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Case Study: Metrics Keep Budgets Intact |
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While on a recent business trip, a product manager (We’ll call her Paula) for the leading provider of business education materials learned management wanted to cut her budget – by half a million dollars.
“We have this fight all the time,” Paula relates. “Part of the problem is the marketing budget is overseen by a separate MarCom (marketing communications) group that doesn’t necessarily understand how their work ties into revenue generation. I, on the other hand, am responsible for bringing in sales dollars – but lack control over the marketing budget.”
The other problem is spreadsheet decision-making on the part of the controller. Says Paula, “Finance doesn’t understand marketing and what’s involved in producing campaigns. Our controller will tell us we have unspent funds and that he’s going to move those funds elsewhere. I have to tell him those funds have been allocated to pay printing costs on a campaign that’s been delayed. It’s a constant battle.”
To keep her budget intact, Paula keeps abreast of a number of metrics: she matches revenues to campaign and conducts testing to determine which campaign tactics bring in the most revenue. (The company relies heavily on direct mail and telemarketing and produces upwards of 300 campaigns a year.) She also tracks sales revenue by month and quarter. When she received the urgent “your budget is being cut” message, she was ready (after first nearly passing out).
First, she pulled together her original revenue target and the amount she had already brought in – in order to show revenues were well above goal. Then she pulled her original marketing budget as well as metrics showing what each of her marketing campaigns had generated thus far.
“I wanted to prove to management that if they cut the budget, they wouldn’t make their stretch target for the year. I basically said, ‘How do I bring in this additional money if you cut my budget? If you have the answer, let’s talk.’ They finally backed off,” she reports.
Why? Not only would the company have not made their original revenue target, they would have not made their new goal, either. Most likely they would have come in more than $3MM under budget for the year if the marketing budget had been cut.
In addition to keeping track of campaign metrics and revenue, and as a result of attending Sequent’s Product Strategy and Planning Workshop, Paula implemented a product strategy and vision for her products and is now communicating both concepts to her cross-functional team – which includes the MarCom side of the house.
“One thing I want MarCom to understand,” she states, “is that they are just as responsible for revenue generation as I am. We’re working very hard to get everyone on the same page. Once we do that, it will be much easier to track campaign metrics and costs – and prove that marketing is indeed necessary for generating the company’s revenues.”
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