Marketers have an opportunity to proactively help board of directors understand marketing — but most are missing out. I’ve sat in many board meetings over the past few years where the CMO presented slides full of detailed metrics on conversion, reach, mindshare and more without putting the information, which is essentially Greek to most of the board, into context.
Marketers, in short, need to speak board member's language.
Christopher Faust, a life-long SaaS-industry CMO, pointed out that marketers typically present “beautiful charts but don’t answer the most important question of whether the sales and marketing team is adding pipeline at the pace needed to meet future total forecasts.”
Ken Klein, who sits on several boards, said board members lack the expertise to ask the right questions of marketing. Their backgrounds are typically in sales, finance or company founders. “Few of my peers come up through marketing and therefore don’t understand that marketing’s results is an early indicator of the company’s future performance,” he shared.
“Boards really only care about one thing — are we going to meet our number and do we have the coverage to get there. Marketing's role should be to help simplify metric reporting to answer that question and prove marketing's ROI,” said Faust. Part of the problem, he continued, is that marketing and sales present different pipelines and revenue forecasts. This creates confusion for the board and friction between the teams. “The metric of marketing contribution to sales is important, but meeting sales targets is most important. It doesn’t matter if marketing’s revenue contribution is 50 percent or 100 percent, if the pipeline and conversions are too low to meet targets, those numbers are meaningless,” said Faust.
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What Marketers Should Be Presenting to the Board
When I attend board meetings, I look for specific insights from marketing which put their efforts in context:
- Total pipeline forecast for next three quarters and actuals for the past three quarters.
- Line of sight conversion for the buyer journey funnel — trigger event through purchase and renewal — by major market segments/buyers.
- Marketing/Sales spend analysis and how it could be optimized to improve revenue, customer alignment and reputation.
- QoQ and YoY changes in customer/SaaS cohort, buyer (lost/never considered), and influencer behavior patterns and marketing and sales’ joint action plan.
- Market landscape changes, with a particular focus on disruptive risks from tangential/orthogonal markets.
CMOs can provide deeper context by presenting pipeline sources and the plan to achieve a quantified target growth rate. Faust is a big fan of presenting comparisons of forecasts to actual results for the past few years as they help clarify trends and provide context. He and I firmly believe that with any variance greater than 10 percent, positive or negative, marketing executives should partner with sales and customer success professionals to explain why.
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What Boards Should Ask CMOs
There is no one-size-fits-all list of questions that boards should ask the CMO. The questions differ based on the maturity stage of the company.
Start-ups and early stage companies are in a unique situation: They are often pre-revenue and trying to figure out the right go-to-market model.
Bruce Cleveland, founding partner at Wildcat Venture Partners and author of "Traversing the Traction Gap," said that for very early stage companies, “Boards should be focused on asking the team about what I call 'market engineering' tasks. These are tasks that must be completed such as 'minimum viable category' (category creation or redefinition), developing a thought leadership talk track about how you are going to transform the world, and what the initial sales talk track is, all while the company is still working on reaching MVP (minimum viable product).”
For companies that have achieved MVT, minimum viable traction, board-level marketing discussions should focus on high-level metrics. Cleveland stressed, “The focus should be on trends such as: CLTV (customer lifetime value), CAC (customer acquisition costs), NPS (net promoter score) and DAUs (daily active users).” He echoed Faust’s point that marketing’s macro metrics should tell the board if things are on track or not.
Based on his experience, Cleveland argued that “Marketing be responsible for helping to forecast what the revenue will be in the next quarter; Sales should own the current quarter.” Marketing should use lead conversions and other data to help the board and management team forecast future revenue. Most companies aren’t there yet.
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Growth stage companies are all about scale. Management and the board are focused on quarter over quarter growth in market share, profitability, revenue and customer retention. The sales cycle should be repeatable and predictable, as is the competitive landscape. The marketing mix is more diverse and should be driven by customer experience expectations.
The company may be privately-held or be publicly traded. The composition of the board frequently includes independent board members and/or industry experts.
Gayle Crowell, a serial public and private board director, recommends that CMOs focus on four areas when talking to their boards:
1. Overall marketing investment and structure: Venture capitalists and private equity investors need to understand, at a glance, where that money is going.
- What kind of return (in terms of revenue generated) do you expect for each area of spend?
- What are your most effective marketing channels, why and does the data support your findings?
- Do we have the right marketing structure, skills and talent to overachieve on our growth plan?
2. Growth and leverage: If a company plans to increase their growth by X percent next year, the board wants to know what additional investments are needed to achieve that result.
- On a scale of 1-10, how confident are you that the additional results would be achievable?
- What kind of leverage should be expected from additional investments as the business scales?
- How can we double the results without doubling the marketing investment?
3. Marketing and sales productivity:
- What is marketing doing to increase the efficiency and effectiveness of the sales organization?
- What are marketing’s goals in this area and how should success of your initiatives be measured?
- Specifically, what can marketing do to significantly increase the conversion rate in middle to late stage of the sales process?
4. Marketing strategy:
- Is the company positioned in right place (product/market/price) to successfully compete?
- What are the top three causes of wins and losses? Specifically, where would you invest to drive more wins or fewer losses?
- What are specific ways the company can create new revenue streams? (Pricing, services, new distribution channels, new markets, etc.)
Late-Stage Growth and Mature Companies
Mature stage companies are well-established in their industry, with clearly defined competitors and product/service substitutions. Their challenges are focused on maintaining a culture of innovation, year over year growth, organizational productivity and customer loyalty. At this stage, the board is a true governance body.
Their interest is in the marketing strategy, not in number of leads, marketing and sales spend statistics, etc. The board assumes those things are being effectively managed by the CMO and CEO. Directors are interested in the big picture strategy and how that affects the outcome.
Most CMO presentations at this stage are just not high level enough. They don’t connect the dots of what they do and say with the bottom line.
Agnieszka Winkler, is a serial board member for private and public companies including SuperCuts, RenoAir, The Cheesecake Factory and Ascension Healthcare Network among others. Her marketing background makes her the "go to" board member to determine if the company’s efforts are on the mark.
Her advice to board members is to get comfortable asking probing questions. Only by "peeling the onion" can the board understand how effectively marketing is setting strategy that will increase its brand value, reputation and revenue growth.
Winkler suggests three areas of focus:
1. Market share: This implies that marketers know their total available market, competitors, what their revenue breakdown is and how much they are investing in marketing.
- Are your marketing strategies adequately increasing market share or should you shift focus to grow total available market?
- What are the triggers to sell different offerings into your existing markets to maintain/grow market share and revenue?
2. Competition: This is an increasingly important area with the answers literally changing throughout the year. Recall how Apple’s iPhone redefined not just the mobile industry but music, photography, geolocation services, banking, etc.?
- Are your primary competitors doing the same thing as you or are they solving the market problem in different/unique ways?
3. Customer Mix: Understanding customer satisfaction levels is a critical success factor and can be an early predictor of target market softening. Equally, understanding revenue concentration helps to see how vulnerable revenue targets would be if something changed in target customer segments.
- What percentage of your revenue is from repeat customers and from net new customers?
- What are the customer acquisition costs?
- Who are your strategic customers and what percent of revenue do they represent?
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Share the Stories That Inspire Confidence
Board members want deeper visibility into revenue impact from marketing spends. CMOs who are accountable for delivering revenue must be able to speak in business terms that help board members and investors better understand how marketing is driving growth. Getting lost in the day to day tactics and metrics that don’t tell the bigger story of growth isn't helpful.
While that might sound like CMO-bashing, it is one of the realities facing CMOs. Boards want to know with a high level of confidence that the CMO understands the levers that drive demand, can adjust accordingly and are trusted stewards of company resources.