How would you handle finding out your marketing spend had been misreported by millions of dollars? More importantly, how would you go about reallocating that spend against campaign activity to give you a better indication of ROI? Could you? Would you?
ROI is a hot, hot topic. Well to be honest, it has been for a while now but as ROI software, apps and other such tools become accessible to businesses of all sizes, it seems it’s all anyone can talk about.
I blame it on the culture of instant gratification and the fact that everyone these days from the CMO’s, CEO’s and CFO’s feel they need to know NOW how a campaign is tracking against spend (remember the good old days when you could take 6 weeks after a campaign ended to give your post analysis, but I digress).
To be honest I love the fact we are now drowning in so much instant data we can gloat about our successes or sob about our failures several times an hour, or simultaneously depending on how your day is going. But in my opinion, focusing myopically on this live tracking ROI against spend once a campaign is in market is overlooking the much more important budget management process of capturing the spend correctly in the first place.
A major part of the work I do with TrinityP3 involves understanding how a marketing team functions at every level – from briefing, to strategy, stakeholder engagement to ROI and everything in between. And over the course of a project engagement I will get to know a marketing team inside and out, spending hours talking to people across the marketing team to find out how it works.
Do CMOs really know how their marketing budgets are being spent?
One of the areas I focus considerable energy on is marketing spend. With a client, I will discuss at length with them what their marketing spend is, where it is spent, with whom and its performance.
I do this to get a good understanding of how the spend aligns with their strategy, budgets, agency split and of course ROI. But I also do this to get an understanding of how well the client is across what is actually being spent and how. Now you may laugh at this and say ‘every CMO worth their salt knows how their marketing budgets are being spent – to the dollar’ and to that I say ‘no they don’t’.
From my experience, CMO’s of larger or decentralised marketing teams, who tend to work in campaign or departmental silos, may know the bottom line amount of their marketing spend (and how it is performing to the minute), but they don’t really know how their marketing budget is being spent – and this can have dire consequences.
The question I posed at the start of this post comes from a real situation. A CMO of a decentralised marketing department had lost control of the many, many marketing budgets that had happened over the course of a 12-month period, and the result was incorrect reporting of marketing spend in the millions of dollars.
How could this happen I hear you ask?
Well, quite easily to be honest.
The CMO was juggling an enormous job, the decentralised marketing structure they’d inherited had gone rogue and as a result the marketing managers and their teams were handling budgets and coding spend however they felt – at times handing to other departments.
My conversations with the marketing managers uncovered their belief that as long as the total spend at the end of the year matched the budget amount they had been given, everything was ok. Well, that’s sort of right isn’t it?
Interestingly, during the course of my discussions, the marketing managers could proudly tell me their platform ROI all the way down to the minute, but they couldn’t tell me what the total campaign actually was with the same conviction.
Sadly, I am hard to shock so I would sit there listening to the many marketing teams discuss amongst themselves how much the last digital or print campaign cost with figures varying by the thousands for the more organised teams to tens of thousands for the rest.
But the alarm bells did go off for me when my mental calculations had their photography spend sitting at tens of thousands of dollars, yet the finance report sitting in front of me only showed a couple of hundred against that line item. Uh oh.
The reality was that the lunatics were well and truly running the asylum and had been for so long, no one across the business seemed to notice. I don’t blame the individuals in the marketing teams though, I blame the total business.
Apparently dealing with this overgrown decentralised marketing structure had become such a punishment they were left to their own devices; meaning no one across the business, including the CFO or CMO, was sitting down with the various marketing teams on a regular basis to cross check financial coding and ensure proper, and more importantly, consistent spend attribution was happening.
Cleaning up the mess
When this was highlighted to them as part of TrinityP3’s findings it was like the lights went on for the first time in a while and as a result, a more thorough marketing spend audit was conducted by myself and others in the TrinityP3 team; across every single marketing budget for the preceding 12 months.
It was a big job, but one that identified clearly how and why this misreporting was occurring and what needed to happen to control it. The findings also initiated a bigger conversation around realigning the marketing structure to ensure a more streamlined, efficient, effective and crucially, manageable marketing team was in place to drive the business forward and be able to properly report on marketing ROI.
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