The best of frenemies

It could be said that marketing & finance functions have historically been pretty distant from each other. Stereotypically they are the organisations’ left and right brains, but in practice it’s often less of a Ying & Yang relationship, more Punch & Judy. 

It’s a bleak picture. According to a recent US study, 7% of CMOs report a non-existent relationship with their finance counterpart and nearly a quarter only speak when they really have to! Although nearly half did report either an improving relationship or good (but limited) collaboration, just 14% of CMOs regard finance as a trusted strategic partner

What’s changing?

• Today’s landscape is more conducive to – and demands – a far more effective working relationship between the two functions. With lots of acquisition activity in consumer-packaged goods, there’s more focus from investors on the enterprise value (EV) of a firm. The CFO needs to be able explain how marketing investment makes the business more valuable.
• Product portfolios are coming under pressure, with extraneous SKUs being removed by retailers and often replaced by own label or higher margin branded competitors, this can have impacts on sales, margins and overhead recovery.
• Online price transparency and the growth of discounter chains have made pricing a key battleground – it’s harder than ever to push through price increases which many CFOs see as the most direct way to bolster the bottom line.
• The digitisation of communications media, customer relationship management systems and so on, mean it should be easier to measure the return from marketing activity.But in an EY survey, whereas 79% of CFOs saw measuring marketing ROI an important or very important priority, just 13% believed marketing/finance agendas are aligned.

Getting it right

If people in both functions are able to form powerful alliances, then this can help turbo change performance and make for a friendlier, less-silo-ed workplace.

Too many finance directors continue to see themselves as custodians of cost and control, whereas they can bring valuable strategic and forecasting skills to the mix. Senior marketers are sometimes guilty of extreme budget secrecy, but a good finance person can help them with analytical approach needed to get more for their investment. 

Finance directors may have a better insight into the expectations of a firm’s investors, so closer collaboration with finance helps the marketing director demonstrate how brand activity connects with high level financial goals. 

Helping finance to understand customer segments, competitors & consumer insights – and involving them in marketing planning – gives the CFO what she needs to actively support the marketing strategy. After all, it’s quite difficult for a CEO to argue with finance and marketing execs that are united.

Last, but not least, a commercially savvy marketing exec has better career prospects. A mastery of both marketing, numbers and strategy is a potent mix and makes the CMO far more promotable. 

5 things you can do now

Based on our experience with exec teams and review of published material, here are five practical things you can do as a marketing leader to create a strategic partnership with finance.

1 - Get to a shared view of how marketing metrics connect with the firm’s goals and ultimately create enterprise value. Understand what is important to the CFO: what are the conversations he’s having with the CEO and investors?

2 - Re-frame the role of functions in a positive way.Consider how you want finance to behave. For example, using the term ‘marketing investment’ implies allocating resources for future growth; whereas ‘marketing budget’ or ‘spend’ implies expenditure and cost control are required.

3 - Have a grown-up conversation about the short- & long-term value added by marketing activity. Any fool can shift volume with aggressive-enough promotional activity, but most finance directors do ultimately recognise that developing strong brands and marketing systems helps to attract more customers, protecting and growing revenues over time.

4 - Involve finance in marketing planning and try to reach a balanced consensus about priorities. For example, in a specific year, it may be that portfolio optimisation and net revenue management are bigger company priorities than new launches. That shouldn't be a problem for marketers if it's the right thing to do for the business.

5 - Ask for help where you need it. For example, many FMCG marketers still feel under-equipped when it comes to measuring and improving return on investment. Most analytics are available at a very tactical level and - despite the promises of tech - it can be incredibly hard to correlate investment with financial return, at least in the near term.

Final thought

• If you want a better relationship with finance, you need the support of your team. How can you encourage your team to develop greater financial acumen and build bridges? One of the most useful training sessions I organised as a marketing director in corporate land, was an internal ‘finance for marketers’ workshop. Could your team benefit from this sort of intervention?
• Encourage your marketing team to think and behave as through the business was their own. It’s an old, but extremely effective mantra. It's a universal truth that people are more astute with their own money!

This article first appeared in 'Food for Thought' my monthly newsletter. If you'd like to receive your own copy of this 15 minute read for marketing leaders simply click here.