The Lightning Strike Marketing Strategy: How Legendary Executives Plan & Leverage Lightning Strikes (Part II)
โIโm not sure thatโs in my budget.โ
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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 youโll hear is this:
โIโm not sure thatโs in my budget.โ
Most CMOs at both large companies and rapidly scaling startups think of the marketing budget as โtheirs.โ 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 arenโt treated as true executives, and oftentimes are left out of โadult conversationsโ between the CEO, COO, CPO and CFO or CRO. (Itโs 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, โHey! Iโm an executive too!โ)ย
The truth is, as a CMO, the marketing budget isnโt your budget.
Itโs the companyโs budget.ย
Just like the product budget isnโt the Head of Engineeringโs budget, and the HR budget isnโt the Head of HRโs budget. Everyone works for the same company. Marketing just happens to be the largest discretionary budget in the company. And while other budgetsโsuch as sales, product development, HR, etc.โare intimately tied to headcount, marketing is the only place where there doesnโt 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.ย
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 themselvesโleading to a death of 1,000 cuts.
The product manager says, โIโm rolling out a new product in March.โ
The sales manager says, โWe need more leads in this territory.โ
The product designer says, โWe need beta testers.โ
Etc.
This is not a very strategic or intelligent way of thinking about (or using) your marketing budget. Itโs the mistake that causes โmarketingโ to turn into a service bureau for โserving internal customers.โ Weโve even heard marketing people say stuff like, โOur goal is to add value to the business.โ 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 โmarketingโ is one.ย
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 youโve 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, letโs go). If youโre 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 isnโt flat after all.ย
Since the marketing budget is the largest discretionary budget in the company, it should not be thought of as โthe marketing budget.โ It should be thought of as โthe companyโs budget,โ of which marketing has the most flexibility and creative potential.ย
However, in order to do anything of consequence with a companyโs marketing budget, itโs crucial to understand how that budget sits in the context of the rest of the companyโwhich is why the CMO needs to work directly with the CFO.ย
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 โAir Warsโ 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 โheld backโ 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 investorsโand 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: โThe company had a blowout quarter this year, now we need to have an even-more-blowout quarter next year.โย
So, what happens?
The CFO/CRO tells the CMO, โI need you to spend $2M in 2 weeks. Can you do that?โ