Traditionally, the Chief Marketing Officer and the Chief Financial Officer have been the frenemies of the C-Suite. They’re on the same team, but their departmental culture, viewpoints, processes, tools, and KPIs are often wildly different. The time has come, however, to bury the hatchet and join forces. As Brand Quarterly points out, “In today’s increasingly digital economy, a strong partnership between finance and marketing can spell the difference between a leading organization and one that is playing catch-up.”
Though they may seem like strange bedfellows, partnerships between CMOs and CFOs are on the rise. In fact, more than half of 652 CFOs surveyed by EY report an increase in cooperation with their CMOs. The results are impressive, to say the least; Harvard Business Review found that “companies that adopt [a] marketing analytics approach can unlock 10-20 percent of their marketing budget to either reinvest in marketing or return to the bottom line.”
An Allocadia study on Marketing Performance Management (MPM includes planning, budgeting, and measuring marketing investment results) found alignment between marketing and finance to be a key characteristic of success. Companies that excel at MPM see significant revenue growth of at least 10 percent YOY as well as larger budgets and higher confidence in their ROI. The study also found that high-growth organizations are three times more likely to demonstrate positive alignment between marketing and finance.
There are a lot of obvious reasons that CMOs and CFOs have traditionally found themselves at odds with one another. The two jobs generally require very different personality types, and it can be difficult for them to find common ground. Without viable analytics available to build a solid business case that demonstrates ROI, marketing is too often seen as a cost rather than an investment.
According to the EY report, Partnering for Performance: The CFO and the CMO, which is based on a global survey of 652 CFOs, the top seven most commonly cited barriers to CMO-CFO collaboration were:
- Lack of common tools and practices
- Absence of clear KPIs that link financial performance with the marketing agenda
- Cultural differences between the two departments
- Lack of perceived value of the collaboration
- Need for CFOs to maintain objectivity
- Lack of financial resources to dedicate to the marketing agenda
- Marketing is too difficult to quantify
The rise of advanced analytics and bountiful data have made it possible for marketers to demonstrate ROI to an unprecedented degree. Unfortunately, only 36 percent of CMOs have been able to prove the short-term impact of marketing spend qualitatively.
While collaboration between marketing and finance has improved, according to Brand Quarterly, “only 43 percent of C-Suite executives feel there is a strong CFO-CMO bond.”
With so many clear benefits to aligning marketing and finance, the executives in charge must find a way to make it work, especially in an increasingly digital economy. The starting point for breaking down these barriers is forging a strong relationship between the CMO and CFO so that they can lead the way.
Overcoming Obstacles – Best Practices
To break through the barriers and build up this powerful alliance, commonalities have to be found wherever they exist, planted where they don’t, and nurtured, so they grow to be both strong and effective.
Give and Take
The first step is getting on the same page, with a common set of terms and metrics. The CFO and CMO need to work together to define performance metrics that will work for both departments and contribute to the company’s overall strategic objectives. That means there’s going to be some compromise and consideration taken on both sides.
CFOs have to be mindful to expand their paradigm beyond hard measures like ROI to include more qualitative measures, such as brand equity, that are important to marketing. On the flipside, CMOs must be careful to ensure they are using numbers that resonate with the CFO.
Find the Metrics That Matter Most
Shareholders and CFOs aren’t interested in how many fans, followers, or likes the marketing department has generated unless those numbers can be tied to numbers with a dollar sign in front of them. That doesn’t mean that marketing should stop tracking engagement; it just means that for collaborative purposes, it’s critical to focus on metrics that matter to both departments.
Now that TV audiences, for example, can be targeted and bought in a much more efficient manner that broad Nielsen demographics, the CMO now has data that can provide the ROI on ad dollars that the CFO expects. In fact, media buying metrics are evolving to actual business outcomes like sales and profit. For more on this, download our white paper, “Aligning your media buying with business results“.
Kurt Binder, CFO at VIZIO recommends that CFOs view marketing as both an investment that drives long-term equity, value and loyalty as well as one that can “accelerate short-term sell-through, using pricing and promotion to help manage channel inventory in line with the supply chain.” It’s important to find the right balance to keep the company agile enough to adjust to short-term changes in the market, while still building loyalty, preference, and demand for your brand in the long-term.
Team Up on Marketing Analytics and Planning
Big data and advanced analytics are completely transforming marketing as we know it. There is more intelligence available than we ever could have dreamed of twenty years ago. In fact, there’s so much data, that managing it and turning into actionable plans is a gargantuan undertaking.
The answer is to tackle the marketing planning process together. Finance is uniquely positioned to benefit marketing with their expertise. They are your numbers people, utilize that! It’s a great way to build bridges and make sure everyone stays on the same page.
There is likely to be some fear on the marketing side that inviting finance to be an active participant in the planning process will transform their jobs into a mindless, numbers-driven grind. This simply doesn’t have to be the case.
“An analytical approach to marketing doesn’t mean an end to the creativity required to touch people’s emotions. It only means using data to better define when and where marketers should target audiences with which messages—and to demonstrate the value in doing so.” – Harvard Business Review, How CMOs Can Get CFOs on their side
Getting Along Means Getting Ahead
A powerful alliance between CMO and CFO based on trust and a shared understanding of marketing’s role in driving real business value undisputedly helps boost overall c-suite productivity, especially when it comes to assurance of quality in relation to the marketing department. In short, the opportunities are endless when these two executives, and their respective departments, stop butting heads and start working together.