In B2B Marketing, the CFO May Be Your Most Important Customer

CFO MarketingMany B2B marketing managers believe that their primary customer is the Sales VP, or perhaps the end-customer, or even the CEO. While these are very important constituencies, you shouldn’t forget the person who may have the most influence over your career – the CFO.

My last blog post talked about how to get your share of the 2017 marketing budget, using several different budget allocation methods. However, none of these methods will work unless the CFO has faith that whatever you are spending contributes to revenue. This is what I call the “marketing as investment” model, instead of the traditional “marketing as expense” model.

Here are some things you don’t want your CFO to say to the CEO about you or your department:

  • Those guys spend a lot of money but I have no idea what they are accomplishing.
  • Why should we give marketing more budget if they can’t show better results?
  • Why is the sales team always complaining about the marketing department?
  • We have to cut the budget – let’s start with marketing since they are such a large expense.
  • Every time I ask marketing what they are doing, I hear a bunch of gobbledygook!

To make sure this type of language is never used to describe you, let’s look at what CFOs are looking for from their marketing departments. As you can see, four out of the top-six goals relate directly to measuring the effectiveness of B2B marketing spend and activities as a driver of sales pipeline and revenue.

CFO Marketing Survey

Note that the fourth goal listed is to achieve non-financial goals (i.e. brand awareness) but even here I would argue that the reason we spend time building the brand is to make it easier to achieve revenue. I’ve never met a CEO or CFO that would trade some of their revenue for a stronger brand (or for almost anything else). In the end, it comes down to the marketing department’s ability to increase awareness, generate leads and facilitate sales, all in the pursuit of more (profitable) revenue.

So how do you impress your CFO and ensure not only a favorable impression but more important, the necessary funds to accomplish your mission? Here are four strategies:

  1. Understand your customer.  Most CFOs have a set of challenges and objectives that are not the same as yours. See the world from their perspective and you are more likely to win the perception game.
  2. Tightly align with sales. Creating a service level agreement (SLA) to outline the processes, expectations and deliverables of both departments – will go a long way towards satisfying both the CFO and CEO. Chances are, if the sales team is happy with marketing, the executive suite will likewise be happy.
  3. Revenue…revenue…revenue. Whenever you can do so, shift the focus of the discussion from activities (expenses) to revenue (investment). Investments in revenue are much more palatable than increases in spending, so modify your language accordingly.
  4. Measure what matters. As a B2B marketer, you no doubt understand the importance of capturing all types of performance metrics. But the ones that matter most to the CFO will all point to how what you do, and what you spend, contribute to revenue. That is why our lead-to-revenue (L2R) modeling process always starts with revenue targets and works backward to set goals for inquiries, awareness, website traffic, and so forth.  

 I’ve worked with a couple of CFOs that had such a fundamental misunderstanding that they never could see the value in what their marketing department did. Fortunately, these types are not common and if you follow the above advice, you will not only have a more satisfactory working life but also a much healthier marketing budget.   

Secure Your Share of Rising B2B Marketing Budgets

Marketing BudgetThe press release announcing Gartner’s 2016-2017 Chief Marketing Officer (CMO) Spend Survey showed that marketing budgets rose for the third straight year.  Marketing budgets increased to 12 percent of company revenue in 2016, up from 11 percent in 2015. Fifty-seven percent of marketing leaders surveyed expect their budgets will increase further in 2017. Only 14 percent of marketers say they are bracing for budget cuts, but this is up from 3 percent just two years ago.

At Fusion Marketing Partners, we deal with lots of B2B companies and our experience echoes the Gartner research. Here are some observations about why marketing spend is on the rise and why you may be in a great position to justify a larger spend as you craft your 2017 marketing budget:

1.     Prospects and customers spend more of their time with marketing assets than sales assets. Studies range on the exact statistics, but most strongly point to the fact that prospects do a lot of their research online, prior to engaging with a sales rep. If you don’t have the right resources to guide them, you lose the prospect to the competitor.

2.     Throwing more sales reps into the mix is not solving the revenue challenge. You need a complete lead-to-revenue strategy that covers everything from creating initial awareness to closing deals.

3.     Marketing has accepted a wider range of responsibilities ranging from customer experience to revenue–generating systems. As Jake Sorofman, research vice president at Gartner stated, “Over the last several years, we’ve witnessed an expansion of the CMO mandate, from what was largely a promotional role to what is now often seen as the growth engine for the business. … In more than 30 percent of organizations, at least some aspects of sales, IT and customer experience now report into the CMO.”

4.     Smart marketing managers have learned how to prioritize spending on productive and measurable activities that tie into revenue. This ‘lead-to-revenue investment model’ makes the budget process more efficient and predictable. Read more about the top 10 sales and marketing metrics.           

Im often asked to advise companies on how to establish the correct marketing budget. In addition to the percentage of revenue described above, there are several other methods:

       Competitive Parity: With this method, you figure out what competitors are spending and then budget enough funds to keep up with, or surpass, the partner. The problem is, it’s usually difficult to find out what they are spending and their circumstances may be so different that a head-to-head comparison is not helpful.  

       Objective and Task: This is our go-to method. We set the objectives, identify the tasks necessary to achieve those objectives and then determine the budget necessary to complete those tasks.

       Lifetime Value (LtV): The LtV method works in scenarios where it is worth spending more to obtain a new customer because they produce so much revenue over the time they do business with you. This will often produce much higher spending scenarios than the more traditional and formulaic methods. For example, spent $25.4 million to achieve its first $5.4 million in revenue. 

       What You Can Afford: Sometimes, your marketing spend is limited by the amount of money you have left over after other expenses — or the amount the CEO or CFO gives you to accomplish the mission.

       Lead-to-Revenue (L2R) Budgeting: With L2R, we establish the revenue targets and work backwards to determine how many opportunities, qualified leads and inquiries are needed to meet the revenue target. L2R is a highly effective way to make sure you spend the right amount on lead generation, but it is not so helpful when it comes to budgeting for other expenses like personnel, PR, website, etc. 

Regardless of the marketing budget methodology you use, it is important to start the process early enough in the planning cycle to ensure the right allocation. If you truly believe (and I hope you do) that marketing has a big impact on revenue, you are doing your company a favor by helping them invest in an area that will have many positive benefits downstream.

B2B Marketing Leaders: 3 Things that Can Hurt You (And Your Company) in 2015

2015-b2b-marketingThe transition to a new year can be a perilous time for B2B marketing organizations. Sales managers, finance people and CEOs are gathered in rooms or on conference calls having tough conversations about priorities and funding for the new year. The output of these meetings can wreak havoc on the unsuspecting marketing department, especially when these types of statements are made:

“Marketing underperformed last year. Why don’t we cut the marketing budget by 20 percent?”

“The sales team thinks it can out-market the marketing team. Why don’t we let the marketing department report to the sales VP?”

“We need to cut marketing staff to afford more sales reps.”

“What’s up with all this social media? Are we really paying people to Tweet and play on Facebook?’

“The website is awful and our leads our worthless. Why don’t we just outsource our marketing?”

“What does marketing do with all that money we give them? Do we really need another $30,000 trade show? How does any of it convert to revenue?”

And the cruelest statement of all: “Do we really need marketing?”

All of these statements and outcomes are driven by three basic problems:

Problem 1: Misalignment between sales and marketing. This gap occurs if your sales leader and marketing leader don’t see eye to eye on objectives, branding, sales support needs, etc.  Because the sales department is closer to revenue, this gap will usually work against the interests of the marketing department. Marketing VPs have been fired because of the failure to achieve alignment. My recent post on how to align sales and marketing plans will help you in this area.

Problem 2: Lack of accountability. Metrics drive the modern B2B marketing organization. Ideally, you have a sales level agreement (SLA) that specifies what your department is expected to directly produce in terms of awareness, inquiries (raw leads) and qualified leads – and also how you will influence metrics like the number of qualified leads, opportunities and even revenue. A lack of accountability can produce issues like that reported by John Staples in his blog post titled Why Don’t We Just Cut the Marketing Budget?: “Lead Generation does not produce quality leads – marketing continues to take the blame for a lack of evolution in many sales forces. “It’s not me, it was a bad lead.” All of us who have been in B2B marketing for any length of time have heard such pronouncements, and regardless of whether they are true, it is often perception more than reality that can sink your marketing ship.

Problem 3: Unachievable objectives. We marketers tend to be optimistic by nature but too much optimism can get us in trouble, especially when it comes to making promises. The sales VP says, “We need 150 qualified leads a month to hit our numbers.”  Instead of a thoughtful response like “Let me run the numbers and get back to you,” you blurt out, “Of course. No problem. We’ll get your 150 qualified leads per month.” Like the coach who promises to win the Super Bowl and only wins a division title, even though you have a good year, your well-intentioned promise will come back to haunt you. For B2B marketing leaders, it is always better to slightly under-promise and over-deliver.

Address these three potential problems early in the year and you will have a more successful 2015 and beyond.

How To Protect Your B2B Marketing Budget

In a recent discussion on the Chief Marketing Officer (CMO) LinkedIn network, Art Hyde asked this question: How do you keep your marketing budget from being cut by the CFO while every other line-item is untouched?

There is a lot of interest about this issue in the B2B marketing community, for good reason.  No one likes to see their budget cut, especially if they (fairly or not) perceive this as a sign of waning influence.  Budgets are cut for all sorts of reasons, some rational and some not. But it helps to have a strategy to reduce the impact that cut-marketing-first thinking will have on you. Here are some ideas:

  1. Tie your budget directly to revenue. You want your marketing department and the marketing budget to be viewed by the CFO as an investment, not an expense. These are two vastly different perspectives—the “marketing as investment” mentality will ensure that you get your share of the budget dollars, while the “marketing as expense” mindset will lead to your budget being cut at every opportunity.
  2. Use data to support your financial requests. It’s not enough to talk about how you contribute to revenue; you must also have the data to back up your statements. My two-part series on B2B marketing metrics will show you the specifics of the data you need to track to prove your value to both the sales department and the executive suite.
  3. Align your efforts with the sales department. Many times, the marketing budget gets cut not because marketing isn’t doing its job, but rather because of a lack of support from the sales department. Fairly or not, there is often a gap between what the marketing department thinks it is delivering and what the customer (sales) believes it is receiving. If the sales team blames marketing for their own failure to perform, the CFO and/or CEO can take a negative view of the marketing department and sharpen their budget-cutting axe. The solution to this problem is a carefully crafted service level agreement (SLA) that outlines the process, roles and deliverables of each department.
  4. Make your requests early. Budgets are often like a “land grab,” with the best results going to those who get there fastest. Stake your claim early, back it up with data, and you will have a better chance of a favorable outcome.
  5. Don’t take it personally. Your budget may be cut for reasons that are unrelated to your performance. In fact, it may be cut precisely because you are so competent. For example, if you can generate more leads at less cost, why wouldn’t the company take advantage of your efficiency? As the saying goes, “No good deed goes unpunished”.

Before joining the services side of the B2B marketing profession, I served as a director or VP of marketing at several large software companies. Along the way, I met some highly effective marketers who spent their company’s money wisely and got great results relative to the dollars spent. I also worked with a few who couldn’t market their way out of a brown paper bag, yet were very adept at playing the corporate game and commanding large budgets. These people spent more time fighting internal battles than communicating with prospects.

If you have such a budget waster on your team, it’s best to part company with them quickly. While such individuals are eventually replaced, they can do major damage in the meantime.