CFO & Marketing: A Profitable Partnership
- CFO and marketing alignment. Understanding the CFO’s perspective enhances marketing strategies, aligning both for optimal company value creation.
- Investment perspective shift. Viewing marketing budgets through an investment lens helps in navigating uncertain markets and predicting outcomes.
- Aligning diverse goals. Recognizing and reconciling the different priorities of CFOs and marketers strengthens company strategy and financial health.
An excellent resolution for marketers in 2024 would be to make friends with your CFO (chief financial officer). Early in my marketing career I reported to the CFO (a little weird, I know). But in retrospect, this unusual setup has served me well. The CFO can be a solid partner and a wellspring of free financial advice on how to navigate market currents.
Let’s take a look at CFO and marketing alignment.
In 2024, with fears of a big recession receding, companies will need their marketing budget to fuel growth ambitions. An Ernst and Young survey found that 81% of financial professionals and 88% of marketers believe that collaboration between the two groups would improve marketing budget performance. To make this partnership work, marketers must understand more about the CFO’s world.
I thought I’d share insights I learned while working for my CFO boss and later reinforced by CFOs with whom I worked.
CFO and Marketing Alignment Lesson 1: CFOs DO Believe That Marketing Is Essential
But CFOs don’t see marketing in the same way marketers do.
CFOs view marketing as a primary lever of value creation, whose purpose is to generate profitable opportunities, so the company can earn profits. While I think most marketing leaders would recognize this perspective; I don’t recall ever having heard a CMO describe their job this way.
I came to work for the CFO in one of my first jobs managing marketing for a technology reseller. In that company, much of the marketing budget came from our vendors’ market development funds. Making good use of these funds — using them entirely and productively — was essential for company profitability as well as business development. Therefore, the CEO felt that the company was best served by having marketing supervised by the money guy.
As you would expect, as a direct report of the CFO, my one-on-ones focused a lot on money. I discussed typical marketing topics like awareness, messaging and events. Then, my CFO boss would ask me to translate the conversation into financial language and explain how they benefited the business strategy. He supported me getting an MBA, which further bolstered my business acumen.
I learned that the CFO doesn’t want to know everything about marketing, but they want to know anything about marketing that matters to company value. Dashboards for the CFO should answer two questions:
- How are you measuring the impact of your budget on outcomes that count?
- Are you a good steward of the resources the company has entrusted to you (i.e., money, people, data, technology)?
Keep detailed activity metrics within marketing for performance diagnostics and improvement and check with the CFO to gauge their interest before sharing creative.
Related Article: CFO Buy-In: Making It a Marketer’s Advantage
CFO and Marketing Alignment Lesson 2: The Marketing Budget Must Be Reframed as Investment
Here’s a conundrum: being pragmatists, CFOs crave quantifiable answers, but because markets are constantly changing, it is impossible to get solid, predictable, marketing ROI except for small slivers of the budget. Marketing is not a vending machine where you put your money in and out pops your desired outcome. Markets are uncertain, more like the weather, or the stock market. Therefore, marketing funds are risked, more like buying a stock, rather than being spent like buying a printer. Like any investment, outcomes are only semi-predictable.
I’ve learned that most CFOs haven’t thought about marketing in this way. Some will push back, convinced that more data and better operations could hammer down marketing outcomes. In one respect they are correct. Although precise, machine-like forecasting is unattainable, the use of better data and more advanced analytics, such as Marketing Mix Modeling (MMM) rather than the less-reliable rules-based attribution, can enhance the accuracy of predictions. This improvement helps in establishing a clearer connection between marketing efforts and business outcomes, even considering the inevitable time delays.
While CFOs may be reluctant to relinquish the pipe dream of certainty, they will understand the investment concept. It was my CFO boss that first pointed out the investment analogy to me years ago, and it completely changed my frame of reference. This may be the year to have the conversation about the reality of managing outcomes in an uncertain environment. A survey by Concur reports that 90% of senior finance leaders agree that their key task is to prepare their business for the unexpected.
When reporting outcome metrics to the CFO, there’s a “goldilocks zone” — not too many and not too few. Of course, you should report any data that you have connecting marketing actions to concrete results, but most marketing metrics are, at best, moderately concrete, leading to interim outcomes such as pipeline acceleration, that can be reasonably correlated to financial results.
Some marketing priorities, such as customer loyalty, brand value and influence, are very challenging to quantify, but don’t leave these out because these long-term investments build the strongest value. Whichever metrics you choose, avoid “metrics du jour.” You gain credibility by continuously reporting changes within the same metrics.
Related Article: In Turbulent Economic Times, 4 Ways CMOs Can Work Better With CFOs
CFO and Marketing Alignment Lesson 3: CFOs and Marketers May Have Conflicting Priorities
CFOs have long lists of important investment options. Should the company get more leads or hire more software developers? Update the brand or replace the antiquated payroll system?
Since marketing ROI can be vague, CFOs have a tough time comparing marketing investments to other opportunities across the business portfolio. The pressure to divert marketing funds to other burning needs can be intense because marketing budgets are often the largest bucket of “discretionary” funds (i.e., not committed to payroll or other obligations) available in a company.
This tug-of-war worsens if CFOs aren’t forthcoming about the company’s real financial situation. For example, they may tell marketers that the goal is high growth and that they aspire to be a unicorn or a market leader (strategies which require big marketing budgets), while behind the scenes, the company has cash flow problems, or a sale of the company is planned (indicating small marketing budgets).
Although, while there may be good reasons why this information can’t be shared widely, the disparity between voiced strategy and operational realities causes confusion and ill will. The same is true for lack of transparency about marketing performance. Trust erodes when marketers cherry-pick metrics to show just the stuff that makes them look good and hide difficult information.
If words and actions don’t match or if difficult information must be discussed, close the door, and have an honest conversation with the CFO. Even if details can’t be disclosed or if you don’t like the answers, at least you will be on the same page. CFO and marketing alignment matter.
You don’t have to report to the CFO to break down the silo walls between marketing and finance. The more each party learns about the other’s world, the greater the rewards for the whole company.
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