Marketing, Finance Battle for the Bottom Line
When I was a teenager, I got an allowance for doing weekly chores. After I quickly spent that money, I'd go back to my parents with stories of how the money wasn't enough to get the clothes, music, or other toys that I needed to survive the adolescent world. Most of the time they'd answer with, "when I was a kid, we didn't have...," which really meant NO. Today's issue of 1to1 Weekly shows how a similar dilemma plays out between marketers and the CFO.
"The CFO Is Not the Enemy" discusses how, like parents and teens, marketing and finance just don't speak the same language. They can't get on the same page about money issues, and as a result tend to battle it out more often than work together. Our suggestion is to create a dialog that ties marketing initiatives around financial metrics, where possible. What do you think? How do marketing and finance get along at your company, and what can be done about it?
That was an interesting article about CFOs and CMOs. Just a couple of points: I believe Finance is forward looking, but Accounting is typically not. After all, our key concepts in direct marketing have close ties to Finance; LTV is nothing but the Net Present Value (NPV) of cash flows attributable to customers and NPV is one of the first concepts one learns in an introductory course in Finance for evaluating projects. When Marketers use metrics not related to incremental profits generated as a result of their activities, it is because, they have not set up the mechanisms to capture the information or it is just too hard to do so under their current way of operating. Of course in some businesses it is easier to do so, than in others. But in my consulting I have found even packaged goods companies able to collect the information needed to tie marketing investments to customers’ behaviors.
Thanks for bringing up another interesting question.
I have to admit that I never came up with that question, as it seems so clear that data might tell you WHAT worked well and WHEN, but rarely WHY.
So we'll always try to give our customers a clear outline what you can really track and analyse.
We then tend to suggest additional qualitative studies, in-depth interviews with focus group members and generalize their comments to an extent. As we do user centred marketing, we actually try to integrate both sides, taking whatever is appropriate. And well, it's just welcomed by our clients.
As it may relate to CFO/CMO collaboration, I've been thinking through a commute conversation I had with the CFO of one of the major corporations I worked for that has stayed in my mind for more than 20 years. It was an impromptu chat that took place on a homeward-bound train out of Grand Central to New Haven.
The subject was "the bottom line" and the CFO's comment was a very clear commitment to the importance of that metric. However, he went beyond that. It was, as closely as I can quote it after this length of time, "a good bottom line is the goal; but, the only way to get to a good bottom line is to start with a good top line." Cost control, of course, went without saying for the "in between."
We did most of our business through large bids on major projects, so the CFO had a vested interest in the marketing process which is not unusual for large scale project bidding. He also had to remain watchful about affordablility and quality. The "CMOs" involved were the presidents of the individual companies that made up what was essentially a conglomerate turning itself into an integrated, end-to-end support services company.
The Chairman and CEO held the two sides of the discussion together with his vision of providing the maximum of support at an affordable price. Clearly, with a commitment to the bottom line through the quality of the top line, and an understanding among the financial and marketing leaders that customer satisfaction is essential to presenting a competitive price and winning bids, the benefits of collaboration among the CFO and CMOs of this company strongly support the interdependence of the two functions.
I recall, also, an earlier comment within another major corporation, that for bottom line health and growth the CFO's mission was to create an efficient cost structure (delivery system) through which tne CMO could drive volume. At the right prices, that was a formula for excellent bottom line results.
Elizabeth
This is an age-old problem and not just between marketers and financiers.
I first came across the problem when I joined a big-six management consultancy as a systems analyst, over 20 years ago. There the gap was between IT staff and business staff. The solution to the problem was 'hybrid staff': business staff who know about IT and what it can realistically do and IT staff who know about business and the problems it faces. The only problem is that these people were and are very difficult to find. I suspect the same goes for marketing-finance hybrid staff.
Graham Hill
Independent CRM Consultant
Interim CRM Manager
As a marketeer who has worked inside the walls of a Fortune 100 company down to those that were family owned and operated, I’ve seen plenty of disparity. Now that I have my own marketing services firm, I see this through a different set of lens.
One of the biggest hurdles to overcome is agreement within the organization as to what marketing is all about. Because finance is often left out of the mix, they may be the most disadvantaged. When that happens, they will likely be the first to raise an issue about ROI or overall marketing effectiveness.
In my business, we involve the CFO in our strategy sessions so that they are fully comfortable with our marketing recommendations and the expectations behind the execution of tactics, measurements, etc. This allows a controller or CFO to ask good questions that will help educate them about the marketing approach, process and plan. These are normally ‘black and white’ (left-brained) people who are highly skilled at granular financial analysis, but may not fully comprehend some intangibles in the marketing arena such as ‘brand equity’, awareness, market education, credibility factors, etc.
With one particular client, I found the CFO’s involvement extremely valuable. In fact, he commented recently to the company president that our services and fees were a ‘reinvestment’ into their business. He understood that the things we were delivering had a value and were considered in his mind components that represented a marketing investment for the company. The only way he was able to make this conclusion is that he was involved at the onset when we held our initial strategy session. He has been kept ‘in the loop’ on marketing developments and results. So, when it comes time to review, approve and pay invoices, he ‘gets it’. He doesn’t have to guess or ask a lot of questions about the marketing services that have been performed and why they are being done.
It’s all about common ground. If you fail to involve the CFO, then you’re going to be the first cut whenever there is a dip in business. Marketing is a bulls eye and finance guys love to hit that target whenever they can. If they’re engaged and well informed of the marketing process, this is much less likely to happen. Who would want to cut the fuel for their sales engine?
In other cases, its about setting clear expectations. This normally means some type of metrics such as news release pick-ups, publishing opportunities within a given time frame, response to seminar invitations, lead generation effectiveness, etc. Determining up front what is reasonable, valued by the company and what the goals are will help ensure common ground and language has been set. Showing the results in a marketing dashboard or progress report brings the visual ROI aspect to all marketing initiatives.
Finance by its nature is inward looking, focused on maximizing income and managing costs. Marketing is externally driven, focused on investing in systems and programs to build relationships with customers with the view to improving ROI. The CFO is not the enemy, but the compulsion with the bottom line is. A shared customer language where goals are set and measured against customer satisfaction would bode well for lunch at the same table.
I am reminded from my life in big advertising agencies how unreliable data collected from consumers is; when we once asked a focus group of customers where they had seen the product advertised, 65% cited a television commercial.
Only problem was, there was no TV advertising...
And Aunt Jemima pancake syrup...when focus testers asked pancake eaters for the name of their favorite syrup, many said it was Aunt J's....nice, but they did not, then, make syrup and decided to create a product to live up to their 'brand' name.
They can test and analyze and apply metrics all day long on post-consumer purchases, but this ends up being horribly, historically, unreliable and I wish them all good luck in this effort to quantify advertising.
Bottom line: consumers -- purchasers -- do not usually know what promoted the buy and data hungry CFO's will just have to live with it. All the king's horses are not going to turn this into a 'science'.