarily more tech involved. And perhaps this is the big reason why this debate over revenue driver versus cost center has been bubbling away for the last few years. Traditional marketing was about the four Ps: product, price, place, promotion. Before there was an Internet and before consumers were recognized as having a voice, marketing was pretty much sales dressed up. That worked fine for the Don Drapers of the world for many, many years.

Image of man, taken from back, at a crossroads in a busy city

Image attribution: Saulo Mohana

Marketing Must Own the Full Customer Journey

But then the Internet democratized consumerism. People realized they had a voice. Marketing had to move away from increasingly prettied-up and creative ways to advertise; it needed to research what was happening and learn about the consumer of today. And as technology evolved, marketing could track customer journeys and build accurate personas based on behavior. Teams could automate a lot of the manual things, like sending mail drops and popping into inboxes at the right time.

Arguably, marketing's move from cost center to revenue driver has followed the growth in technology and the growth in marketing operations as a core part of the in-house team. The practice of marketing is growing more technical and data-oriented. Analytics sit at the center of all decisions.

Naturally, marketing transformation brings with it a need to transform those long-held beliefs that this department burns through cash with no real output beyond a few Cannes Lions.

"The journey toward a more strategic, revenue-generating marketing organization goes through skills, analytics, alignment and strategic orientation," writes Jerry Rackley for Vistage. "When asked about boosting marketing's performance, however, most marketers don't provide this list. Instead, the top three most frequently cited changes perceived to help the marketing team improve its performance are perennial requests: more staff, more funding and more systems or infrastructure."

Rackley says that instead of asking for more people, marketing leaders should focus on investing in four key areas: skills, analytics, alignment, and strategic orientation. "These 4 areas of recommended investment-and the systems that enable them-are the cornerstones of the foundation for a marketing team that is a true revenue center. Investing in skills, analytics, alignment and strategic orientation will get marketing a seat at the big decisions table, and keep it there. The marketing organization that gets these right will have adequate staffing and funding for marketing, because the business case is easy to make when it's based on measurable results."

Three people discussing business with paperwork and laptop

Image attribution: Štefan Štefančík

Lead Generation Is Not Enough to Be Taken Seriously

So let's track back to Debbie Qaqish and her revenue marketer: Some see this as the end state of a marketing team's growth from basic marketing to lead generation marketing through quantitative marketing to revenue marketing. Writes William Roberts for Reach Marketing: "Modern marketing is no theoretical science; it produces tangible and measurable results. Today, revenue can be tracked back to marketing activities and touch points; not with exactitude, but with enough precision to steer an organization's strategy towards its most profitable marketing activities and to avoid those without much payoff. Because the revenue impact of marketing is now intelligible, companies are less willing to put money into marketing's black box and hope sales happen.

"But making the transition from cost center to revenue engine is not easy. It's a gradual process, one that can take two to three years to accomplish, and requires ongoing investment in marketing technologies as well as in the data, content, and business processes that enable these technologies."

Roberts defines those four stages succinctly, providing a road map for organizations who want to transform marketing from cost center to revenue driver.

Basic Marketing

Basic marketing is a checklist of activities, but not much monitoring. There's the website, email, trade shows, and so on, but no real idea of the results these produce. There is no hard data, just activity-often reactive, too.

Lead Generation

Lead generation happens when the marketing department shifts attention to strategies that generate leads for the sales team and sees the beginning of tangible results. This is often where companies begin experimenting with content marketing, but the quality of the lead is not considered-it's only important that there is a lead to pass on to sales.

Quantitative Marketing

Quantitative marketing takes amassing leads one step further by scoring, prioritizing, and sorting leads, often by using a marketing automation platform and beginning to use nurture campaigns.

Revenue Marketing

Revenue marketing is that end destination, the "apex of modern marketing." Here leads are quantified by profiles and behavior, and each opportunity can be tied back to a set of marketing activities. Marketing can now definitively prove its worth, and the team is integrated with sales to use advanced nurture flows to influence and accelerate the sales cycle. Marketing has fully transitioned from cost center to revenue driver.

Certainly, Deloitte's most recent CMO survey found that spend on marketing analytics is growing again, currently sitting at 5.8 percent of budget after a 2 percent dip at the end of 2016. The most interesting thing here, though, is a projected growth of 198 percent over the next three years, with spend on marketing analytics set to reach almost 20 percent of budget by 2021.

The Time for Marketing Transformation Has Arrived

But is this really a problem, or is it all in our heads? Research by Marketo and the Economist Intelligence Unit found 68 percent of marketers believe the rest of their company viewed the marketing department as a cost center. The report says, though, that in the next three to five years, four out of five businesses will classify the marketing function as a revenue driver, thanks largely to more focus on customer experience. When marketing owns end-to-end customer engagement, it puts marketing right at the center of revenue generation and setting company strategy.

Research by the CMO Council and Deloitte, released in 2017, shows we're getting there and transforming marketing-but it's often CMO bandwidth that limits perception. Many CMOs believe they are the executive primarily responsible for business growth strategies, more so than the CEO or heads of sales and growth, but their day-to-day is consumed with approving campaigns, attending internal meetings, and making business cases for more spending. CMOs want to be spending the majority of time teaming with leadership on global business and brand strategy, on innovating and implementing new approaches, strategies, products, and on looking for strategic partnerships and alliances-but their own team processes let them down.

Is it fair, then, to say it's marketers themselves that are holding marketing back from being seen as an important strategic partner that drives revenue and growth? To find that out, I spoke with several leading CMOs from across the globe. Check back with the Content Standard next week to hear their views.

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Featured image attribution: Bram Naus


Lauren McMenemy

Lauren is a storyteller. A journalist by trade, she has worked in agencies, in-house and in the media over her 20-year career. She's worked as an editorial strategist and content creator for some of the world's biggest brands, setting up processes and guidelines, advising on planning, auditing content, building loyal audiences, leading social campaigns, writing blogs and flyers and presentations - pretty much handling the stuff with words. She was born in Australia, has resided in London for the last decade, and writes fiction on the side. You’ll often find her grinning like a fool at a rock concert.