When the going gets tough, a typical reaction for business leaders is to make cost cuts. Smart CFOs approach cuts through a return on investment (“ROI”) lens–reduce cost in areas that won’t erode revenue, key investor metrics or strategic initiatives. Unfortunately for Chief Marketing Officers (CMOs), it can be difficult to justify their team’s contributions in quantitative, ROI terms. CFOs can change that by working with the CMO to help convey their results in the language of finance. With clear visibility into marketing costs and returns, the CFO and the CMO can work together to strategically redeploy resources to high ROI activities rather than make painful general cuts that erode Marketing’s good work.
A rosetta stone for finance and marketing
Finance and accounting teams speak the language of general ledger accounts, revenue mix, assets and liabilities and operating and capital expenses. Marketing teams, on the other hand, talk in seemingly more esoteric terms like awareness, campaigns, personas and marketing qualified leads. These two domains differ as much in language as they do in how they define success. In 2023, remaining unaligned on Marketing’s needs isn’t an option, especially when under the stress of market volatility and economic uncertainty.
So, how can these departments speak the same language? What is the CFO-CMO Rosetta Stone? The framework coalesces around three pillars: data, planning and decision making.
Data: To the Office of the CFO, marketing data can read like a different language—especially as it originates from various marketing-specific sources and services. With the help of technology, CMOs can turn marketing data into something finance and accounting teams understand such as fully allocated costs for each campaign and the related return in leads and ultimately revenue bookings. It's critical that these data sources are identifiable and the insights agreed upon upfront, so everyone is aligned on the story being conveyed.
Planning: With a shared set of data, CFOs and CMOs can plan collaboratively. It also gives those teams a foundation from which to align on goals, create better justification for specific campaigns and better define cycle times such as lead-to-close so the CFO can improve forecast accuracy.
Decision making: But these two highly paid C-suite executives aren’t hired simply to organize data and lock in budgets. The CFO and the CMO are expected to monitor business performance and make adjustments to improve outcomes. As a result of the first two pillars, our illustrative CFO and CMO start their year totally aligned on the plan and how to measure outcomes. This creates the conditions for a constant conversation on how to stay efficient and best adjust investment to high ROI areas. In this world, a CFO may actually beg a CMO to spend more than his or her allocated budget on certain campaigns that are producing great financial results. I have asked my own CMO to do this more than a few times in the past year!
A CFO is marketing’s free and personalized financial advisor
CFOs should be viewed as a source of unlimited free financial advice, customized just for the marketing team. While CMOs interact with many parts of the business - whether its sales or customer-facing teams, it’s still difficult for other departments to understand how Marketing fits into the overall business. Only Finance has that perspective and they must be able to help CMOs show their value.
Sure, a CFO might need to tell the CMO some things they don’t want to hear. When markets constrict, cuts and reevaluations will need to be made and budgets might be harder to justify–CFOs want Marketing to hit every goal, both short-term and long-term. When you’re talking and sharing information continuously, it’s easier to stay aligned on how and when Marketing will reach those goals.
Organizations are already well into tightening their belts in preparation for a potentially lean 2023. But we don’t really know what the year will bring and too much tightening could leave an organization unprepared when opportunity does come knocking.
Knowing this, CFOs need to find the levers of value creation, wherever they are. Marketing’s core responsibility is to generate opportunities for the organization. Aligning those two things is what makes the CFO-CMO relationship so challenging. It’s always been difficult to quantify marketing attribution, connect marketing effort directly to generated revenue and pinpoint the business ROI of marketing campaigns. This is where technology can pull data from the various marketing tools and help CMOs measure their marketing plans in the language of finance. Sales has been using CRM tools for decades to ease forecasts and create concrete sales plans and now it’s time for Marketing to do the same.
Marketing is a complex domain. But, when the CFO and CMO work from the same set of data, plan to achieve agreed upon outcomes and create a process of continuous collaboration, they’ll both get more of what they want: wins.