Transparency has been a burning issue since the 2016 scandal, but the industry is changing to solve any emerging challenges. Here you will learn what major factors contribute to this problem and how to address them effectively.
In an April 2019 article, Forbes covers the issue of transparency and executive level visibility of marketing spend and offers advice on how to solve this problem. Since large companies worldwide invest more than $1 trillion annually into an increasing mix of marketing assets, media and technology, this money should be spent wisely and to the best advantage of the company. But you may be surprised at the fact that most CEOs and financial executives have too little visibility into this marketing spend, most of them don’t know how efficient the investments into sponsorship programs, digital media and technology are. It happens because finance and marketing departments currently don’t cooperate at the necessary level to improve tracking, classification and accounting for marketing spending. This lack of cooperation prevents companies from accurately measuring the efficiency of such investments. As a result CMOs are under pressure from their CEOs and have to spend additional billions of dollars to prove the value of marketing. Even though it’s necessary to measure the contribution of marketing and there are numerous tools to do that, more than 75% out of 5000 CMOs interviewed by Forbes struggle with assessing and optimizing the value of marketing. With the growing number of advertising channels, measurement might really seem a complicated process, especially cross-media measurements, but if you follow the five steps that AIB recommends doing before you distribute media budget and strategic approach to planning it is going to be much easier.
One factor contributing to the problem is that the existing techniques don’t take into account all applied marketing tools; they can only calculate short-term results or ROMI on a single media channel, which is why there is no big picture of how marketing on the whole affects cash flow, profits and firm value. You can see the modern marketing mix in the pie chart below.
Another more fundamental issue is that data on marketing spend used for calculations is out of date, poorly classified and incomplete, which affects the accuracy and quality of the results. To solve this problem finance and procurement departments of a company should cooperate and find a better way to classify, account for, and report marketing spending. This can only be achieved with better transparency and full marketing accountability. But there are several reasons why marketing spend transparency problem cannot be solved easily.
- Complex marketing mix: most CMOs are implementing over 20 various media channels and different technology to stimulate business growth. And only a small part of investments goes for paid media, while the majority is spent on analytics, technology and owned media. Also some other sale stimulating activities are not always reported as marketing spend. All these factors contribute to the complexity of the matter.
- No unified standard: There is no unified standard for Finance, Procurement and Marketing department to report and measure marketing spend, which is why it’s often difficult to bring all data to one common denominator.
- Fragmentation of data: And the very fact that the information about marketing spend is kept in different systems, formats and departments, that aren’t cooperating at the necessary level, makes all the efforts to achieve greater transparency almost useless.
And the solution to the problem is to set up categorizing and reporting standards and encourage cooperation between marketing, finance and procurement departments. By introducing three following measures you will achieve better transparency:
- The three departments need to agree on a common and representative classification and tracking system for your marketing investments.
- They should find the most suitable way to account for growth investments.
- The processes of coding, gathering and classification of data on marketing spend should be automated and optimized.
Adoptomedia offers you a tool that can help you classify data, calculate ROMI, create media plans complying with all industry standards. Our flexible platform can be easily integrated into your existing IT infrastructure. We help you define cross-department KPIs for better cooperation and transparency of media budget management process. CheckMedia Solution has already helped numerous large companies to increase ROMI by at least 10-20%.