Revenue Marketing≠Profit Marketing

It was only about 3-4 years back when there was a call to change the role of CMO (Chief Marketing Officer) to a CRO (Chief Revenue Officer) making the marketing department accountable to deliver revenues and not just be cost centers. That was driven by the thinking that marketing has gone through a big transformation from the days of mad-men to become data-driven,  quantitative, and scientific and hence every marketing dollar should have accountability to revenues.

However over the last 2-3 years with the dramatic shift in the ad tech, martech, data landscape, and AI /algorithms coming of age, it now allows marketing teams to shift their goals from just top of the funnel, all the way to revenue, and even profit at the bottom.  Hence the need for the role of the CMO to shift from being a Chief Revenue Officer to a Chief Profitability officer

With COVID 19 and the whole change in consumer behavior, a lot of businesses are being forced to moving online and build a digital-led business. However, the road to profitability has been elusive for digital-only businesses whether it is Flipkart, Amazon, Paytm, or myntra, etc most of them struggle for profitability.

One thing offline businesses did really well is that they have always sold profitably.  As a result, the question we get asked the most is I want to grow my digital led revenues (across industries ie Retail, BFSI, CDG, etc) but how do I do it profitably. 

But when it comes to making marketing plans built, they don't necessarily reflect this profitability goal, they are still focussed on revenues. As a result the constant gap between revenues and profitability. The gap between a company’s top and bottom lines hence mirrors the disconnect between business goals and high-level marketing goals.

The key to understanding this is the fact that given the way marketing has been run, as targetted and sharp it may get, it is not necessarily getting only profitable customers. The key for a CMO is to now start focussing on customer level profitability and build their marketing plans according to that. If you can identify who are your most profitable customers (revenue per customer- the cost of product/ acquisition/ service etc), then your marketing monies will be split into two:

• Retention and growth of these profitable customers and creating a unique experience for them
• Secondly acquire look likes of these profitable customers after you understand the demographics, behavior, and interests of these customers.

Luckily, technology and recent innovation provide a way to combine the two efforts and drive toward the same purpose. Clients who give their marketing teams access to upstream data will experience downstream impact.

Are you ready to become a Chief Profitability Officer? I would love your thoughts.