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Why Your CFO Thinks of Marketing as a Cost Center in B2B

Posted May 7, 2024

Doug Bell, Fractional CMO at Chief Outsiders, joins our host, Camela Thompson, in this episode of the Revenue Marketing Report. Doug shares why he thinks marketers struggle to move away from the reputation of a cost center and how to fix it.

This topic is bound to get spicy. I am so excited. It is our favorite. Why does finance view marketing as a cost center and not a revenue generator?

“Marketers struggle to draw the line between marketing spend and booking. It’s typically why CEOs see marketers as a cost center because we are struggling to make the case that what we are doing turns into revenue. People know, they know we contribute, but it’s really that direct line and that is the holy grail in many ways, being able to associate spend with results.”

And they are looking for this dollar in, dollar out equation for each channel. As Doug and I know, each tactic takes time and we are dealing in millions of transactions or interactions with humans that eventually come out into a few sales. It is like you said, making the correlation is hard. 

“But there’s more.”

Yes, but wait, now I would posit there are a few things marketers could do a bit better to get a little more trust with the finance folks, but have you seen things in your career that haven’t or have worked well? We would love both sides of those examples.

“Full disclosure, I’ve struggled with this in my career. I think that it is a rare marketer, something I have struggled with in my career. I think it’s a rare marketer, maybe if you are in B2C side of the house where you have got more precision, perhaps a little bit shorter sales cycles to be able to attach to, maybe it is ecommerce and justifying ecommerce marketing dollars. So it’s a little bit easier, but I’ve struggled in my career to make that association. However, I will tell you that my first and favorite tactic that has worked, even if it is a rudimentary model, is to get some attribution model in place and begin having a basic way of tracking your spend against those channels.

“But something that is underlying here ultimately is not so much what works and what doesn’t with CFOs. It is whether or not we can prove that we’re actually spending and whether that is driving revenue. But to singularly focus on that is a mistake. What ends up happening is we do a poor job exactly as Camela has said, we do a poor job of explaining the complexity of all the millions of data points in the role that different channels have in engaging buyers, convincing buyers to have a conversation, bringing them into a sales cycle. Different channels have different roles across the funnel. I think the mistake we make is to say, I promise this many results from channels that frankly, at the end of the day, aren’t meant to produce.”

Right. I can think of several channels, like advertising, that are good at driving things like awareness and getting more engagement, but it takes ages to see those pay off. A lot of people don’t even believe in them. I think that is a bit of a mistake, but we could debate on that. The other thing I want to throw out there that you could feel free to disagree with is many founders and CEOs who have been around for a while, have relied on the sales-first model where you hire people who have a Rolodex, and for those who are young, that is a list of contacts in your phone that you can sell to reliably. Whether or not those people are happy with what marketing is doing can also influence the conversation and it is simply just easier to get along when the numbers are moving up and to the right.

“Enough credit to go around.”

Yeah. credit. That is a scary word that is triggering.

“Okay, let us call it a couple of things out here. Organizations that struggle to move from founder-led sales to sales-led sales, that is a common tripping point. But I think you’re calling out something that is important, especially for marketers and future marketing leaders who are starting their careers and startups where the founders there probably drove the first five or ten customers, which is their perception of the sales cycle is driven by their hands-on experience. And your job in many ways is to help them understand how that’s going to transition to a sales motion and then how marketing is going to support that motion. That is an easy place to get tripped up, but I have to say, typically, the founders that don’t get that piece, don’t get their next round. Hopefully, there aren’t that many landmines out there that you are going to step on when it comes to the sales-led and founder-led models.”

Yeah. That is an interesting point and spot-on. We have worked with different kinds of founders and I have been with founders who want to be king as Raleigh put it and then other founders who are truly, they want to get rich, but want everyone to get rich and by that I mean they’re focused on what is best for companies and what the market is saying as opposed to here’s what I have tangibly touched and felt is what we should always do.

“And that is building a model, whatever the motivation is for the model to work so they’re able to step outside that. There’s a fairly low ego. It’s entirely about whether or not the model is sufficient. I feel we are lucky enough in SaaS to have lots of founders and CEOs that think that way. You have always had the corner cases, but those corner cases typically don’t last either.”

Recently, I worked with Openprize on a survey of operations professionals and it was interesting to me that marketing ops professionals, one of their lowest priorities was financial modeling. Hear me out. It does seem like something that would be on the edge. Yet, if you think of budget season, you need to understand and learn top-down and bottom-up approaches. 

Doug, I know you have gone through budgeting and it is easy to make mistakes and mistakes are kind of okay. We expect them. Nevertheless, I am not saying you made a mistake. I have made mistakes. Let us just clarify, we’ve all made mistakes, we’re in it together. Sweet. But understanding how the finance team thinks about the business and spend, I say that it is risky. That skill is such a low priority, don’t you think?

“I do but I think it gets back to your original point being that marketing is seen as a cost center and I am going to oversimplify this. Let me oversimplify this and say that when marketing is viewed as a cost center, that is usually a failure, not of marketing, but is a failure of marketing leadership. I’m sorry, by the way, I’ve been in a cycle too. I have been that marketing leader who created a situation where marketing was seen as a cost center. I think we all at some point in our careers spent some time in that place and it is awful. This is pot kettle, but at the same time, what ends up occurring is, if you don’t have and particularly in today’s SaaS world, if you don’t have a well thought through multichannel model, this gets back to what we talked about before; the nuance of what we are doing and not all spend equals direct booking or pipeline. 

“However, if you don’t have a solid multichannel model that’s not static, that’s flexible, you can play with it. You are always going to be reacting. One of our Managing Partners here at Chief Outsiders, a brilliant woman named Karen Hayward, wrote a book on this titled “Random Acts of Marketing.” I feel that those are kissing cousins, random acts and marketing and marketing being perceived as a cost center. I also think this is easily remedied. I don’t necessarily think it’s a conversation as much as I love CaliberMInd’s products and as much as I love and believe in attribution. I think that is the third step. I feel like the first step is do you’ve a marketing leader who can articulate a multichannel plan that is going to drive revenue? And when it works, show that it works. And by the way, guess what folks? Sometimes it doesn’t work but you flex the model. That is when you start getting away from the cost center and more into the situation where marketing is seen as an engine for growth and revenue.”

Yeah. I 100% agree. I am thinking back in my early career. At all times, the leaders who did well, they were wrong at times and they could admit it quickly and they could explain why and what they were going to do differently. That is ultimately what CFO or CEO is looking for is you have a solid enough understanding of the baseline numbers to understand what works when and you can diagnose what went wrong. It is not something you keep repeating.

“Can I give a live use case with our favorite brand, CaliberMind? I like what Camela said about being able to admit when a part of the model isn’t working. I won’t get into the architecture of the model since I don’t that that’s germane, but I would say there’s a point in the fall, and I know folks, we all went through this collectively, but there was a series of updates that were pushed out by Google, which ultimately are about increasing the quality of content. For the most part that is what they’re looking for or to increase the number of PPC SERPs for them, but  that is another conversation. But that update happened and it caught us on our backfoot at CaliberMind. You’ve done some amazing content marketing strategy and SEO work, but it caught us on our backfoot.

“I’ve to say that part of our formula because of that release, it completely changed the way we look at our multichannel model for the first quarter. We had to adapt quickly and I have to have this fun conversation going to what used to be our mutual boss and go, I goofed up. SEO isn’t working the way it should. By the way, this is your highest ROI channel and it is going to take this much time to recover. Here’s what I am doing. Again, I love that you called that out because I think that is your coin of the realm in the context of being credible, a driving model that produces revenue and ultimately not being thought of as a cost.”

For more content on B2B marketing trends, listen to the full Revenue Marketing Report episode at the top of the article or anywhere you podcast.

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