Is your CMO profit center focused?

A growth-directed executive team and a profit-center focused CMO are the keys to growth and profitability

Marketing Is Not a Cost Center . . . It Is an Investment in Growth

A mindset shift must start at the top

I reported to a CEO once who told me he did not understand what marketing did. The moment I heard that, not only did I know my career would be limited, I knew I would not be able to accomplish my goal of turning that organization’s marketing department from a traditional cost center model to a profit center model. If the company’s CEO could not understand what marketing did, much less how that impacted market growth and ROI, then without his support, it would be much more difficult to convince and gain acceptance for my marketing strategies from the rest of the executive team. 3 years later, no matter how much I tried to change the mindset of the executive team, that cost-center mentally still prevailed, and the marketing department was cut down to a one-person team. If you can’t or won’t understand what marketing is and does, then you will only see them as a cost center—a dark hole into which dollars are thrown and from which decorative artwork sometimes emerges. It’s easy to see why that perception persists, even to this day, in some organizations.

Marketing & sales need to be aligned

Why are marketing perceived as a cost center and sales as a profit center? They both spend money. They both have staff, offices, benefits, support, and business development expenses. They are both looking for ways to connect with prospects and customers and bring in more revenue from these efforts. So, why the disparity?

It really comes down to how the marketing department’s contribution to growth and ROI is presented and the lack of alignment between these departments. The main topic at executive staff meetings is rarely the most recent marketing campaign nor the new inbound marketing strategy projected to bring in $XX in revenue; it’s the last quarter’s numbers compared to the next quarter’s sales forecast. The head of sales, CFO, or CEO usually leads the discussion with little or no input from the head of marketing.

So, it is no wonder that most executives think of marketing as a cost center and not a central part of the revenue team. If marketing is ignored during executive team meetings when discussing revenues, customers, and results, and all eyes turn to sales, your marketing and sales efforts are out of alignment, and your sales funnel might be broken. Your sales funnel is the buying process that customers go through before they buy a product. If there’s a gap (or a leak, as it’s commonly known) in any place in your process, your revenue opportunity will suffer.

A growth-directed executive team and a profit-center focused CMO are the keys to growth and profitability

I’ve thought about the role of marketing as a profit center more and more in the past couple of weeks as I’ve been asked to review marketing plans that lack the kind of KPIs, profit projections, and tie to revenue I’d expect to see presented to a CEO or CFO.  In fact, many of these marketing plans focus more on justifying the volume of activity than on the impact on revenue and new sales. Until there is a mindset shift and CMOs present KPIs tied to lead generation and lead conversion, and revenue, not just awareness building, there won’t be a mindset shift from others in the organization. Of course, to present KPIs that are tied to lead generation, lead conversion, and revenue, you need to have the ability to run lead generation and lead conversion campaigns that track metrics for profitability. This requires outlays for systems, staff, and advertising…initiatives that depend on the buy-in from the executive team. 

A strategic and growth-focused marketing team is a profit center built to drive revenue

The fact that marketing’s role has changed from a cost center to a revenue center is not even in question in today’s high-performing organizations. Executives who have been slow to adapt will find their company, if not already there, losing market share and revenue growth. So how do you move the needle if you have not embraced this paradigm shift? Well, in addition to being flexible with your perception of marketing, you must make sure your CMO is running a profit center and not a cost center. One of the tell signs is if the strategic marketing plan is built for revenue. This is where the mind shift happens. Instead of defending the marketing strategy as an expense, your CMO and you should position the strategy as an investment that will lead to growing market share and revenue…with KPIs and projections to back it up.

How do we get to revenue growth and market expansion?

1. Start with a solid, strategic marketing plan built for revenue.
   The cost-center mindset that your marketing department needs to overcome is the idea that you can’t track marketing ROI. That is simply not true in this digital age, in which you can track various important metrics, including revenue generated from each marketing channel.
2. Put the right people and technology into marketing
   Marketers must move from disseminating content to monitoring its performance and generating high-quality leads that move through a customized nurture program. Every activity is part of an overall plan rather than being ad hoc. This requires the right technology (applications, systems, and processes) to be in place to perform these marketing functions. Suppose you lack the right analytics tools to track the buyers’ journey, each stage of their buying cycle, and the common touch points that customers experience with your company. In that case, your marketing strategies are costing you a fortune. People who see marketing as a revenue center should be placed in marketing management roles. Your marketing managers should consider their budget allocations to high-performing campaigns that generate revenue instead of focusing on what amount of money they have left in their budget and how they will spend it before losing it.
3. Embrace Digital Marketing
   Thanks to digital marketing technology, marketers have access to analytics that tells them that putting X dollars toward Y channel will result in Z revenue. The value of technology available to organizations has grown exponentially because there’s clear evidence that the output (marketing collateral) converts prospects and leads to customers. Moreover, marketing automation allows marketers to disseminate information through various channels, including email, social media, blogs, and others, and easily share marketing content with audiences. In addition, digital marketing technology closes the gap between the sales and marketing departments. Allowing for seamless and instant reporting on which marketing approach and channels are converting, at what rate, and at what cost.
   Finally, Before the advent of digital marketing technologies, customers had to turn to a salesperson to find information about a product or service. Now, two-thirds of customers consult social media before making a decision.  The argument could be made that digital marketing technology has had an equally large impact on the sales team and has helped marketers to work directly with sales to help them find leads.
4. Align marketing and sales
   Your sales and marketing teams must work together towards the same customer acquisition, market, and revenue growth goals. With marketing taking on more responsibility for revenue and a greater, long-term customer focus, marketing and sales are now intricately connected. Leads have to be handed off seamlessly from Marketing to Sales. If both departments’ goals and strategies are not aligned, you will experience gaps in your sales funnel which will bleed money.
5. Designate marketing as the keeper of the brand and all related content
   When I worked as a national marketing director at North American Title, I ensured that our team was the single repository for all communications, brand, and sales-related content. I truly enjoyed building bridges between sales, legal, executive team, and product management teams to develop those materials. I saw my role as a translator, evangelist, and facilitator. By the time we announced any new product to hundreds of salespeople across the country, we had already created sales champions committed to getting our first few customers by utilizing these new products.

If you’re ready to see your marketing department become a profit center, with more visibility, leads, and new business from your investment, we may be able to help. Starting with a thorough analysis of your current situation and discussion with your staff, clients, and prospects, we’ll help you move your marketing plans from being a slave to the expense section of your P&L to being a key contributor to gross revenues.

Call us or fill out the form on the sidebar to schedule a discussion on how to turn marketing into a profit center.