VideoSimply sharing data isn't enough, however. "Data is not a problem now," Jagpal of Rutgers asserts. "It can be fairly instantaneous today, so the usual lags of data collection and data processing are pretty much gone. But the key question is what do you do with the data and how do you make sense of it?" Even at a company as sophisticated as DHL Express, Gritz says there is no easy way to track how any increased investment in advertising, for example, flows through to the bottom line. He believes that's partly because for a business-to-business company, it may be harder to do than for a business-to-consumer company, which can see a "much stronger relationship between advertising dollars and what that does to your volume."
The Three Rs, Plus One
But even at consumer-focused companies, measuring marketing is no walk in the park. According to Jesko Perrey, head of the European branding and marketing ROI practice at consultancy McKinsey & Company, the bad news is there's "no one KPI that [can] track all your marketing investments." And the problem is, as the Xerox study reveals, CFOs and CMOs aren't using the same KPIs. For example, more than half the CFOs said the environmental impact of their marketing was measured at least fairly frequently, although only 36% of CMOs said this was the case. Similarly, when it came to the cost of new customer acquisition, more CFOs than CMOs said the figure was monitored.
What's more, the digital era has only widened the choice of metrics both camps are using. (See "Made to Measure?" at the end of this article.) From click-through numbers for online ads to unique visitors stats for websites, there's a host of new metrics for companies taking business online — but little agreement on which prove the worth of marketing initiatives.
One way to narrow down the choice and help make sure marketing and finance stay on the same page is to focus on metrics that demonstrate as close as possible the link between marketing spend and the bottom line. That's been the case at PartyGaming, a $458m (€364m) Gibraltar-based, London-listed online gaming company. "Marketing for online gaming companies is based on the three Rs — recruiting, retaining and reactivating players," says CFO Martin Weigold. "But it's also very much about another R: return on investment."
When new players sign up to one of PartyGaming's sites, the company immediately begins tracking how often they play and how much revenue they generate each time they do. Attrition rates are also watched closely (which has in the past shown that only one in four customers continues gambling on its sites 12 months after joining). PartyGaming analysts then compare the "player values" to the cost of signing them up through its various marketing initiatives. "So we can work out the expected profit on each new player sign-up," Weigold says. "And we do this across each marketing channel — offline, online, search-engine optimisation, affiliate — as well as by brand and country."
The finance department does not carry this out in isolation, but rather in partnership with marketing. "That doesn't mean I want to micro-manage how they deploy their resources at an individual campaign level. They are the undoubted experts in that area and I stay well clear of those decisions," Weigold says. "But I can and do become involved in looking at how they should consider deploying spend at a higher level, whether by country or marketing channel, based on our internal analysis."
More recently, that analysis has included carrying out regression exercises to understand the incremental return on the company's marketing spend. "If you reduce your marketing spend by 50% in a particular territory, what is the impact on sign-ups?" the finance chief asks. "Do they fall proportionately or by just 10%? And what happens to sign-ups in future periods? Is there any impact on player retention or spend? Understanding this better has given us some very valuable insights into the effectiveness of our marketing spend, which is increasingly important in the current economic climate."
Certainly, the economic downturn weighs on PartyGaming and other online gaming upstarts. As Weigold notes, this is the first full-blown recession that the industry has experienced. He reckons these companies are "resilient rather than recession proof," and will have to face a slowdown in customer spending. "This means that we have to be even smarter with our marketing spend and make sure we adapt to this new environment," he adds. "If we want to maintain our margins and our player values are falling, then we need to reduce our spend accordingly — taking advantage of the adverse climate to negotiate better rates with media suppliers, for example."
Never Too Late
Repairing the relationship between finance and marketing can take time, and many companies will be wary of starting right now. After all, CFOs whose companies are in survival mode have more to worry about than their latest ad campaign.
More fortunate companies, such as PartyGaming and DHL Express, forged stronger bonds between the two teams during better times. Their CFOs probably feel a lot more relaxed about their marketing team's spending, despite the recession.
That's the case for CFO Martin Stewart at Park Group, a £225m (€251m) UK-based company that sells Christmas hampers and gifts through a network of agents. The close relationship and understanding between his department and that of marketing director Mark Lucius, means that the finance chief doesn't have to worry about cutting the company's marketing costs even in the middle of the financial crisis. In fact, he says the company is reaping the benefits of a 2007 marketing blitz in print and online press, TV and direct marketing — the most successful in its 40-year history. Thanks to that campaign, the number of new agents Park recruited to sell its products increased by 20%, and orders 17%, from the previous year.
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