The Lightning Strike Marketing Strategy: How Legendary Executives Plan & Leverage Lightning Strikes (Part II)
“I’m not sure that’s in my budget.”
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Dear Friend, Subscriber, and Category Pirate,
In Part 1 of the Lightning Strike Strategy mini-book series, we wrote about how you can create an annual marketing strategy that solidifies your leadership position, primarily by aligning your Information War, Air War, and Ground War efforts.
This mini-book is going to take this idea one step further.
Why The Marketing Department Needs To Have A Direct Relationship With The Finance Department
Listen to the way most CMOs talk about their budget, and what you’ll hear is this:
“I’m not sure that’s in my budget.”
Most CMOs at both large companies and rapidly scaling startups think of the marketing budget as “theirs.” And what they got hired to do was to be the arbiter of what gets spent, where, based on their own individual wants and needs.
In reality, this sort of behavior is the reason CMOs are often told to sit at the kids table. They aren’t treated as true executives, and oftentimes are left out of “adult conversations” between the CEO, COO, CPO and CFO or CRO. (It’s not uncommon then for the acting CMO, when left out of a meeting regarding the strategy of the entire company, to clench his or her fists and stomp on the ground, insisting, “Hey! I’m an executive too!”)
The truth is, as a CMO, the marketing budget isn’t your budget.
It’s the company’s budget.
Just like the product budget isn’t the Head of Engineering’s budget, and the HR budget isn’t the Head of HR’s budget. Everyone works for the same company. Marketing just happens to be the largest discretionary budget in the company. And while other budgets—such as sales, product development, HR, etc.—are intimately tied to headcount, marketing is the only place where there doesn’t have to be a correlation between the number of employees and the amount the company is willing to invest. In addition, marketing is the only place where the company can (on a whim) either cut back radically, or spray gasoline and crank up the furnace radically.
As a result, marketing becomes one big honeypot of money everyone is trying to stick their hand in. And many in the company will try their hardest to get a chunk of the marketing budget for themselves—leading to a death of 1,000 cuts.
The product manager says, “I’m rolling out a new product in March.”
The sales manager says, “We need more leads in this territory.”
The product designer says, “We need beta testers.”
Etc.
This is not a very strategic or intelligent way of thinking about (or using) your marketing budget. It’s the mistake that causes “marketing” to turn into a service bureau for “serving internal customers.” We’ve even heard marketing people say stuff like, “Our goal is to add value to the business.” As if marketing was some external appendage and not part of the business. Like there is the real business and then there are support functions of which “marketing” is one.
If your CEO and/or CMO think and talk like this, quit.
Become Best Friends With The CFO/CRO
If you want to run a legendary organization and do legendary marketing, you must have a legendary relationship with the finance department.
Savvy CMOs work directly with the CFO to create a strategic escape valve for the company every quarter. If you’ve been the CMO of a global company like Procter & Gamble for the past 10 years, this is probably something you are intimately familiar with (and if not, then hey ho, let’s go). If you’re the CFO, CEO, or CMO of a newly public company or startup about to IPO, you might have *heard* about this but have yet to figure out how to implement it into the organization. And if you are a newer company with newer entrepreneurs and executives, or are a first-time CMO yourself, then what we are about to tell you is probably going to be a bit like learning the earth isn’t flat after all.
Since the marketing budget is the largest discretionary budget in the company, it should not be thought of as “the marketing budget.” It should be thought of as “the company’s budget,” of which marketing has the most flexibility and creative potential.
However, in order to do anything of consequence with a company’s marketing budget, it’s crucial to understand how that budget sits in the context of the rest of the company—which is why the CMO needs to work directly with the CFO.
When there is a direct line of communication, the CFO may ask the CMO to take a percentage of the quarterly budget (often from the “Air Wars” bucket) and hold back the equivalent of $0.25 to $0.50 in earnings per share (EPS). The idea is that as you head into the last month of the quarter, the CMO will then check in with the CRO/CFO on the forecast. If the quarter is looking light on sales, the budget money in the escape valve can be “held back” if the company needs it to meet EPS guidance. (Being light on the top line is never great as a public company, and missing EPS guidance will put the company in the penalty box with investors—and make the stock drop like a turd from a tall cow.)
The inverse then applies in strong quarters. Savvy CFOs of high-growth companies do not want to over-perform their guidance by too much. Because when you overachieve, expectations change: “The company had a blowout quarter this year, now we need to have an even-more-blowout quarter next year.”
So, what happens?
The CFO/CRO tells the CMO, “I need you to spend $2M in 2 weeks. Can you do that?”