Marketeers must communicate in terms the C-suite understand
Throughout the day, a consistent theme emphasised the renewed significance of econometrics in the pursuit of more accountable, effective, and profitable marketing. The IPA event unveiled a newly released report on econometrics and its role in evidence-based decision-making for businesses, underscoring the importance that is being placed on this form of measurement by the industry.
Sessions during the day, many of which were informed by econometric data, provided substantial evidence of marketing's tangible contributions to brands in terms of revenue. This revelation naturally raises the need for marketers to improve their ability to communicate these contributions effectively to the boardroom executives, portraying marketing as an investment rather than a cost.
Ross Farquhar, Marketing Director at Little Moons, highlighted how econometrics extends beyond merely quantifying marketing performance. It excels in its capacity to comprehend the various drivers of demand in a business, not limited to marketing alone. It adds rigor to marketing teams by revealing the interdependency of all demand drivers in a business, granting visibility into these relationships. For instance, during Ross's tenure at Wagamama’s, their model highlighted that restaurant refurbishments and weather conditions significantly influenced demand. This information empowered teams beyond the marketing department, such as the property director, to integrate these insights into their strategies. Essentially, econometrics is a tool that marketers can harness to create utility for colleagues in the C-suite, ultimately amplifying the authority of marketing voices in the boardroom.
Ross also emphasised that econometrics is now more accessible and essential for smaller brands to make informed decisions as they grow and not just for big brands with large budgets.
However, one challenge is evident: while the benefits of such models are clear, CMOs can lack the technical knowledge behind a model. Simultaneously, they must be the ones to advocate for and explain the model within the business, potentially fielding questions from C-suite executives who are highly attuned to the data. The advice underscores the importance of involving econometrics partners in collaboration with senior stakeholders from the outset, addressing any challenges and questions before they reach the boardroom. It advocates involving the finance team in contributing to the model's inputs and jointly owning the outputs, enhancing the CFO’s role as an effective messenger to the CEO on these projects.
Crucially, because business profitability and demand come from multiple areas within a business, involving numerous teams in the initial model scoping process proves invaluable. Models are constructed based on hypotheses, and since marketers do not hold a monopoly on knowledge regarding the drivers of demand in a business, perspectives and inputs can be sourced from various teams. This inclusive approach fosters buy-in and generates stimulating input, which can subsequently be used to simulate numerous investment scenarios looking ahead.
Regarding the most effective use of econometrics with the board, David Grainger encapsulated it brilliantly: "Econometrics is not a presentation but a mixing desk that the board can huddle around and play with the faders."