Why Marketing and Finance Must Collaborate

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These are some of the most challenging times businesses have ever had to face. The UK is suffering from rising unemployment – 600,000 paid roles went in between March and May this year and there are currently 9.1m workers on furlough – and whole industries are closed. Even businesses that have weathered the coronavirus storm better than others have seen hard-thought business plans turned upside down in a matter of weeks.

The media is full of stories of the dramatic changes taking place and long-standing brands are affected as much as newcomers – BP is slashing 10,000 jobs worldwide; Rolls-Royce is cutting 9,000 roles mostly in the UK. Many have reacted by reducing or stopping their advertising spend as marketing budgets have been cut.

Despite the argument that in times of crisis it’s more important than ever to maintain marketing – so companies don’t fall even further behind their competitors while the nation’s purse strings are tightened – finance often sees marketing spend as a cost center.

But this is a moment when the chief financial officer (CFO) and their marketing colleague must be allies. While CFOs may want to keep marketing as a percentage of revenue – which in the current climate will likely be falling – the CMO and CFO have the same overall aim, to grow shareholder value. And for that goal to be achieved, marketing and finance leaders must collaborate and focus on marketing as an investment – one that creates value, maintains brand awareness, pricing power, and is used to stimulate demand.

Marketing – working in tandem with finance – will increase shareholder value by helping acquire new customers and grow sales. If both are achieved, cash-flow is boosted in the short term, while longer-term branding and loyalty initiatives can ensure asset growth.

But what’s crucial here is that both teams are dealing with specifics, with the proof of return on investment (RoI) for all activities. So, at the heart of this collaboration lies the need for measurement – for both long- and short-term goals to be achieved – and marketers should employ independent measurement programs to demonstrate marketing’s value. With credible analytics, the business impact through improved marketing effectiveness, efficiency, and RoI can be identified.

The most successful measurement programs meet the CFO’s focus and blend metrics, research, analytics, and experiments.  At Analytic Partners, for example, we monitor and track the value creation for clients from their measurement programs. In 2019, we delivered $1.8 billion in impact across our global client base, which translated into a 40-times ROI.

There are several factors marketers should consider to be certain they are following measurement program best practices. The first is to recognize that a holistic business approach is needed. The most successful programs capture all aspects of business growth– controllable and non-controllable.  This results in better business impact across marketing, operational, customer/CRM, and new product launches. Leveraging experimentation to quickly test recommendations is key to prove results and enable faster reactions and decision-making. Experimentation, such as A/B testing and beyond, complements your holistic measurement program to better position you to face market challenges and improve performance.

The KPIs – these could be new customer acquisition, sales, profit, market share, brand-building – and metrics should be set across different functions. When this consistency is agreed, each department knows precisely what their roles are in meeting the metrics of success with performance judged against a set target or goal, and not just compared with historical performance.

Many financial measures can be considered in the context of RoI – gross and net revenue, profit, customer lifetime value – and finance and marketing departments also need to agree on where to leverage fully loaded costs ( by incorporating fixed and variable spend), or working costs (variable spend).

Many measurement programs stop right there, but the most successful programs will look deeper into instantly understanding performance drivers to plan ahead.  By reviewing different scenarios where risk and opportunities are tested, along with performance measures such as competitive and landscape business assumptions, future cost assumptions, and real-world business constraints,  further optimizing can be carried out and give a better understanding of risks and opportunities.

These processes are constantly evolving and adapting to changing business needs and the external environment. Successful measurement can only be achieved with continuous learning and then acting on that learning to refine and improve. Business performance goals may change as companies navigate these torrid waters and CMOs and CFOs need to adapt so they are measuring what they should – not just what they can.

Independent measurement programs hold everyone to account. Scrutinizing spending may be uncomfortable and challenging but it is vital for business survival – it also introduces rigor into marketing and allows marketers of all levels to quantify how marketing creates brand value.

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