1 + 1 = 3: CFOs and CMOs Must Form One Team to Achieve Growth
Building your brands and achieving business growth are challenging even during the most stable periods. 2024 looks to be particularly challenging as all indications point to a tumultuous year:
- Stubborn inflation and high interest rates for a longer period than anticipated by the market.
- There will be elections in 50 countries, including significant elections that will shape the global order.
- US consumers are approaching tapped out status on consumer credit
- Potential growth slow-downs in emerging markets.
- Several significant international conflicts and wars occurring simultaneously.
- Geopolitical volatility as evidenced by current farmers protests in the EU.
As businesspeople, we do not get to choose our point in the geopolitical and macroeconomic timeline. Whether the best of times, or the worst of times, our priority remains the same: We must shepherd our enterprises to achieve maximum success given the circumstances. After nearly a quarter of a century of helping brands grow, we at Analytic Partners have lived through (and studied) a variety of business conditions across numerous industries and geographies. In our experience, a key finding is that Finance and Marketing share one overarching goal: to grow their brand(s). Their aim is to create value through growth and profitability. Yet the hurdles these teams face start with the modern corporate structure. Different functions are organized as discreet departments; you have Finance, Marketing, HR, Operations, etc. This has proven to be an effective way to manage the modern corporation for over a century. However, this structure, by its very nature, tends to create silos that hinder the flow of information. Sometimes departmental structures create conflicting operating models and goals. When it comes to Finance and Marketing, a common language and shared metrics is required so that both functions are aligned. Without a shared definition of success based on evidence-based metrics, there is a great risk that both departments will operate at odds with each other.
We’ve seen that strong communication and collaboration between Finance and Marketing can help accelerate revenue growth and unlock incremental financial improvements of 20% to 40%.
CMOs need to understand the challenges faced by CFOs
CFOs are responsible for ensuring financial stability and suitable investment strategies across the business. One of the challenges in their alignment with CMOs is identifying growth drivers and matching specific marketing activities to financial outcomes. Marketing teams often supply finance with channel-specific, siloed metrics like ecommerce conversions or brand awareness. Such metrics do not provide concrete evidence of how marketing investments translate into short-term or long-term financial gains. Additionally, sales cycle times vary, and that challenge Marketing’s ability to attribute financial gains to specific marketing activities. This gap in alignment is often caused by the lack of a commercial measurement framework across the organization that can help overcome siloed thinking and works towards the key success metrics for full business growth. In fact, before adopting a commercial measurement approach, 64% of customers surveyed said that Finance and Marketing were never aligned on the goals and objectives. What matters most to CFOs are outcome-based conversations that speak via commercial and financial metrics. Operational metrics and tactical marketing stats add context, but actual dollar performance metrics need to be the common language between Marketing and Finance.
Getting Finance to understand the challenges faced by CMOs
The key to brand health and brand growth sits in Marketing. Therefore, the most valuable asset of any business, the brand, is in the hands of the CMO. CMOs have the challenge of striking a balance between short-term revenue and profitability and long-term brand-building and customer acquisition. The impact of building and growing a brand is multifaceted, encompassing customer perception, loyalty, and overall brand equity, which are challenging to measure quantitatively. Traditional ROI models are based on historical report cards and do not adequately capture the full scope of customer-brand relationships. Additionally, the cumulative nature of brand building means that its true value may unfold over an extended period, making it difficult to attribute specific financial results directly to brand-related activities. CMOs grapple with finding metrics that convincingly convey the holistic value of a strong brand presence, often relying on a combination of surveys, brand tracking, and other qualitative measures to gauge long-term impact. There's often back and forth with Finance, particularly when choosing between brand-building and demand-generating initiatives to align with the bottom line. CMOs are also feeling increased pressure from CFOs and the board to demonstrate ROI through metrics like generated revenue and weekly sales results. But the increasing complexity of customer journeys across diverse channels is making it difficult to attribute and quantify the impact of marketing efforts on tangible business outcomes.
Bridging the gap with a commercial measurement program
A commercial measurement program can play a pivotal role in bridging the gap between Marketing and Finance by providing a framework for evaluating the impact of marketing activities on financial outcomes. It puts the customer at the center and incorporates internal constraints and external factors -- quantifying the impact of marketing activities on financial outcomes. The sophisticated models consider both Finance and Marketing KPIs, giving both departments the levers to drive revenue and sales. A holistic commercial measurement program surfaces growth opportunities that benefit the entire organization, breaking down silos, and creating a common currency to measure success.
Quantifying opportunities and impacts – together
To create a stronger collaboration and unlock those growth opportunities, CFOs and CMOs must find commercially aligned metrics that both leaders understand. This can be done by aligning on common success metrics, building trust through transparency and validation, and adopting a forward-looking approach to optimize, track and monitor results. What impact does marketing have on profit and customer lifetime value? What revenue is the new marketing campaign driving in the short and long term? These are just a few examples of questions that Marketing and Finance can answer when they work together towards the shared goal of driving shareholder value. Now is the time to break down the siloed thinking and create Commercial Intelligence. To overcome communication barriers, maximize profitability and turn marketing from a cost center to a “motor of financial results”, read our latest strategy guide, ‘CFO & CMO Strategy Guide: A Collaboration to Drive Growth’. In this guide, you will discover actionable steps every CFO and CMO can take to better collaborate and drive future growth with data-driven projections and quantifiable results.