Cash, Lies and ROI, Redux: 3 Signs Your Marketing Budget Is A Flight Risk

Are you cleared for takeoff or grounded?

In my previous post, I discussed the reasons why marketing budgets are growing and what marketing leaders need to consider as they build their 2014 marketing "flight plan." As the new year approaches, my intention is to showcase the framework, skills, and expertise needed to build a financially sound marketing powerhouse.

Once marketing leaders recognize these growth opportunities, support an increasing number of strategic programs, and measure marketing on a much broader scale, what happens next? Most leaders will typically forge ahead, confidently navigating across departmental lines and engaging customers in their new initiatives. Yet expanded authority does not give marketing leaders license to fly at unsafe speeds or altitudes.

Strategic, mindful leaders need to first anticipate what obstacles they may encounter in their flight path and create a strategy to address them swiftly. Here are the most common obstacles I have seen with my clients:

1. Underestimating potential turf battles. Recently, the CEO of a fast-growth technology company told me that she has repeatedly witnessed the growing tensions between CMOs and IT within her customer accounts. The CEO shared that "we are seeing increasingly where Marketing owns the budget . . . many IT departments are feeling left out, and less influential."

She then explained how this tension plays out in their customer accounts. "In one of our largest accounts, a multibillion-dollar industrial company, our primary buyer is the VP of Marketing. The IT department was never consulted during the evaluation and selection processes. Now, they are behaving badly.

Marketing originally paid for our product. My account team participated on a call with both IT and Marketing, and the IT deptment said: ‘You are not allowed to install the tool, because it has not yet been vetted.’ In other words, Marketing had not performed the proper security checks. The customer’s IT manager said this in front of my team. We were just polite and said, ‘We will do what you want us to do.’ "

Imagine how many weeks of productivity were forever lost due to this turf battle within the customer’s own business!

2. Lack of clear attribution. Some companies lack clear metrics attribution, especially between Sales and Marketing. In a recent Forbes article, Dominique Hanssens, professor of marketing at the UCLA Anderson Graduate School of Management, posits that "attribution can sometimes cause double accounting, particularly with TV ads and follow-up sales."

3. Short-term mind-sets. In the United States, Accounting's standards do not allow Marketing to be put on the balance sheet as an asset. Marketing is usually treated as an expense, even though some Marketing initiatives impact long-term brand repute, a customer’s propensity to buy more products from you, and a company’s cultural and community clout. Forbes columnist and MarketShare Director Daniel Kehrer observed that "marketing expenditures are technically an expense, as opposed to an investment, and that’s an issue here. In finance speak, marketing costs are a P&L item, not a balance sheet item."

Hanssens also reveals that most companies focus too much on flow metrics, which can include weekly sales and comparisons of revenues over time and lead conversion rates. He recommends companies also consider stock metrics in their performance management systems. These can include future income streams such as brand repute and value, the value of inventory, and the quality of the customers you are attracting.

What about your company? Are you selling to buyers who are going to be loyal, long-term customers, or to transactional buyers who, as Groupon and LivingSocial have demonstrated, chase daily deals? These online discount sites exemplify an obsession with flow metrics.

It’s time to create marketing budgeting models that will not only boost your credibility in the boardroom, but will also expand your value vocabulary (hint: It’s time to think beyond number of leads required to drive X dollars in sales). My future posts will explore ways to achieve that. This expanded view will help you define your organization’s value in a new whole—and holistic—light. Every captain needs a 360-degree view of his or her surroundings before enjoying a smooth landing.

Related posts:

"Why Today's Marketing Planning Models Fail To Deliver In The C-Suite"

"Nine Common Obstacles That Derail Growth"

"Cash, Lies, And ROI: Are Your Marketing Budgets A Flight Risk?"

[Image: Flickr user Amrit Patel]

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