- All but one of the 400+ C-suite respondents said they believe in the power of great marketing and communications to create business value
- Most leaders said that their marketing team had failed to provide reliable indicators of quantifiable business value, despite multiple requests over recent years
- B2B company respondents said that martech had proved insufficient in delivering proof of marketing and communications impact, ROI
- Large majority of respondents no longer believe their marketing team can answer the ROI question without significant participation from finance, operations, procurement
- New trend: finance departments are being asked to assume control over marketing performance measurement and analytics
CHICAGO, Oct. 22, 2018 — CONNECT CFO LEADERSHIP SUMMIT – Multiple Proof Analytics surveys of more than 400 senior business leaders in 160 key Fortune 1000 C-suites reveal that most top executives see their marketing and communications teams – and by extension their agency partners – as either “unwilling or unable” prove the ROI of their investments, prompting companies to evaluate new ways to break the impasse, including asking their finance teams to take the lead.
One of the approaches most commonly mentioned in the surveys were the proposals or recent decisions to transfer responsibility for marketing measurement and analytics to the finance department as well as to procurement, particularly with regard to agency contracts.
Crucially, many of the C-suite respondents went out of their way to say that their frustration did not stem from a lack of belief in marketing’s impact, but rather the failure of their marketing teams to embrace full accountability for ROI and business value.
“The Proof survey is a giant wake-up call for marketing and PR teams, and their agencies too,” said Michelle Killebrew, head of global performance marketing at CA Technologies and the company’s western regional marketing leader. “This survey places a white-hot spotlight on the difference between marketing and PR as service providers, and marketing and PR as proven value creators and ROI generators. Business leaders want to know that every marketing and PR dollar is helping their sales teams sell more product to more customers, faster and more profitably than sales could do if marketing was not there. If that’s not happening, why is that and what can we do differently? And if it is, can we spend more on marketing to get even more value? Proof answers those questions and many others with precision and speed.”
Crucially, every business leader that participated in the Proof surveys said they believed that marketing and PR played an important or very important role in the growth, health and prosperity of their business. However, 94 percent reported that they had little or no reliable understanding of the quantifiable business value actually delivered by marketing. 97 percent said they have little or no idea how much money they should be investing in marketing and PR. A very large majority – more than 90 percent – of respondents indicated that they oscillate between frustration at the failure of marketing and communications teams to offer credible proof of their business value and fear that their tendency to cut marketing spend is harming a very valuable business driver. Nevertheless, 72 percent of respondents said that they predicted that 2019 marketing budgets would be cut by 10 percent or more – a sentiment echoed by many top analyst firms.
Tom Schodorf, board member for high-growth technology companies such as Rapid7, has been outspoken about the need to substantiate marketing’s value and ROI. “Marketing and communications have a very privileged place in most companies. It is often one of the most expensive investments many companies make, and it is one of the most important parts of a successful company’s growth, profitability and acceleration. But while great marketing with proven business impact is a major contributor to a company’s income statement, unproven marketing is essentially an opportunity cost ‘tax’ on growth, profitability and shareholder value. More and more business leaders and board members believe it is time to address the ‘marketing value’ question head-on.”
Business leaders also said they see the disconnect between marketing and the business in deeper, more structural terms. 95 percent said they doubted whether marketing leaders have the same understanding of value creation as business leaders, with many marketing and PR teams defining value in non-financial terms. 92 percent of respondents said that they were not sure that marketing leaders understood the range of business problems that need to be solved, or had a framework that connected marketing and PR to specific business issues. More than half the respondents said they felt marketing teams ignored the question of ROI, seeing it as a point of vulnerability or a ploy by sales or finance leaders to justify cuts to marketing budgets.
Bob Beauchamp, an experienced technology CEO and board member for public companies like Raytheon, was not one of the leaders surveyed. But he penned an op-ed on the subject last year that clearly presents his views. He wrote: “Boards, CEOs and CFOs often see a budget request as an investment deal: in return for X dollars, the business unit or functional team usually promises to deliver more revenue, better margins, accelerating cash flows, and brand accretion. We can’t fund everything, so it’s a big part of our job to rank every one of these investments. But here’s the problem: Determining that stack rank is very tough if we can’t connect investment to incremental value.”
Later in the same editorial, Beauchamp wrote: “Marketing and PR professionals clearly believe they create a lot of business value. But business leaders need a lot more than belief. We need CMOs and CCOs who believe so strongly in their financial impact that they will tie their compensation to it, just like any sales leader. The same is true for advertising and PR agencies and marketing consultancies. It’s time to say clearly that hourly billings have no connection to value creation. Modern CMOs and CCOs should compensate their agencies and consultancies based on the incremental value they create. This significantly improves economic alignment between the agency and the company, all while reinforcing the importance of value creation v. spending on activities.”
This move towards the establishment of durable economic alignment between marketing and the business is picking up a lot of steam. 87 percent of executives responding to the Proof surveys indicated that determining marketing’s impact and ROI is now a major C-level or board discussion inside their companies. Yet 96 percent of respondents said they had no or low confidence that their marketing and PR teams had the willingness, capability or capacity to do what is necessary to demonstrate their value. The result? Top analyst firms believe that marketing budgets will fall again in 2019 after being cut more than 10 percent year-over-year between 2017 and 2018. And there is mounting evidence that the surveyed leaders have begun to look at new ways to increase the alignment between marketing investments and the business impact and financial value resulting from those investments. For example, 64 percent indicated that they were looking at new value-based approaches to establishing advertising, digital and PR agency compensation.
“I report to our CFO, who is very concerned about expense,” said one senior finance leader. “Our annual marketing and PR spend is very large, so it is very much on our radar. Our marketing team’s inability to connect any part of our marketing investment to unique attributed value is very, very concerning to us. Some of it is very likely creating a lot of value, but we don’t have any way to know. That means the risk attached to our marketing spend is potentially really high. If there are more effective ways to invest that marketing spend, we need to know that, given the size of the investment we’re making in the function.”
One senior operations executive summed up the general sentiment captured in the Proof surveys: “Marketing’s value has been the blackest of black boxes. To counter this, we’ve begun to specify the marketing KPIs we need in order to get to clarity and transparency. That’s the only way we can make the best business decisions.”
The CMO Council, the largest CMO organization in the world, began to advocate two years ago for what the organization calls Financial Impact Analytics for marketing and communications. “The message from business leaders is exceptionally clear: there’s nothing more necessary to CMO success than having the proof of how marketing is driving the business forward in a multiplicity of unique and powerful ways,” said CMO Council founder Donovan Neale-May.
One of the core elements of the surveys was to determine the specific business impact and financial value questions that business leaders most wanted marketing and PR leaders to be able to answer, in effect to define the target that marketing and PR leaders need to hit.
The survey respondents consistently prioritized answering the following questions:
- Are we spending the right amount on marketing, advertising and communications? Should we be spending less, or more?
- If we increase or decrease marketing spend, what are the short-, medium-, and long-term business impacts of those decisions?
- Are we past the point of diminishing returns on marketing and PR investment, or do we still have headroom to create substantial additional value?
- How long does it take for our marketing and PR investments to deliver impact and value? What’s marketing’s time-to-value in our business?
- How do we know that our marketing and PR is creating the desired audience effect?
- How do we know that audience belief is translating into more deals, bigger deals and faster deal velocity?
- With regard to opportunity cost, where should we spend our next marketing dollar (or other currency) most effectively?
- At what point do I get more value from investing more in marketing and communications than in hiring more sales people? Or vice versa?
- Should we be insourcing or outsourcing more of our marketing and communications support? Why? Who creates the most value the fastest?
“These are the sort of normal, routine questions that business leaders always ask of everyone asking for investment. It’s not just about marketing and communications, but for every part of any business,” said Kyle Brantley, co-founder and head of product management at Proof. “The good news is that the analytics show that many marketing and PR teams are generating tremendous impact and value for the money they spend. The bad news is that most business leaders still can’t see that impact and value clearly. CEOs and CFOs have been concerned about this for a long time. What’s changed is that many business leaders are starting to take decisive action, a trend that will continue to escalate in 2019.”
The Proof surveys included very senior business, finance, administration, procurement, sales, and operations leaders. The surveys were completed over the past 16 months. The most recent survey was this past summer. Absolute anonymity was provided in order to obtain the highest number of respondents and the clearest possible responses.
Proof leads the market in delivering ROI governance and compliance. The software platform quickly bridges the “proof gap” that exists between business leaders and marketing and communications teams. Championed by finance teams as well as progressive CMOs and agencies, Proof calculates the performance of marketing and communications investments, including audience impact, business value creation, time to value, materiality and risk, ROI and opportunity cost. www.proofanalytics.ai
Contact: Diane Kegley (Pacific Time) Mobile: 925-786-8600 [email protected]
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/750cda8f-250f-4452-843f-5b7029f338ee