CMOs are pretty familiar with this scenario -
- Economic uncertainty and recession
- Cutbacks by funders/ investors
- CEOs and CFOs hyper-focused on slashing marketing budgets
As we begin 2023, the scenario hasn’t changed - marketing budgets are under scrutiny and marketers under intense pressure to prove that their contributions aren’t just nice-to-have. In The CMO Survey 2021, 59% of marketers reported increased pressure from CEOs for proving the impact of their marketing efforts.
Increasing evidence suggests that shrinking marketing budgets is no way to manage economic downturns. In fact, slimming down marketing efforts can harm a firm’s revenue generation capacity.
Then where’s the disconnect? Why does the marketing budget always have to bear the brunt of cutbacks?
One possible reason: marketers (read CMOs) are unable to persuasively solidify their reputation as a revenue driver. Therefore, in this post, we will show you how to build a business case proving the impact of marketing on SaaS revenue.
Let’s get started.
Let Data Do the Talking
To prove marketing's impact on revenue and achieve long-term strategy objectives, CMOs must hone their story-telling skills. And great stories are built on data.
Make sure you share solid facts that point to how each campaign contributes to revenue generation.
Marketing data is spread across dozens of systems. Consequently, the technical marketing team often spends hours assembling the data and little time gaining insights from it. Thus, data collection and centralization are a challenge.
Further, most marketers share concerns about data accuracy, especially when it comes to reporting ROI.
Automating data collection in areas that could create blind spots will break data silos like conversion and landing pages.
Invest in a platform that easily integrates with other channels and gets all the data together on one platform. This makes life easier for the marketing team who otherwise spend hours performing such technical tasks.
Update your marketing tech stack with Revlitix, our SaaS revenue marketing platform that not just stitches data from different platforms but also empowers marketers with its predictive and prescriptive analytics capabilities.
- Predictive Analytics - Revlitix analyzes thousands of KPIs across various marketing channels and data combinations to share insights and trends that can have a big impact on revenue.
- Prescriptive Analytics - Revlitix is packed with built-in NBAs (next-best actions) tied to metrics. So, it spots anomalies and offers fitting recommendations for the team.
What’s more? Revlitix will execute the recommendations for you with its one-click optimizations.
Thus, building a robust tech stack can ensure your team spends more time sharing insights that position the marketing team as a revenue center.
Think and Talk Like the CFO
The firm’s CFO is your first audience and the decision-maker when it comes to marketing budgets. Hence, what they think is important.
What would a CFO expect from a campaign? What is their top priority? What metrics do they want to hear about?
For instance, they may be curious about your customer acquisition cost because an increase or decrease in this metric broadly indicates the financial health of the business. And if the business’s financial health is good investors will be interested.
The VALUE framework can help you develop the skills and fluency needed to internalize what’s on a CFO’s mind.
Thinking and talking like a CFO means explaining how investments in marketing campaigns and events affect financial metrics like SaaS revenue, price elasticity, margins, and more. The C-suite wouldn’t be interested in vanity metrics like brand awareness or social engagement that do not directly connect with revenue.
Prioritize Sales and Marketing Alignment
This article from the Harvard Business Review confirms that sales and marketing misalignment can cost companies more than a trillion dollars per year. In fact, it is the number one reason for business revenue stagnation.
Sales and marketing alignment (smarketing) is a hot topic in the SaaS domain where 96% of sales and marketing professionals admit to having difficulties aligning strategies, goals, and KPIs.
Sales and marketing alignment is key to shortening the sales cycle, improving forecast accuracy, enhancing customer experience, and driving revenue. Plus, when they are on the same page, they can convincingly showcase where the budget is being spent and how much revenue each spend is getting.
These questions will help you determine if your marketing and sales teams are aligned.
- Are the sales and marketing goals aligned?
- Do your teams have an SLA (service level agreement)? Is it being reviewed regularly? You will need customer service, internal service, and multilevel service SLA.
- Are they aligned on the customer lifecycle stages and the ICP?
- What tools are they using? Are these systems speaking to each other? Are they seamlessly passing along data? Both teams need to have end-to-end visibility of the data, from prospect to revenue.
- Have you set a process of recurring billing and easy SaaS revenue recognition? Revenue recognition for SaaS firms can be time-consuming and tedious as there could be multiple sources of truth.
Smarketing aligns teams with the company’s goals, namely customer acquisition, churn reduction, SaaS revenue recognition, and revenue generation.
Further, B2B SaaS firms often have long and complex sales cycles. This makes it difficult for marketers to track how SaaS revenue multiplies. Smarketing eliminated this challenge by offering a shared system for reporting and SaaS marketing analytics, thereby boosting transparency between teams.
Track and Deliver C-Suite Worthy Marketing Metrics
When making a business case for your marketing spend there’s no room for a black box. The C-suite wants to see how a specific campaign impacts the growth of SaaS revenue and SaaS revenue recognition. Talking to them about these metrics will make them make decisions in favor of the marketing team.
1. Return on Marketing Investment (ROMI)
Showing your C-suite the actual SaaS revenue earned on the marketing activities allows them to see the impact of the brand campaigns on the company’s bottom line.
The marketing metrics shared on this dashboard translate into meaningful business results and help the C-suite measure the impact of each marketing channel or campaign.
Return on marketing investment or ROMI measures the effectiveness of individual campaigns on the SaaS revenue.
ROMI helps the C-suite -
- Assess the past and expected marketing productivity
- Decide if the marketing budget should grow or shrink
- Allocate funds to the most profitable marketing channel
2. Customer Lifetime Value (CLV)
CLV shows how much a customer will spend on a product or service throughout their lifetime with the business. This metric coupled with CAC (we will talk about it in the next point) allows marketers to optimize their resources and avoid spending on bad-fit customers.
Research shows that acquiring new customers is far more expensive than retaining loyal ones. Customer lifetime value shows the value of loyal customers.
CLV helps the C-suite -
- Segment customers based on their acquisition cost and the value they offer to the company
- Evaluate the strengths and weaknesses of a product
- Act in favor of strategies upholding customer loyalty
3. Customer Acquisition Cost (CAC)
Customer acquisition cost brings all the marketing and sales expenses together and shares how much a company spends on acquiring a new customer. It includes the sales and marketing costs including salaries, discounts, advertising costs, creative costs, cost of tech subscription tools, and more.
This metric shows if the company is generating enough revenue to cover the cost of running the business. If your CAC is too high versus the value offered by the customer, the C-suite will not support that campaign. To boost revenue and uphold the business’s financial health, the marketing team should work on reducing CAC.
CAC helps the C-suite -
- Know how much money is being spent on acquiring a customer
- What’s the company’s cashflow like?
- Understand how the campaigns are performing in terms of revenue
To prove their impact on SaaS revenue, marketers have to be data-driven storytellers who think and speak the language of the C-suite. However, marketers often struggle to connect their efforts and investments to revenue.
If this connection isn’t established, there’s no way for finance to learn about their impact. We are sure the insights and tactics shared in this post will help you prove marketing’s financial impact on the sales pipeline and revenue.