From cost center to revenue center - it's time to change the marketing conversation

Most organizations still see the marketing department as a cost center, one that can easily be scaled down when times aren't so great. Part of the reason it's looked at in this way has to do with how marketing projects itself. So how can marketing change the way executives perceive it? Change the conversation.

Marketing is always feeding on budget scraps

This is the advice Tricia Saunders, Trimble's Director of Global Revenue Marketing Operations, gave during her Adobe Summit session: Best Practices in Marketing Operations to Earn a Seat at the Revenue Table. 

Saunders made the point that marketing is always in the dog house and feeding on budget scraps. It seems regardless of what they do, marketing is still seen as a cost center. She said marketing needs to figure out how to be seen as a strategic organization within the business.

That means they need to change:

• The way they act with executives
• How they present themselves to executives
• What information they share

She made an excellent point: marketers spend a lot of time and effort defining personas and mapping out needs and journeys to be sure they provide the right information at the right time, in the right context to customers, but they suck at doing the same thing when it comes to communicating internally.

And that's what has to change. It starts with how to communicate with members of the executive team, including the CEO, CFO, CMO, and CRO. 

Every company will have different business objectives, which means the unique concerns of each of these executives will be different from one company to another. Still, Saunders showed some examples of how you can identify key executive concerns, and then map out what marketing needs to do to support those concerns and what information to communicate to prove it.

Set aside the traditional marketing dashboard - try this instead

First, don't throw the traditional marketing dashboard away - you still need it. You just don't need it to communicate with the executive team. Saunders said traditional metrics don't show how marketing is driving specific business objectives. 

Here's an example of what to do instead. Saunders gave the example of a CEO who wants to ensure operational efficiencies that drive growth. To support that objective, marketing is "standardizing lead stages and launching lead lifecycles across all divisions," giving the company a single consistent view of sales. They then report their effort by showing the CEO that they have delivered on this corporate-wide view reducing leads to cash from 28 to 14 days, and reducing stale leads by 35%.

This is one example of address a key concern/objective and how to report on how marketing helps meet that objective. The idea is to outline the goals for each executive that relate to marketing and sales and then map out how marketing is working toward achieving those goals.

For most executives, Saunders said quarterly reporting is enough. But for the CMO and the CRO (or VP Sales), monthly reporting is important because things can change quickly, and you need to be able to respond rapidly.

The switch to a revenue center

A true revenue center knows how to measure the right information at the right time. Saunders said that marketing also needs to show it is part of the sales pipeline. This is where that close relationship between sales and marketing comes into play. 

Marketing must know Sales goals, including how those goals break down into net new, renewals, cross-sell/upsell, and partner revenue. The next thing to understand is how marketing helps drive these sales goals. So, you have to look at past experience and understanding of previous pipelines to figure out how many marketing inquiries and MQLs it took to achieve the revenue from past pipelines. 

From Adobe Summitt:  Best Practices in Marketing Operations to Earn a Seat at the Revenue Table. 

Once you understand that, you can figure out marketing's pipeline coverage ratio and contribution percentage for each type of revenue goal, which in turn helps you understand marketing's expected contribution to the end of the year.

This approach is very different from how many marketers think. But if you want to secure a budget for the tactics you are working on to drive revenues, then you have to think and communicate in terms of revenue. 

Another point that Saunders made is thinking about marketing activities in terms of ROI. She said that effective tactics typically have a ratio of 5:1 or higher. The ROI you want to see depends on your team's desired ROI for each tactic, although there are some best practices. 

If you find some of your tactics have low ratios, then you might want to consider stopping them or finding ways to improve them. Sometimes, Saunders pointed out, it doesn't matter if the ROI is low because the tactic is more top-of-the-funnel focused - building brand and awareness more than driving revenue. 

Last tip

This final tip from Saunders really hit home. When you are talking to Sales to define expectations, don't speak in terms of how many leads they want, or how many you need to generate. Talk in terms of the sales revenue your team must produce (see table above); whether you get that from one lead or 100 doesn't matter. 

When you are talking about marketing in terms of driving sales, Saunders said the budget conversation becomes very different. 

And it's a much better conversation to have.