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Memo from CFO: Ad Metrics Not Good
Enough
by Pat LaPointe
Following is a sanitized version of an actual email from a CFO to a CMO in a global 1000 company…
TO: Susan James – Chief Marketing Officer
FROM: Amy Ivers – Chief Financial Officer
RE: Congratulations on your recent recognition for
marketing efficiency
Susan –
Congratulations on being ranked in the top ten of Media
Weeks’ most recent list of “most efficient media buying
organizations.” It is a reflection of your ongoing
commitment to getting the most out of every expense
dollar, and well-earned recognition.
But I can’t help but wonder, what are we getting for all
that efficiency?
Sure, we seem to be purchasing GRP’s and click-thru’s at
a lower cost than most other companies, but what value is
a GRP to us? How do we know that GRPs have any value
at all for us, separate from what others are willing to pay
for them? How much more/less would we sell if we
purchased several hundred more/less GRPs?
And why can’t we connect GRPs to click-thrus? Don’t
get me wrong, I love the direct relationship we can see of
how click-thrus translate into sales dollars. And I
understand that when we advertise broadly, our clickthrus increase. But what exactly is the relationship
between these? Would our click-thru rate double if we
purchased twice as much advertising offline?
Also, I’m confused about online advertising and all the
money we spend on both “online display” and “paid
search”. I realize that we are generally able to get
exposure for less by spending online versus offline, but I
really don’t understand how much more and what value
we get for that piece either.
In short, I think we need to look beyond these efficiency
metrics and find a way to compare all these options on the
basis of effectiveness. We need a way to reasonably relate
our expenses to the actual impact they have on the
business, not just on the reach and frequency we create
amongst prospective customers. Until we can do this, I’m
not comfortable supporting further purchases of
advertising exposure either online or offline.
It seems to me that, if we put some of our best minds on
the challenge, we could create a series of test markets
using different levels of advertising exposure (including
none) in different markets which might actually give us
some better sense of the payback on our marketing
expenditures. Certainly I understand that just measuring
the short-term impact may be a bit short-sighted, but it
seems to me that we should be able (at the very least) to
determine where we get NO lift in sales in the short term,
and safely conclude that we are unlikely to get the
payback we seek in the longer term either.
Clearly I’m not an expert on this topic. But my experience
tells me that we are not approaching our marketing
programs with enough emphasis on learning how to
increase the payback, and are at best just getting better at
spending less to achieve the same results. While this
benefit is helpful, it isn’t enough to propel us to our
growth goals and, I believe, presents an increasing risk to
our continued profitability over time as markets get more
competitive.
I’d be delighted to spend some time discussing this with
you further, but we need a new way of looking at this
problem to find solutions. It’s time we stop spending
money without a clear idea of what result we’re getting.
We owe it to each other as shareholders to make the best
use of our available resources.
I’ll look forward to your reply.
Thank you.
Copyright © 2010 MarketingNPV LLC
www.MarketingNPV.com
Memo from
CFO: The Best
Response
I posted a disguised version of an
actual email from the CFO of a
Global 1000 company to the CMO
of that company, congratulating
the CMO on doing a good job of
improving marketing efficiency, but
then raising questions about the
effectiveness of that marketing. I
invited readers to comment on
how they would respond if they were the CMO.
Some of the responses were, not surprisingly, promotional messages for proprietary marketing
measurement research or analytical methodologies being positioned as silver bullets to solve the
problem. While I’m sure some of these solutions would be helpful to some degree, it’s naïve for ANY
executive to pin their hopes of understanding marketing payback on any single tool, method, or metric.
Many have tried this approach, but very few have succeeded as the “tool in lieu of disciplined
evolution” tends to answer the immediate questions, but loses luster as dynamics (both external and
internal) evolve. Besides, CFOs tend to be immediately suspicious of any tool packaged in hyperbole
like “all you really need is…”
A few responses were pretty hostile. They came in the form of marketers berating the CFO (aka the
“bean-counting techno-wonk”) for asking such questions in a way that implied the CMO should have
had a much better handle on marketing effectiveness. In truth, there was no malice in the questions
posed. Just a bit of naiveté on behalf of the CFO with respect to the subtleties of marketing. Sometimes,
that lack of understanding manifests itself in poorly-chosen words. But rarely does that mean the issuer
of the words is “anti-marketing”. They are just playing one of the many roles they are paid to play…
the role of risk management. If the CFO is to adequately assess the corporate risks (including the risk of
wasteful spending), they must have the confidence to challenge the evidence put forward in support of
EVERY material investment. If you ask the head of IT, you’ll likely find that they too have felt the heat
of the CFOs microscope from time-to-time.
So if your first reaction was anger, get past it. Don’t let your own insecurities about marketing
measurement negatively taint your assessment of logical questions that inquisitive but un-informed
executives may ask.
I think, all things being equal, the best response would be:
Copyright © 2009 MarketingNPV LLC
www.MarketingNPV.com
To: Amy Ivers – CFO
From: Susan James – CMO
RE: Congratulations on your recent recognition for marketing efficiency
Amy –
Thanks for your note on measuring marketing effectiveness. You raise many good points that I too have
been thinking about for some time. There are a number of ways we can approach answering these
questions, but I’d need your help since some would inevitably require us to get comfortable with partial
data sets, while others may necessitate a temporary step backwards in efficiency to enable some further
testing. Together, we might be able to come up with an approach that John and the others on the executive
committee find credible. But it might be a bit more involved than emails can adequately address.
I share your passion for better insight into marketing effectiveness. If you’d like to suggest a few possible
dates/times, I’d enjoy getting together to bring you up to speed on what we’ve been able to do so far,
where our current knowledge gaps are, and what we’re doing to try to close those gaps. I’d appreciate
your critical assessment of what we’re doing, and any suggestions you may have for making us better.
Thanks for your input.
Susan.
In a nutshell, the best strategy in this type of situation is:
1. Disarm and diffuse. Take the emotion out of it, even if the history frustration runs deep.
2. Focus on defining the questions to be answered. Don’t jump into evidence-presentment mode
until you have agreed on what reasonable questions are. You’ll be shooting at a moving target.
3. Prioritize the questions. Don’t assume they’re all equally important, or you’ll fracture your
answering resources into ineffectively small parts.
4. Decompose the questions into small pieces. Define the sub-components and assess what the
company knows and what it doesn’t know with respect to each of the small pieces. Trying to
boil the ocean is another sure way to accomplish nothing.
5. Admit your knowledge limits. Be clear to label your assertions conservatively as facts,
observations, and opinions derived from experience.
6. Have a continuous improvement plan. Show your plan to improve the company’s marketing
effectiveness in stages and manage the expectation that it might take time to tackle all the pieces
to the roadmap absent a significant boost in resources.
I realize that many of you are caught in situations where the CFO’s questions may in fact be emanating
from some apparent malice. In those cases, use honest questions to understand how much they actually
know (as distinct from what they think they know). Their path to self-realization is only as fast as your
skillful approach to engaging them to be part of the solution instead of just the identifier of the problem.
Using this approach, even the thorniest marketing/finance relationships can be improved by at least
50% (and I have the statistics to back it up).
Pat LaPointe is Managing Partner at MarketingNPV ‐‐ specialty advisors on marketing metrics, ROI, and resource allocation, and publishers of MarketingNPV Journal Copyright © 2009 MarketingNPV LLC