In any given company, the CFO and the CMO are often at loggerheads. When profits roll in, marketers are quick to secure their budgets and march forward. When profits take a dent, marketing budgets get the first and deepest cuts.
Intrinsically, CFOs often don’t trust marketing ROI. Marketers talk about creating brand impressions, TRPs and websites clicks. CFOs can’t be blamed for failing to decipher these as bottom line figures. To many a CFO’s mind, these metrics have no value.
And this vicious cycle all-too-often continues – businesses make investments, CFOs fail to understand the return, and marketing budgets get chopped. But what the CFO has to realise is, in ever-fleeting competitive markets with myriad brands, to flash your product and jog the customer’s memory, marketing should be effective and consistent.
So maybe it is time for the CFO and CMO to cease fire.
In many ways, the CMO and CFO are diametrically opposed due to their functional responsibilities. One role requires a large degree of extraversion, where interacting with customers is key. The other requires an astute guardian of the company’s assets, a risk mitigating figure who can steer the ship in the right direction. A degree of compromise should be expected from both sides. A CFO needs to realise that not all spending can have a quantifiable return, and that brand building is a key mandate. CMOs meanwhile need to ensure responsible control of their spending, selecting initiatives that are likely to have the greatest impact.
Asking the right questions is a key step in ensuring CFO-CMO cooperation. ‘What sales volume will we generate from the new product?’ is a brainteaser for a CMO, for example. ‘How much would we need to sell to break even at the various investment levels being considered?’ is more specific and a more diplomatic way of approaching the situation.
As with any good partnership, communication is the key. Open dialogue is important in any successful relationship, and this is especially apt at C-level. Direct contact, clear planning, and no nasty surprises all make for a smoother relationship. Stray from these basic principles, and needless problems ensue.
Finance chiefs want to know about revenue and revenue growth, profit and profit growth, and cash flow. As money minders, they take calculated decisions on where, when and how a business is likely to turn a profit. As far as they’re concerned, the CMO is responsible for returning the cash invested in the marketing budget over time. For the CMO on the other hand, it is better to use the same healthy metrics as the CEO reports during the quarterly business review. Convey marketing results at an enterprise level; don’t start off with campaign outcomes. The CFO ultimately wants to know if the business is making progress or not. Address this first, then follow with inquests to explain how and why things have happened.
On their part, CFOs shouldn’t hesitate to ask questions of CMOs to make sure the department is not straying from its budget, and can remain transparent to the results of its campaigns. CFOs need to understand sales forecasts to help the management team project cash flow and income and then adjust their core strategies. When it comes to dealing with non-finance people, the CFO needs to manage the situation patiently. Marketing staff are often not focused on total net income. Helping them understand the important balance of revenue generation and spending is key.
Another way to foster the relationship is to identify metrics that translate across departments. They need to surpass simple marketing budgets and projected returns, and involve more dynamic uses of customer and prospect data.
Most CMOs have a wealth of customer data, but would benefit from the use of the finance department’s experience in drawing relevant conclusions from it.
It’s absolutely essential for marketing leaders to understand the value in getting the most out of their relationship with the CFO.
While it’s wise for conversations to centre on financial data, some non-financial marketing metrics could prove a lure for the CFO. Such examples are customer acquisition and retention rates, up sell yield, Net Promoter Score (NPS) and market share. The path of purchase data may also help the CFO with capital investment decisions.
Grey areas between numbers could cause confusion for some CFOs, and CMOs need to use this opportunity to clarify these results. For example, if consumers are not buying one of the company’s most popular products – which will prompt demands of an explanation from the CFO – the CMO, as the voice of the consumer, should aim to provide context within the buyer’s realm.
An approach that could benefit both parties is if the CFO can adopt the mentality of an investor, while the CMO gains a better understanding of capital, liquidity and balance sheets. This could make it easier to grasp what it takes to meet growth return goals. If the CMO can see a greater portion of the profit and loss, and have access to transactional data, they can gain a stronger understanding of how capital works and how decisions are made based on its use. It’s likely that with this approach, CMOs will gain an insight into the pressures on other members of the executive leadership to meet certain growth targets. In line with this, the CMO needs to learn how to drop marketing strategies that will not profit the company.
The skills of both executive parties are essential in delivering robust business strategies. Collaboration of the two departments has the potential to create innovative growth metrics for the future.
Before this collaborative vision can become reality, the CMO-CFO relationship must grow beyond budget meetings. CMOs and CFOs share the responsibility for marketing performance. Once both the chieftains realise this, the integration of marketing and profits should be smooth sailing.