Many organizations consider marketing a cost center. Really? The basic definition of a cost center is any part of an organization that adds to the cost of running a company and is not directly responsible for revenue or investment decisions. Wow! Customers create revenue and Marketing’s job is to find, keep, and grow the value of customers, so clearly, Marketing is an essential part of the revenue equation. How did the Marketing organization end up being lumped into the cost-center category, and how should we think about marketing in today’s environment? And does it matter?
Let’s answer the last question first: yes, it matters! Because cost centers are viewed as detrimental to the bottom line. As a result, there is always pressure on the cost center to maximize efficiencies and reduce costs, facing the relentless challenge of doing more with less. When the Marketing function is treated as a cost center, the Marketing leadership is constantly in the budget hot seat, focused on keeping their costs in line or below budget. And when sales are down, Marketing organizations characterized as cost-centers are expected to reduce the Marketing budget further. Just the opposite of what needs to happen. Does that sound familiar? Of course, marketing should stay within budget, but that really shouldn’t be its primary focus. Creating customers, the very essence of business, should be our focus. Which leads us to the back half of the first question. How should we think about Marketing in today’s environment? It is to recast the Marketing as a Value-Center.
What It Means For Marketing To Be A Value-Center?
Ok, you say, that sounds good, but what’s that mean? A value-center demonstrates value for the money it receives. That value needs to be measured in terms of value to the business. To be perceived as a value center, an organization needs metrics that connect the function to what matters to the business.
When you use measures and metrics related to activities (events produced on time and within budget) and outputs (response rate and qualified leads), the Marketing function remains a cost. To transition to a Value Center, your metrics MUST link Marketing to value, such as revenue generated from new customers for new or existing products and/or revenue generated from existing customers for current or new products. Marketing organizations that serve as Value Centers focus on improving market share, category ownership, and customer lifetime value. When you connect the work of Marketing to these outcomes, it becomes a Value Creator worthy of continued investment. Of course, you still need to show the cost side as well, but by showing the value generated, you change the perception of marketing from cost to investment.
Perception is good, but proof is better. And that’s why you need the right kind of Marketing dashboard. Your marketing dashboard should show the impact of your marketing investments and initiatives on the business over time and how well you are achieving investment performance targets. With the right marketing dashboard, you are not managing a Marketing department – you’re managing business performance. When the leadership team begins to use the Marketing dashboard to make strategic decisions that will shape the direction of the business, Marketing has evolved froma cost-center to a value-center. Imagine that!
Find out if your Marketing dashboard proves you are a value center.
FAQ:
A: Marketing is often labeled a cost center when it is viewed as adding cost without direct responsibility for revenue or investment decisions. Yes, it matters—because cost centers are pressured to cut costs, maximize efficiency, and “do more with less.” When sales decline, cost centers are often expected to reduce budgets further—exactly the opposite of what’s needed to fuel demand and growth.
A: Because customers create revenue—and Marketing’s job is to find, keep, and grow the value of customers. That makes Marketing an essential part of the revenue equation. While Marketing must manage budgets responsibly, cost control should not be the primary focus; creating customers and value should be.
A: Recast Marketing as a Value Center—a function that demonstrates measurable value for the investment it receives, in terms that matter to the business.
A: A Value Center proves it generates business value relative to the resources it consumes. To be perceived as a Value Center, Marketing must use metrics that connect its work to business outcomes—not just to internal activity.
A: Metrics focused primarily on activities and outputs—such as events produced on time/within budget, response rates, and qualified leads—signal efficiency and production, but do not prove value creation.
A: Metrics that link Marketing to value, such as:
- Revenue generated from new customers (for new or existing products)
- Revenue generated from existing customers (for current or new products)
- Improvements in market share, category ownership, and customer lifetime value
You still report costs, but when you show value generated, Marketing shifts from “cost” to “investment.”
A: Because proof requires visibility over time. The right dashboard shows the impact of Marketing investments and initiatives on business performance and progress against investment performance targets. When leadership uses the Marketing dashboard to make strategic decisions, Marketing has effectively evolved from managing a department to managing business performance.
A: When the leadership team relies on Marketing’s dashboard and metrics to guide strategic decisions that shape business direction—and Marketing is evaluated on value creation outcomes, not just budget adherence and activity volume.
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