Generating financial value through marketing investment is a topic we’re passionate about at DocuStar, and we’re looking forward to hearing Cincinnati Bell’s CEO, Jack Cassidy, deliver his upcoming Return on Innovation keynote at the 2012 Cincinnati Innovation Summit.

To dovetail with Mr. Cassidy’s keynote, we are pleased to welcome Mike Vanderwoude, Senior Vice President of Consumer and Wireless Markets for Cincinnati Bell, to our Marketing Organizational Leadership series. Mike has held numerous senior level positions in at Cincinnati Bell and past roles at ChaCha Search, Inc. and MSV Group, LLC. In his current role, Mike holds P&L responsibility for the Consumer Wireline and Wireless markets and the corporate marketing function. Mike has earned degrees in Political Science and Economics from Miami University, and an MBA in Finance from Xavier University.

Mike’s interview offers strategies and tactics for defending Marketing’s budget and initiatives through an ROI mindset, and his insights below will help you to identify opportunities for improving Marketing’s alignment with Finance, ultimately elevating your marketing organizational leadership.

Adopting an ROI Mindset

Learning to speak in terms of financial results and impact is more essential than ever before as Marketing is challenged to do more with less.

Having served in both Marketing and Financial Management roles, Mike understands both the breadth of marketing initiatives required to grow revenue – in Cincinnati Bell’s case, from new subscribers – and the need to justify the related expenditures. As Marketers, we understand intuitively that mass communications and branding efforts can be difficult to measure, but it behooves us to find a way to communicate marketing plans and results in financial terms.

“There is a set of metrics in every industry that people tend to look at,” says Mike, “and it’s Marketing’s job to figure out what those key metrics and business drivers are in order to gain alignment with Finance.”

In telecom, key metrics include new subscriber adds (new customers gained), churn (customers lost), ARPU (average revenue per user per month), and margin on subscribers. Some products, such as fiber-optics-based services, require a large fixed capital investment. Marketing needs to learn to speak the language of the business, in financial terms, to be successful. Mike recommends identifying what core drivers are shaping forecasts, financial models, and plans.

“Marketing’s budget has to be anchored to the real financials of the business, and it can’t be nebulous,” says Mike. “It can’t be purely abstract because Finance will sniff that out.” If need be, Marketers can seek out a mentor in Finance to explain these business costs in order to anchor marketing plans and budgets to financial realities.

Defending Mass Marketing Investments

In some industries, syndicated research may be available to help guide mass marketing investments and justify marketing budgets. When the research can’t be purchased, however, it’s important for Marketing to conduct research to validate their approach in the marketplace with real data and market research.

Cincinnati Bell conducts its own primary market research to quantify gains in awareness and purchase intent and to help determine when customers might intend to switch to a competitor.

“Mass media is always going to be a little opaque,” says Mike. “Just about everything can be measured, but perceptions and emotional response to your brand get into the subconscious. It’s hard to put a finger on what it is worth and how they got there.” Cincinnati Bell monitors competitive advertising spending because it often correlates to market share.

“It really comes down to your competitors and your customers, data and metrics that support what your marketing is doing,” says Mike.

Gaining Cross-Functional Alignment: What Marketers Need to Understand

1. Drivers of business costs. What are the capital costs and incremental costs? What is EBITDA (revenues minus costs before interest, taxes, depreciation and amortization)?

2. How the business works. What is the forecast or five-year plan that finance is putting together? “You need to understand the linkage and how Marketing is moving the drivers of the forecasting models that Finance is using,” says Mike.

3. The self-talk pitfall. Are the marketing messages, strategies and tactics relevant to customers and target segments? Marketers need to ensure that messages are impactful to the customer and stay away from messages that exist to make the company feel good. Messages that attack the competition often fall into the latter category.

4. Collaboration is key. Marketing plans needs to be synched with corporate plans, and all departments need to work together to achieve corporate goals. For example, Sales and Marketing need to be aligned about growth plans, while Operations needs to be linked up with Sales to make sure they can deliver against demand.

5. Anchor budget requests. “When you are suggesting a new approach in the marketplace, it helps if you can tie it to something that is familiar to your stakeholders,” says Mike. “If you’re asking for funds beyond the approved budget for a new product launch, for example, anchor the request for funds to something that is familiar with real results tied to it. Large, all-or-nothing initiatives make people nervous. Offer stakeholders the chance to approve a trial project on a limited investment, and give them the opportunity to re-assess the project later.”

6. Follow up. Once you have the green light to move forward on an initiative, it’s still critical to check-in with those who have approved the project. Both successes and disappointments should be communicated as quickly as possible. Lay everything out there from the beginning. “You don’t want to make people work to understand what is happening,” says Mike.

7. Define success up front. The check-in process is easier if you define what success will look like up front. That way, stakeholders can see if you are where you said you would be, and if you’re not there, you can figure out what you need to do in response. “Jack Cassidy is fond of asking the question, ‘Was it insufficient or ineffective?’ to help focus on the reasons that you fell short of a goal you set,” says Mike. “It’s a fork in the road kind of question to help you decide whether to expand your approach or stop and change direction altogether.”

Conclusion

For marketers, adopting an ROI mindset means understanding the financial drivers of the business so that they can help grow the business. Marketing ROI can be challenging to demonstrate, especially when evaluating the impact of mass media spending. However, by anchoring marketing plans to the financial models and benchmarks of the business, marketing is able to help show growth from marketing efforts linked to business goals. An ROI mindset also means communicating often with stakeholders, including defining success up front, establishing goals for the marketing initiatives you plan to pursue and reassessing the approach later if the initiatives aren’t going according the plan.

How do you demonstrate Marketing ROI?

Submit a comment below or join the discussion in the LinkedIn group, “Marketing Organizational Leadership.”

Marketing ROI DO’s

1. DO anchor your budget to key business drivers and financials.

2. DO communicate results in terms of financial impact.

3. DO discipline your department to define success up front.

4. DO communicate successes and failures as soon as possible.

5. DO reassess. If marketing efforts don’t go according to plan, figure out if whether your approach was insufficient or ineffective.

Marketing ROI DONT’s

1. Don’t attack the competition.

2. Don’t overlook the value of follow up: It’s important to do what you’ll say you do and explain why things don’t go according to plan if they don’t.