Adding a new leaf to the playbook

Updated: Jul 27 2006, 05:30am hrs
The mental playbook that guides every CMOs decisions is in need of a new chapter. In todays, corporate environment marketers are being held accountable for driving profits to the bottomline.

Todays momentum toward greater accountability from marketing may be a challenge to CMOs because its unfamiliar, but demonstrating that accountability will assure marketing executives a higher level of credibility and respect.

The starting point is to understand the four components of the infrastructure supporting marketing profitability management.

Most marketing organisations have a solid process for setting, tracking and managing clearly stated goals and objectives. The problem is the significant gap between traditional marketing metrics and corporate objectives. Data, technology, analytics and methodologies have advanced, but metrics have become the goals instead of the measures.

The time has come to realign marketing objectives and metrics with critical financial and strategic business objectives.

As part of that process, youll need to map the objectives for each tactical initiative to the business goals, providing clarity in the role of marketing at both the organisation and staff levels.

The financial management component of the infrastructure is made up of measurements, modeling, analytics and ROI calculations. It is this ROI framework that uncovers the key profit drivers underlying marketing decisions and feeds financial intelligence into the strategic planning process.

With a consistent approach to estimating, calculating and measuring, the marketing organisation would be well-positioned to prioritise and optimise its budget allocation. However, the analysis that feeds into ROI calculations is generally weak within the marketing function.

The initial challenge with adopting ROI analysis is the lack of historical information for creating reliable assumptions. Building a knowledge base that reflects marketings financial performance and profitability dynamics will allow CMOs to improve precision over time, earning them greater profits.

Sales organisations live and die by their ability to manage the sales funnel. When prospects fail to progress through the funnel in a consistent, timely manner, the impact on the next few quarters results becomes all too apparent. Marketing needs to embrace funnel management and the insights gained from a tight linkage between brand positioning, demand generation, prospect relationships, revenue generation and, ultimately, the customer relationships that follow.

The process involves mapping the detailed stages through which prospects progress from both the organisations perspective and the buyer's perspective . Only by understanding where current marketing initiatives are concentrated within the funnel stages can you identify gaps, further analyse reasons for progression and leakage, and tighten integration between the series of marketing contacts that are required to drive profitable actions at the end of the funnel.

While the marketing ROI framework enables marketers to complete the analyses necessary to assess profitability at the tactical level, the dashboard enables marketing executives to manage profitability across the organisation.

A marketing dashboard is much more than a graphical representation of summarised marketing results. It combines diag- nostic and predictive functionality to deliver actionable insight, and it prompts corrective actions when necessary. A well-designed dashboard presents CMOs with an easy-to-assess, one-page overview of the top metrics that align with business objectives.

A mix of financial projections, brand health, funnel progression, strategic initiatives, and organisational metrics are carefully selected and customised to the role of each management level. Alerts and triggers indicate when the variance in performance represents a major threat or opportunity that requires additional diagnosis or action. The benefits of marketing profitability management go well beyond basic profit improvements and addressing accountability concerns.

As marketing gains greater control over delivering on business objectives, its credibility and importance in strategic decisions at the corporate level increases significantly. It also supports the development of a financially sound business case that meets the needs of the CEO and CFO.

Its a whole new game for CMOs today. The question is whether you are choosing the game of avoiding these new expectations for accountability or choosing to lead the organisa-tions adoption of more advanced approaches for managing marketing profitability. The mental playbooks each marketing executive brings to his or her role become only more valuable with the insight that marketing profitability management brings.

Jim Lenskold is the author of Marketing ROI and provides consulting in specialised areas like marketing dashboards, ROI and profitability management. Lenskold will address the upcoming iMedia Leading Minds seminar, Maximising Marketing ROI, on August 22-23 in India