This schism has traditionally created a challenge for CMOs in getting their budgets approved. A 2017 study found only 14% of marketing organisations see finance as a trusted strategic partner, and 28% either have no relationship with finance or speak only when forced to.
The same study found that high growth organisations are three times more likely to align marketing and finance, suggesting it’s imperative for these disciplines to work together with common goals to bolster the bottom line.
In terms of what working together entails, a 2019 McKinsey study divides CMOs into three different archetypes: “unifiers” who foster strong partnerships with key players in the C-suite; “loners” who focus more on marketing and communications with limited C-suite relationships; and “friends” who have one or two good C-suite relationships (particularly the CEO).
Of these three architypes, CMOs should strive to be unifiers.
“[Unifiers] ensure that marketing has a clearly defined role in the eyes of C-suite peers; they adopt the language and mindset of other C-suite executives; and they articulate how marketing can help meet the C-suite’s needs,” the study stated. “As a result, their budgets are more likely to be protected during a downturn, and they enjoy a 48 percent longer tenure.”
With that in mind, how can CMOs work better with their CFOs to ensure they’re on the same page, and, more importantly, get the budgets they need to do their jobs?
Finding Common Ground
Thanks, in large part, to the rise of digital, companies are awash with data, including what people buy, how they respond to marketing triggers, how long they engage on websites, and plenty more.
Armed with these analytics and hard facts, CMOs have exactly what they need when meeting with their CFOs—so long as they use it to speak a common language with finance, advised Julia Vargiu, founder and CEO of Sydney-based consultancy New Business Methodology. She pointed to zero-based budgeting (ZBB) as one way marketing and finance can achieve this.
“With zero-based budgeting, you start from a zero-dollar figure every year, and you have to use facts and figures to build the case for every dollar that marketing gets,” she told CMO by Adobe. “Just because you had $10 million last year doesn’t mean you get it again. This makes marketers commercially savvy, and it helps persuade CFOs and CEOs to invest in innovative new initiatives.”
A common language also makes clear marketing’s transformation from a cost centre to a revenue centre. Integrated tools, such as marketing automation software, analytics, and big data, coupled with deep learning and artificial intelligence, will take marketers far in demonstrating hard numbers, Vargiu said.
Building A Budget
Rohan Liyanage, chief financial officer at Philips Lighting Australia, pointed out several common mistakes CMOs make when building their budgets.
“We often see aggressive growth assumptions that are often not achieved in the real campaign,” he told CMO by Adobe. “We also see marketing putting together a spend-now/return-later model, but this has to be backed with real data and needs to be realistic.”
Again, it goes back to the data. CMOs need to find data-driven common ground with their CFOs if they want their budget goals fulfilled, Liyanage said.
It’s also important for CMOs to get buy-in from other groups within the organisation, he added, because all functions need to plan ahead in support of the marketing investment.
For example, Liyanage said, if there is an increase in demand at the call centre but resources are not adjusted, customers will have to wait on hold too long. This will create a poor customer experience, which, in turn, could negate the effort and money spent by marketing.
“Other functions need to be aligned to support and capture the results of the marketing investment,” Liyanage said. “Essentially, this is managing the team priorities in line with the marketing calendar.”
Partnering For Performance
For their part, CFOs need to evaluate which marketing initiatives to fund through two lenses, according to Kurt Binder, CFO at consumer electronics company VIZIO. The first lens is to consider how a marketing investment impacts the brand to drive long-term equity, value, and loyalty that, in turn, fuels consumer demand for products.
“That’s critically important and that’s an investment that can be challenging to measure directly,” he told EY for its “Partnering for Performance” report. However, measurement is possible through indirect feedback, such as brand studies that measure awareness, preference, and recommendation rates over time, he said.
“The other lens is to consider how a marketing investment can accelerate short-term sell-through using pricing and promotion to help manage channel inventory in line with the supply chain,” Binder said.
Both lenses are important, he said, as long as there’s “good balance” between short-term and long-term thinking, he added.
Align On Goals
Another important CMO-CFO success factor lies in planning. Both groups need to bring their expertise to the table and agree on goals to maximise revenue.
“Marketers need to provide hard evidence by using analytics and data if they want their budgets to be approved,” Vargiu said. “At the same time, CFOs need to teach marketing about what is important to the business and where there’s overlooked financial value.”
By speaking the same language and agreeing on metrics and KPIs, marketing and finance can have a successful relationship that ensures marketing gets the budget it needs, and finance has the underlying numbers it requires for business success.