If marketing is to be seen as an emboldened contributor to the business, CMOs can no longer be on the defensive about the challenges of marketing measurement and business alignment. They should instead go on the offensive with the CFO by their side. Because marketing bears the burden to demonstrate its business value, anything less than a transparent partnership with finance perpetuates skepticism of the marketing function, said a recent report by Forrester. Yet, many CMOs still prefer to keep their CFOs at arm’s length.
It’s no secret that CFOs can become aggravated with marketing jargon.
To avoid this, CMOs must speak in terms on par with their financial counterparts — something that many marketers fail to do because they often give marketing answers to financial questions, said the report.
As Mastercard’s CMO Raja Rajamannar warns, “Unless marketers equip themselves with data, finance acumen, and the ability to correlate marketing activity with business impact, they will become hopelessly obsolete and get left behind.”
A starting point is to take basic business finance training, which can be done formally through external classes or informally with an internal CFO ally. Then, as the marketing function becomes more confident in the numbers, it needs to move from defense to offense.
It is also important for marketers to paint a picture of success. CFOs want to know what the business is getting in return for the dollars spent on marketing.
Simply saying, “Marketing needs to implement these projects and hire additional people to meet the needs of our customers,” doesn’t cut it.
According to Mike Gerrish, chief marketing experience officer of BCBS of Kansas, “You’d better be making or saving money or show a quantifiable result.” His CFO counterpart Ann Shelton adds that without providing support for how expenditures are contributing to the growth of the business, customer satisfaction, and/or operational efficiencies, a CFO views this as increasing the cost to the customer without the corresponding benefits. In making the business case, CMOs should show the CFO the investment equation for growth: the potential incremental revenue from marketing initiatives minus their costs while factoring in any risks.
CFOs are also often skeptical of marketing because of its high cost and lack of financial transparency.
On one hand, there’s the common excuse that marketing is hard to quantify, but as Rajamannar explains, “You cannot take the stand that ‘everything in marketing cannot be quantified.”
According to Forrester’s interviews with CFO, it is found that when revenue increases, marketers often attribute it to “insightful marketing strategies and/or greater spend, while decreases get rationalised as changing market dynamics.” It’s important for the CMO to be clear on what marketing can accomplish and what it can’t.
When speaking to CFOs, marketers also need to ditch the marketing metrics. CFOs want to talk about top-line growth and bottom line savings, period. Dave Schneider, CMO at Red Wing Shoe Company, said:
No one in the C-suite wants to hear about email open rates, social likes, or PR impressions.
Markerers often fall into the trap of marketing metrics versus focusing on business metrics. CMOs should embrace key performance indicators (KPIs) that tie marketing’s value directly to the business, incremental revenue, profitability, and marketing costs.
So how can you stop annoying the CFO?
Well, first of all, start using metrics that report short and long term business impact of marketing. Successful B2C CMOs align their marketing objectives to business goals in partnership with finance to ensure that marketing contributes to overall growth and long-term value. When marketers say “short term,” they usually mean fewer than three months, with a hyper-focus on metrics that are quantifiable and immediate, such as sales conversion rates and cost per acquisition.
In Forrester’s 2021 Global Marketing Survey, 35% of global B2C marketers indicate that they routinely use net-new customers as a metric for assessing acquisition-based campaigns.
Brand perception is also an important metric as they are leading indicators that can provide early signals of financial lift or distress. Marketers should evaluate post-campaign perceptions and equities on an ongoing basis using a brand tracking program as well as work with the CFO to connect equity to the company’s business and financial results.
Long-term brand value estimates also matter as they can show how brand strength impacts the financial performance and value of a company. As long-term brand value models typically utilise traditional financial valuation tools, a CMO-CFO partnership is vital in ensuring that this methodology, whether homegrown or from an external partner, meets the needs of the company.