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Marketing And The CFO

A Marketers Guide To Working With Finance

by

CFO CMO Brand Strategy

It’s an old bias but a telling one. Finance, procurement and purchasing leaders accuse marketers of only spending money. Marketers accuse finance, procurement and purchasing leaders of only counting it. It’s another re-run of the analytical versus emotive debate yet it has the potential to carry deep bias into decision-making.

As my colleague Brad VanAuken observed in this article, “I have found that many scientists, engineers and finance and operations professionals view marketing as a soft skill that lacks the rigor of other disciplines and that it deserves less attention and investment.”

While marketers will scoff at that idea, they cannot escape the accusation that marketers are generally the worst marketers of marketing. Frankly, they have in many cases failed to sell the value equation of what they do internally and they have failed to engage with and convince key audiences of the need to change their view.

It would be convenient to dismiss the tussle between finance, procurement, purchasing and marketing as “politics”. Unfortunately, it’s a lot more serious than just difference of opinion or even outlook. Because of how they have tended to behave towards each other, both parties have ensured that potentially, huge amounts of money are being left on the table because neither party is fully using their skills to grow the brand to the greatest benefit of the company.

For Chief Financial Officers, who must account to their shareholders for the company’s financial performance, marketing often looks mercurial, tangential and irresponsible. The lack of consistent standards within which to measure brand performance only exacerbate this bias. Marketers push back, arguing that leaders in finance, procurement and purchasing don’t understand people, that life is not a spreadsheet and that pulling the legs off the marketing budget is petty and self defeating.

No one action or process will change this impasse in our view. Rather a range of initiatives are needed to get both parties talking to each other and valuing the other’s contributions.

Marketers who seek breakthrough should start with Brad VanAuken’s excellent checklist for assessing your company’s appetite to build brands. It’s vital that the company as a whole and senior decision makers in particular recognize the value and advantages of investing in brands. Capitalize on those areas where the answer is “Yes”. Address the areas where the answers are “No”.

Secondly, ensure that the management of your brands is threaded throughout your culture by working with Human Resources to implement a framework where specific roles and responsibilities are put in place to ensure brand management is actively and successfully implemented. These roles can range from Chief Brand Champion (who we argue should always be the CEO) through brand management to identity oversight. This isn’t about creating new roles necessarily but rather broadening the overview of specific roles within the organization to take account of brand.

Thirdly, change how the budgets are set. The key problem, says Mark Ritson, is that marketing budgets have been decided on a top-down approach that is “non-strategic, takes no account of new initiatives within the company and ignores changes in the market. It also involves estimating how much a firm expects to sell before making any decision on marketing spend, thus inferring that marketing is an inconsequential expense, rather than integral investment.”

To rectify this, Ritson advocates a 7 step process:

  1. Convene marketing for a one-day meeting.
  2. Review lessons from the previous year and discuss the strategic goals for the coming year.
  3. Agree to strategic objectives.
  4. Break each one down into the practical, tactical challenges that need to be met next year.
  5. Works with service providers to economically price each challenge.
  6. Set realistic metrics around what constitutes success.
  7. Present findings back to senior management, emphasizing can be achieved if senior management provide the investment requested.

Finally, build some bridges. As Jean-Hugues Monier, Jonathan Gordon and Philip Ogren note, the key to building strong Chief Marketing Officer / Chief Financial Officer partnerships revolves around five actions:

1. Use Consistent Language Across Departments – And Within Them

CMOs need to start building this relationship by having a clear understanding of what CFOs expect. CMOs have typically found it hard to say what the actual marketing spend is (by product, by market, by strategic intent), how much is spent on customer-facing (creative) initiatives and how much is spent on enabling (IT); how much is focused on different parts of the consumer decision journey; what is the spend on digital and social media (and what is it worth); and how much is spent on non-advertising activities (sponsorship, promotions, trade events). Qunatifying these initiatives helps CFOs understand where and how value is being gained or lost, which makes budgeting discussions much more productive.

2. Focus On The Metrics That Matter

Shareholders don’t care about fans or followers unless those numbers can be tied to profit. In order to talk meaningfully with CFOs about the audience that matters to them, CMOs must focus on key performance indicators that are important for shareholder value such as strong cash flow, cost of capital, return on capital, and operating margin. Marketing KPIs that don’t directly address shareholder value and the company’s objectives don’t tell the CMO or the CFO where marketing efforts are having the most impact.

3. Help CFOs Focus On The Long Term

As a long-term asset, the brand has a critical role to play in generating superior growth and return on invested capital over the long term. Over the past decade, for example, the total return to shareholders of companies with strong brands has consistently been 31 percent higher than benchmarks. Too often, the brand is perceived as a “fuzzy” asset that’s hard to quantify.  CMOs need to work with CFOs to help them understand how critical the brand is to financial impact by providing estimates of brand worth and investment proposals that build the brand based on hard data.

4. Get More For The Money

Marketing could certainly take a long hard look at its procurement. The writers cite the case of a consumer packaged goods company where strong brands had evolved in separate silos, which meant total marketing spend was very inefficient. By analyzing costs more closely, the company came to understand that it was spending three times the industry benchmark on coupons and spending 50 percent more than the industry average on research and over-testing TV commercials without improving them. It was also using more than 50 market research companies to conduct similar tasks.

5. Ask For The CFO’s Help

As obvious as it may seem, CMOs should invite finance to participate in marketing’s planning process to build bridges and to benefit from financial expertise. As the writers conclude, “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. This may not mean an end to difficult CMO – CFO conversations. But we believe it will mean the beginning of a powerful alliance based on trust and a shared understanding of marketing’s role in driving real business value.”

It was Peter Drucker, widely regarded as the father of modern business management who defined marketings’ overall value to an organization with this thought: “Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

But Peter’s influence only goes so far. It is up to you, today’s marketer to be proactive in building the bridge – helping finance, procurement and purchasing leaders understand the importance and benefits of building strong brands together.

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1 Comment

Amrita
Twitter: AryaOmnitalk
on March 19th, 2014 said

I completely agree with the views and suggestions mentioned in the article but how does one increase a marketing budget where the company is very conservative about marketing and branding and whether or not it will be effective?

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A Marketers Guide To Working With Finance