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Marketing

Marketing and finance – working together on ROI

Written by Jon Tolley
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Originall published
March 28 2018,
updated

Collaboration is a theme that good marketers are familiar with. We rarely operate in a silo. Our sales colleagues ensure our efforts come to fruition because generating leads that they can’t, don’t (or won’t) close mean our work all comes to nothing. With automation being increasingly relied on, our IT colleagues maintain systems that run smoothly and are integrated. But what of finance, the guys that hold the purse-strings and allocate/monitor our marketing budgets?

Cost vs investment

It’s ten years since the financial crisis of 2007-2008. The one that blind-sided us and is still believed by many economists to have been the worst since the Great Depression of the 1930s. Companies were forced to make tough decisions, to cut people, investments and costs. Marketing and training budgets were amongst the worst hit as businesses scrambled to negate the downturn in consumer spending, and the austerity measures taken by B2B customers and the public sector.

Who would have anticipated that a sub-prime lending catastrophe across the pond could have such a negative impact on those in our profession?

 

Proving our worth

Return on Marketing Investment (ROMI) is a relatively new concept. While marketing has been around since, well forever, measuring its effectiveness in any kind of scientific way has not. It was only in the first decade of the twentieth-century, with the publication of two books - Return on Marketing Investment by Guy Powell and Marketing ROI by James Lenskold – that it gained any kind of traction.

Prior to that, most within the organisation (many marketers included) viewed money spent on advertising and promotional activities as “lost”, merely an expense to be borne.

In simple terms, Marketing ROI is “the monetary return generated by a company's marketing activities”. And return is the operative word here. Because, as we all know, good marketing achieves results – it generates leads, cements relationships with existing customers and, ultimately, increases revenue.

 

Products without Marketing = Waste

Scrutiny woke us up. Having our budgets challenged, and our resources chopped, made us “wake up and smell the coffee”! Beautiful imagery and clever straplines alone meant that the “colouring-in department” of old was simply a vanity if it didn’t add real and tangible value. So, we learned the language of our accounting colleagues and recognised the need to view campaigns through their eyes too.

 

The budget conundrum

Last year the Wall Street Journal1 reported that companies on average are spending 7.5% of total revenue on marketing, a fall from 8.5% in February 2012. And that’s bad news. Being able to identify and prove ROI makes discussions on maintaining and increasing the money we have available in those budgets a whole lot easier to negotiate.

 

Risk versus reward

A recent Marketing Week article2 analysed the ever-closer relationship between finance and marketing teams, the growing need to have a shared version of success and one which “simultaneously fosters creativity and delivers concrete results”.

As GDPR approaches, along with ROI, it’s likely we’ll be borrowing another term from the financial lexicon and measuring the “risk versus the rewards” of our tactics. Guesswork and gut-feel will have no place in the post-GDPR marketer’s toolkit. The risks of using data and approaches that fall foul of the regulations, and the resultant fines, will outweigh the minimal rewards they generate. Non-consented email marketing is the obvious case in point.

 

1 http://deloitte.wsj.com/cmo/2017/01/24/who-has-the-biggest-marketing-budgets/

 2 https://www.marketingweek.com/2017/10/17/marketing-finance-working-together-shake-off-us-versus-attitude/

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