Quantifying Marketing Value: A New Formula

True Value of Marketing (TVM)

Marketing faces an image problem despite being built on persuasion. Consumers are tuning out marketing efforts, CFOs are shifting funds, and CMOs are leaving quickly. The usual reasons given, such as shrinking attention spans, fragmented channels, and old tech, don't fully explain it. Generative AI was supposed to help, but it has produced more experiments than actual profits. Research indicates that a large percentage of enterprise GenAI tests don't improve profit and loss. This erodes trust in the boardroom because results are not being measured effectively. We often measure reach and volume instead of real outcomes and value. CEOs and CMOs frequently have different perspectives.
According to research, most CEOs assess marketing based on revenue growth and margin, while a much smaller percentage of CMOs prioritize these metrics.

However, there's a way to reverse this decline. The Net Promoter Score (NPS) assisted customer experience by offering a simple score with an actionable strategy, establishing a standard, aligning teams, and fostering steady improvement. Marketing requires a similar metric, which is referred to as the True Value of Marketing (TVM). TVM serves as both a benchmark and a plan, providing an actionable index and a system to demonstrate and broaden marketing's influence. TVM considers each marketing program as an investment, categorizing it as value-adding, value-neutral, or value-contracting. This enables organizations to allocate resources appropriately.

Understanding TVM Components

TVM, like NPS, appears simple but has profound effects. The TVM formula is designed to operate within a range. Here are the components:

Profitable Customer Value (PCV) indicates the profit customers generate through marketing. This represents the measurable business value gained by acquiring, keeping, or growing customers. It covers short-term sales and the lifetime value (LTV) of those customers, before direct marketing investment.

Opportunity Value (OV) is the growth achieved by capitalizing on clear opportunities. These include decreasing churn, boosting upsells and cross-sells, or discovering profitable customer acquisition areas, instead of relying on uncertain opportunities. This emphasizes the importance of knowing when to decline.

Complexity Cost (CC) is the friction that slows progress, such as having too many platforms, duplicate vendors, slow approvals, and siloed data. It acts as an invisible barrier to growth.

How to Use the Formula

Increase value and the score goes up; increase complexity and the score goes down. A rise in value warrants funding. If value stalls, address the issue. If value declines, discontinue it. This provides a single, consistent index across brands, regions, and reporting periods. The underlying principle of TVM is that a single source of truth outweighs many dashboards.

Here are key steps:

Establish the Foundation
• Use contribution margin as the standard unit.
• Define the LTV horizon.
• Codify OV with confidence bands.
Identify the levers:
• PCV: illustrate actual improvement through causal attribution.
• OV: employ predictive value models to forecast future impact.
• CC: utilize AI analytics to assign a cost to complexity, ensuring that retiring tools, consolidating vendors, and automating processes positively affect the score.
Adopt the cadence:
• Conduct a monthly CMO–CFO review featuring headline TVM and three bar waterfalls (PCV ↑, OV ↑, CC ↓), along with a brief variance note.
• Apply TVM to each campaign to assess if it adds value, remains neutral, or erodes value. Scale value-added campaigns, refine neutral ones, and halt value-eroding ones.

A financial services company encountered the problem of rising customer acquisition costs, stagnant revenue, and marketing expenses spread across tactics without a clear link to profit. Although the CMO believed marketing created value, the CFO disagreed. Lacking a common metric, budget reviews were contentious. TVM provided a solution.

The marketing team established contribution margin as the standard, agreed on the LTV horizon, validated incrementality through geo-holdouts, and incorporated churn and upsell into confidence-weighted figures. Weekly CMO–CFO reviews categorized programs as Scale, Tighten, or Stop. After six months, PCV rose, OV also improved, and CC decreased. Net TVM Lift improved significantly. TVM replaced uncertainty with alignment, marketing trustworthiness, and growth. TVM makes customer profitability manageable, in the same way that NPS made customer advocacy measurable. Marketing can convert doubts into revenue by streamlining the tech stack, accelerating insight-to-action, personalizing at scale, and precisely measuring impact. TVM transforms how marketing makes decisions. It offers a single standard, a common language for the C-suite, and a plan to shift AI from experiments to profits. By refocusing on profitable customers, TVM enables CMOs to drive growth.

The approach is straightforward: adopt TVM, align the C-suite, prioritize results, and assess each program as value-adding, value-neutral, or value-contracting. Although it will require effort, and changing habits and systems can be difficult, the rewards are substantial: a shared language for growth, a system driven by value creation, and a culture that encourages constant improvement. Marketing can then influence the score by raising it program by program, quarter after quarter, to succeed in the AI era.

Learn how your organization can gain more value from marketing using TVM.