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Can CMOs defend budgets with market mix modelling?

Can CMOs defend budgets with market mix modelling?

The answer: lift your MAFL

By Mutinex Co – Founder, Matt Farrugia

It’s fair to say, the majority of organisations have overcome the tension between the CMO and CFO, evident in common org structures with both the CMO and CFO reporting into the CEO.

However, decisions around total marketing budgets are still largely driven by the CFO, and a lack of respective understanding on each role and its objectives remains. In this article we explore these challenges and how market mix modelling could help.

Marketing leaders risk facing a crisis, if they don’t champion their internal profile for the value they create and contribute to the business.

A difficult thing to achieve when few business leaders understand the value that brand marketing contributes to their key metrics of their organisation like revenue, profitability, margin and risk reduction – yet isn’t this marketing’s raison d’être?

Moreso, in a post pandemic environment, when cost cutting and profitability are under the spotlight for business survival, thus elevating the CFO’s seat at the table.

As we’re seeing at Mutinex with our clients, it’s marketing that is increasingly becoming more vital to the bottom line than ever before. 

Let’s dig a little deeper and see how

The modern CMO today, traverses as a CTO/CFO, using tech to quantify outcomes and predict the future, while pushing the creative envelope.

When Finance functions are reviewing marketing spend for budget discussions, access to accurate numbers in a timely fashion is critical for the CMO. These discussions are often riddled with assumptions that are difficult to prove i.e. spend on brand awareness, leading to tension between Marketing and Finance functions, and making it difficult for the CMO to defend budget cuts. 

The key to unlock this challenge lies within market mix modelling capabilities to accurately and timely scrutinise spend, determine ROI and focus more on generating growth. 

But how? First, let’s take a look at the landscape

It was only a short time ago, when a brand’s marketing activity was defined by whether it was above or below ‘the line’ distributed with a standard, repeatable media plan with a standard, repeatable set of metrics often reported on by the media agency buying the media. 

Fast forward to today, the proliferation of channels, changes in media consumption behaviours, rising customer expectations and importance of managing their journey, has resulted in the need for advanced data and measurement capabilities to get ahead.

There are now channel segments within channel segments, Social Media is spread across FB, Insta, TikTok etc etc, not to mention the blurred lines between TV and OLV. Further complicated by more channels and platforms entering the media plan year on year i.e audio, voice, ambience (AR and QR finally finding their mojo!). 

This continual evolution is placing more pressure on marketing leaders to rethink how they prioritise their spend and prove their contribution to the bottom line while defending budgets.

And with the volume of data doubling every year or two, with more types and sources, it is now near impossible for humans to manage this alone.

It’s now an essential item for marketers to have visibility of their data ecosystem to manage consolidation and analysis. But, gathering, cleansing, structuring, labelling , and storing data, let alone constructing the insights needed, requires new technology, analytics capabilities and ways of working. 

So here’s a few MUST DOs to empower CMOs and their teams to achieve MAFL (yes the official Mutinex coined term MAFL; Marketing and Finance Love):

Assess your data ecosystem and connect the dots

Audit your data and its sources. Ensure you know where critical data sits and appoint an internal custodian. When your data sits externally, it makes it difficult to use it as a strategic asset and your costs to acquire data are high!

Ensure your related platforms that are housing and or generating data talk to each other, as opposed to living in black boxes within external partners i.e digital and media agencies. 

With the goal being to link marketing spend and ROI to understanding how individual channels and their tactics are driving impact, the three components that are critical to enable this are data availability, how connected data is, and the  processing power to use it.

Lift financial literacy in marketing teams

Marketing leaders MUST ensure financial literacy is lifted and a culture for upskilling is adopted and continual.

If marketers rely too much on marketing jargon and vanity metrics, they’ll be irrelevant, and as one client said “ we must elevate ourselves from being the arts and craft department to being business critical. 

The CFO and their peers, simply don’t understand or give a sh*t how you’re contributing to business with marketing jargon.

Find the sweet spot to bridge marketing to finance with language e.g. “by achieving an x% uplift in profitability, we require X$ to spend on brand, and here’s why..”

Another way is to offer financial training to non-financial managers, or simply get your finance people to conduct a presentation to your marketing team. This should also happen in reverse, Marketing to Finance i.e. a marketing effectiveness preso – it will only create a knowledge sharing culture, which is not a bad thing.

Involve finance early when establishing KPIs 

Early buy-in and alignment on what metrics matter, will help avoid endless discussion about the metrics themselves, and instead better focus on the impact your marketing efforts are making on them, for example short and long-term impact advertising is having on sales and profitability.

Involve finance early in the selection process for Measurement tools and their training. This will help not only by in, but increase chances for enterprise adoption.

Embrace new ways of working with data and software

By now it should be obvious, right? Organisations with rich data ecosystems, know their customers better and have more informed content development, campaign testing, better media-buying decisions and stronger measurement capabilities. All of which is more important with the impending regulatory changes i.e. targeting without cookies!!

It’s also critical that software and data is embedded in your team’s workflow. And while you may have the ability to impact business results more than ever before, hiring more data and tech people is not the answer.

At Mutinex, we believe the answer is in a combination of best in breed software, training and new ways of working – to power up any marketers ability to access all relevant data, capabilities, with the right tools available as they need.

In doing this, identifying the optimal marketing mix is easy, when combining organisation data (i.e sales, profit and pricing) with relevant brand and media performance data (i.e media spend, reach) to get outputs like ROI and creative performance.

And much like the CMO traversing roles, the modern brand manager needs to not only develop a brand strategy, but have access to quick predictions of the impact their plan will have on sales, profit, and ROI. Therefore, they require total visibility and strong integrated planning capability for the entire marketing plan, covering the entire media investment and below-the-line activities like footfall and trade promotions. 

The modern brand manager needs to be able to track sales, while campaigns are live, and know how to leverage real-time data to predict future performance i.e. sales, to inform future brand marketing activity.

In conclusion, yes software is eating the world, so get on board or get left out.

Software enables marketing teams to not only plan, but test, and execute campaign simulations at lightning speed with the ability to go live quickly, and tweak live campaigns – and importantly, be able to do this regardless of the quantity of channels or the future complexity of the media and tech landscape.

This technology exists today. Mutinex’s very own platform GrowthOS is helping our clients achieve this by building out their capabilities through the implementation and use of our platform. Our platform organises their ecosystem enabling access to the relevant internal and external data. The processing power and storage capabilities are shifted to the cloud, which makes intelligence tools like GrowthOS, readily accessible to users globally, super fast and a much more valuably cost efficient solution. 

And importantly, it’s not about perfection, but rather improving with a step change in capability – with a view to progress further over time.

Prior to the advent of advanced data analytics, it was incredibly difficult for to accurately demonstrate the ROI for a prospective campaign. 

Finance managers had to have a lot of trust in marketing. 

All the data available today, when added to the predictive power of advanced analytics tools, gives marketing an extraordinary level of accuracy in positing the ROI. And as a result, finance teams have always wanted their investment in marketing to drive commercial value.  

Thus bringing the CMO’s and CFO’s objectives closer together, while showing their inherent interdependence, then the CFO can trust that marketing ROI focused, cost-benefit conscious and responsible for spending money on the right things. 

This will give confidence to the CFO that marketing budgets are what they need to be. As a result, finance teams will be confident that Marketing is contributing to growth.

And if the Marketing and Finance relationship is nurtured towards collaboration, universal language, performance analysis and growth, it’s less about defending budgets, and more about growing them.