CMO= Chief Metrics Officer

4 05 2009

I was an invited speaker at a Dallas AMA panel discussion about how a CMO can be an ally to the CFO.  There were 6 of us on the panel and the first thing we did was to introduce ourselves.   The first panelist said he started his career in advertising and developed some commercials for a well known ad agency and many people in the audience remembered and resonated with those commercials.  The second person said he had an ad agency background also and developed some unique trade shows.  The third person said he was a CPG maven and was able to improve the brand of several products for a well known telecom company.  Then it was my turn.  

I said I was a strategic marketing executive, an engineer by my roots and my big concern was bottom line profitability and while the fluff and stuff that my colleagues talked about was great to see, it was a minor part of being a CMO and valued partner to the CFO.    The audience became somewhat silent and then laughed- somewhat uneasily.  During the rest of the panel discussion, my co-panelists defended their position.   And I became known as the anti fluff and stuffer.

My purpose is not to dengrate the skills that they bring to the table.  They are clearly important and can drive demand and provide sales support.  And, let’s not forget, that a good commercial or a trade show energizes all the people who work for the company.    What I wanted to point 0ut- and I will cover aspects of this in other blogs- is that to be a great CMO and an ally of the CFO, requires the CMO to be the Chief Metrics Officer- at least from the perspective of measuring things related to revenue growth and the costs related to generating those revenues.  One of the main principles of StreetSavvyMarketing is that the CMO MUST develop and meticulously manage the metrics that drive profitable growth.

Let’s take a look at a simple equation:    P=R-C.   The role of the CMO is to drive all things related to making the “R” increase and managing the “C” such thatthe return on investment for those expenditures is greater than the internal rate of return of the company.    As a CMO you have to ask:  What are the routes to revenue that I control?  What are the costs that are under my control to develop programs and tactics and how can those programs and tactics drive revenue growth?  In future blogs, I will take a look at ways the CMO can affect “R” and what can be done to affect the effectiveness of managing “C.”   

For now,  let’s just focus on metrics.  Here’s my list of goals and metrics, some of which may be useful in a service business, some in a retail business, some in a manufacturing business, some for B2B and some for B2C.   As you can tell,  this list is far from and has to be specific to each company.    However, maybe by collective wisdom we can develop a more comprehensive list.  If you have others, please suggest them and I will compile them. 

Some of these metrics have a primary effect on revenue, i.e. a tactic or program results in a specific sale.  Others have a secondary effect i.e. an ad drives people into the store and then the sales staff has to convert the prospect to a sale.  As you go through the following list, think of which are primary (directly measurable) and which are secondary.

Average revenue per customer

Occupancy rate

Average revenue per room night

Revenue growth per year (total, per segment, per customer)

Revenue per square foot (in retail)

Margin per product (in setting price and supporting sales)

Revenue per channel member (in support of expanded distribuiton)

Number of channel members (breadth of channel members)

Percent of revenue by channel

Percent of revenue by product line

Visits to the e-commerce portion of the website

Time visitors stay on a page or site

Leads generated

Cost per lead generated (at trade show for example)

Response rate

Aided and unaided awareness

Percent of revenue from new products

Percent of new to the world revenue vs. total revenue (if you have an innovative culture)

Customer satisfaction

Customer retention/churn

Customer willingness to recommend ( Fred Reichheld’s “ultimate question”)

Customer willingness to repeat use

Secure customer index

 

I know there are probably many more metrics that may be specific to different businesses.  Finance companies are very different than manufacturing companies.  Telecom companies are different than Internet companies.   B2B companies are different than B2C companies.  The CMO must know which metrics are important to his/her business and then ensure that his company, his CEO and CFO agree that these are important measures to be tracked.  Then, these metrics must be carried down to each person on the marketing team and their goals and objectives must reflect these metrics.  By doing this the CMO becomes Chief Metrics Officer and will become a better partner to the CEO and CFO.

David

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2 responses

12 06 2009
Dana Theus

David:

This stimulated a few thoughts on this end of the country. In no particular order:

The question about what R’s and C’s the CMO controls are legitimate, certainly, but many CMO’s (and marketers in general) actually “control” very few resources in those categories. If we’re lucky, we influence most of them. I think a lot of our job is to work through persuasion, politics and plain old common sense to help the company (including those CXOs who DO control more resources) to understand the market and our company’s opportunity and risks within it. It’s inherantly frustrating, but good marketing happens at ever stage of the product lifecycle and so we need to be thinking about it holistically this way and get of our “promo stovepipe” and lead the company on behalf of the customer.

Your “revenue per” metrics are great, but you’re missing their “cost per” counterparts (other than lead): cost per sale, cost per unit sold (and not returned), cost per conversion. Also, revenue per employee is always an eye-opener;) I love the “per” metrics because they tend to cut across the stovepipes and indicate patterns that can only be effected by joint action between multiple groups within the company.

It’s interesting that you say that the way to talk to the CFO is by focusing on metrics. While this is true, an underlying principal in what you’re saying is that – just like a good marketer learns to use the vocabulary of his or her customer to be persuasive – the good marketer has to do the same internally. Understanding that the CFO cares about more than just revenue, but PROFIT (and other intricacies of the books like ‘recognizable revenue’) is the same as understanding that customers don’t care about the RPMs but the cupholder on the latest car (I know that particular example is several decades old now, but I still like it).

Ok. enough for tonight. Thanks for the conversation.

12 06 2009
David Friedman

Dana: Valid points. As a marketer, I tend to focus on teh growth aspects of the business. But to be fair, the cost components need to be taken into account for it is not just revenue growth but the margins that are generated for the business and the net incremental profit (which includes a cost component). I like what you said about the way marketers talk to their customers to be persuasive. If the marketing head is to be a true integrative force across functional boundaries, the abilty to talk in each of the functions own terms and to relate the “go-to-market” strategy in ways that are understood by that function and its people is critical to gain support. Great comments!!!!

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