9. Stop being a cost center

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Posted: December 21, 2006 | Marketing Metrics, Modern B2B Marketing

Too many CEOs and CFOs think of marketing as a cost center. Left unchanged, this attitude makes it almost impossible for a CMO to succeed. Take the following example, courtesy of Anne Holland at MarketingSherpa:

A B2B marketer started the year with an average cost per lead of $40. Determined to improve performance, he embraced online channels and created best-practice landing pages that quickly engaged prospects and gave them good reasons to register. As a result, the marketer improved lead quality and simultaneously reduced cost per lead to $10. Thrilled with the results, he went to the CEO to approve increased spending on this highly successful program.

Did the marketer get his budget? No. The CEO decided that since leads now cost only $10, marketing can deliver the same results with less budget. Instead, she cut the marketing budget and used the extra funds to hire new sales people.

What went wrong here? The marketer had great performance, but did not connect his marketing results to bottom-line metrics that mattered to the CEO. By framing the discussion of marketing results in terms of costs, he perpetuated the perception that marketing is a cost center. With this framing, it is only natural that the CEO would try to reduce costs and put the extra budget to a “revenue generating” department such as sales.

As I wrote in Earn a Seat at the Revenue Table, B2B marketers can defend against this by framing the issue of marketing spending and marketing results in terms of hard metrics like revenue and growth. Marketing budgets must include revenue forecasts, and marketing plans must have business cases that show how the activity will drive revenue. Only by demonstrating how their efforts directly influence revenue can B2B marketers position Marketing not as a cost center but an asset that drives revenue.

I should note that making the connection between marketing activities and revenue is not always easy, but that doesn’t mean you shouldn’t try. It is too important to ignore, and even small steps can help show the value and give the motivation to keep trying to do it better.

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Jon (@jonmiller) is a VP and co-founder at Marketo. He is the author of multiple Definitive Guides including Marketing Automation, Engaging Email Marketing, and Marketing Metrics & Analytics. In 2010, The CMO Institute named Jon a Top 10 CMO for companies under $250 million revenue. Jon holds a bachelor’s degree in physics from Harvard College and has an MBA from the Stanford Graduate School of Business.

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9. Stop being a cost center

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