Often I'm asked "Why do you believe that the most marketable marketing candidates are financially literate?" Fair question.
The short answer is that the best marketers are realists -- and the most realistic marketers believe that there's nothing as devastating to an opinion as a number. True, certain marketing disciplines (like direct mail) have always been math-driven -- where products, lists, and offers are scientifically tested to sift out which mailing worked best.
But now that mentality is securing a beach-head in the online space, thanks largely to analytics packages. CEO's are becoming addicted to analytics reports -- and are they beginning to demand the same level of accountability for their company's mass marketing initiatives. And why not? Branding metrics like "recall" are just too abstract when compared to online key performance indicators (KPI's) like
- Unique visits per month
- Homepage bailout rate
- Page views per visit
- Average time spent on site
- Average order value
- Avg # of items p/ purchase, and
- Shopping cart abandonment rate
For sure, marketers from all disciplines are being called to develop a greater agility with numbers in order to account for the success of their campaigns in terms of their impact on their company's financials. In fact, the measurability of a new marketing initiative can be just as important to senior management as the viability of the initiative in the first place. No margin, no mission.
Let me give you an example: Suppose your company wishes to enter a new market niche (this is called expeditionary marketing), and they have asked you -- as the VP of Marketing -- to assess the niche's attractiveness. Certainly, understanding the mind of the target customer is critical. But management would also want you to assess:
- What market, competitive, and technology risks does your project face -- and how can you quantify them?
- How will your revenue, expenses, and income develop? Is there a "continuity" element to your revenue model?
- How will your cash flow develop? When will you break-even in the new market -- and to what extent will you need to buy market share with discounts?
- How high is your need for financing based on your liquidity planning? Put another way, how much cash is needed in the worst case scenario?
- What assumptions underlie your financial planning?
- Which sources of capital are available to you to cover your financing needs?
- What deal are you offering to potential investors or outside partners?
- What return can investors expect?
- How will they realize a profit? What are their exit options?
Increasingly, great marketers are excellent intra-preneurs who can marshal internal and external resources to get the funding they need for their expeditionary marketing projects. That means being savvy enough to speak the language of the risk-averse finance guys in your company. Naturally, the better you can communicate with your internal stakeholders, the higher the likelihood your project has of getting a green light.
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A final note: Most companies require that all expeditionary marketing initiatives meet a certain hurdle rate of return. Usually, this hurdle rate must exceed the company's cost of capital. If this sounds like Greek to you -- then simply buy a programmable financial calculator, like an HP 17B-II, and load the necessary financial routines into it. Seriously.
Although I lack agility with numbers, I can understand and apply many financial and cost accounting concepts to my work simply because my HP 17B-II does the algebra for me. This "crutch-enabled" analytical bias gives me the ability to ...
- Deal with ambiguity
- Manage and measure my marketing initiatives
- Negotiate in a fact-based manner that's hard on the issues and soft on the people
- Prioritize projects, knowing which activities will drive the highest payoff
- ... and more.
My HP 17B-II "keeps my candidates honest" because I have dozens of standard online and direct mail formulae at my finger tips during the phone call. So for example, if a candidate claims to run a $10 million online business -- but he only reports 25,000 monthly unique visitors and an average order value of $500 on a 2% conversion rate -- I know he's full of baloney.
Furthermore, I can totally rattle such candidates by immediately back-solving for the correct conversion rate for a $10 million business: 6.67%. This is very fun to do.
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