Break Through the Barriers between Marketing and Finance
Marketing and Finance are rarely in sync when it comes to measuring marketing impact. This means agreeing on the investment needed for marketing objectives is a fractious, unhappy business.
Results from a recent study, Breaking the CMO-CFO Language Barrier, highlighted the significant gaps between how CFOs and CMOs perceive the ROI from previous marketing expenditures, as well as the wide variation in confidence regarding future campaigns.
It’s serious, this CFO crisis of confidence. How do we marketers address this?
Let’s go directly to the source. Here are seven answers from a real-world CFO, Kent Smallwood, to seven questions posed by marketing executives. Kent Smallwood is the Principal of the CFO centre with a career spanning across 3 decades and many industries.
How can a marketer best demonstrate ROI on past marketing investments?
I see four ways:
Start by falling on your sword! How? Acknowledge one or two highly visible programs that have fallen short in achieving expected returns. Then, conduct a rigorous review to show that Marketing knows where things went wrong and how to adjust. There’s no better way to build trust.
Highlight one or two highly visible marketing initiatives that achieved desired outcomes and generated financial returns. In story form – make it come alive, make it memorable.
Establish outcomes and measurements from proposed marketing investments that can be reasonably linked to cash and profits.
For programs or campaigns that have less direct links to financial returns, Marketing can still state 2-3 tangible measurements that show the advancement of a core strategy. CFOs do know that not all investments can be tied up perfectly with an ROI bow.
Marketing focuses on long-term brand development, yet financial planning is based on monthly or yearly expectations. How to overcome this disconnect?
Marketing leadership must boldly own their role as shapers of the future. Business plans and budgets should state clearly that marketing is tasked with driving longer-term outcomes. Bring your longer-term strategies to life by establishing milestone metrics or KPIs that will confirm you are tracking towards financial returns that rely on future-period revenues. The “own It” approach will have much greater success if you bring the CFO in early to build the story together. Yes, your CFO also cares about long-term success.
What KPIs will be most impactful in convincing the CFO of the value of marketing plans and strategies?
The foundation KPI for any marketing budget discussion should be the accurate tracking of past and current marketing budget expenditures, compared to actual spend. If Marketing does not show that they are on top of past spending, they miss an easy opportunity to build credibility.
Beyond the basic budget metric, Marketing should be bold and resourceful in developing KPIs that track their desired outcomes. Ask yourselves the “So what?” question several times for each metric!
When cash is limited; what extra elements need to be added to limit marketing cuts?
First, link program spend to short-term cash generation. Marketing may be in a better position than Sales to generate advance purchases from customers through promotions on existing platforms.
Second, use risk mitigation to make your case more convincing. Beef up your risk analysis – CFOs facing cash shortages will place the organization’s bets where there is the highest probability of return.
How should Marketing add analytical capabilities to establish quantitative foundations for the budgeting process?
Two phases. The first requires marketing leaders to cultivate relationships with one or two mid-level or even junior finance team members with analytical capabilities and interest in broadening their horizons. Believe me, these types of finance professionals do exist.
The second requires marketing to take the lead in data analytics. Many organizations lack the skill sets to convert Big Data into true insight. Marketing, with its reserves of market and consumer information, should take responsibility for hiring this unique talent.
Marketing executives are constantly seeking to deploy emerging technology solutions. How do we get CFO support for technology investments?
The fastest and easiest method to get finance to buy-in to emerging technology is to work with the provider to deliver a CFO-specific presentation. Combining the technology provider’s expertise with the Marketing team’s knowledge of specific opportunities will make a significant difference in getting a CFO stamp of approval.
What is the ultimate secret strategy to converting a CFO from barrier to champion?
The secret is for Marketing to see the CFO and the finance team as one of their most important customers. This mindset leads to investing energy to understand and build connections, with frequent touchpoints throughout the year. It demands that Marketing communicate with Finance on their terms, with tailored messaging that responds to Finance’s needs. Every marketer that adopts this approach is doing themselves a big favour, not to mention their department, Finance, and the company as a whole.
Of course — your organization’s CFO and their team would do well to adopt a similar approach to Marketing.
Kent Smallwood
Kent Smallwood is the Principal of the CFO centre Canada.
Mo Dezyanian
Mo Dezyanian is the President of Toronto agency Empathy Inc., professor, and co-author of the Chartered Marketer curriculum.