It’s an old bias but a telling one. Finance people accuse marketers of only spending money. Marketers accuse finance teams 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 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 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.
Marketers are generally the worst marketers of marketing
For CFOs, 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 financiers don’t understand people, that life is not a spreadsheet and that pulling the legs off the marketing budget is petty and self defeating.
Building bridges between viewpoints
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.
Start with Brad’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 recognise the value and advantages of investing in brands. Capitalise 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 HR 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 organisation to take account of brand.
Thirdly, change how the budgets are fixed. 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.”
Changing the relationship via process and actions
To rectify this, Ritson advocates a 7 step process:
- Convene marketing for a one-day meeting.
- Review lessons from the previous year and discuss the strategic goals for the coming year.
- Agree strategic objectives
- Break each one down into the practical, tactical challenges that need to be met next year.
- Works with service providers to economically price each challenge.
- Set realistic metrics around what constitutes success.
- Present findings back to senior management, emphasising can be achieved if senior management provide the investment requested.
Finally, build some bridges. As Jean-Hugues Monier, Jonathan Gordon and Philip Ogren note in this article, the key to building strong CMO/CFO 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). Quantifying 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 exceeded benchmarks by 31 percent. 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.”
Photo of “Not Talking” taken by Manish Bansal, sourced from Flickr