How CMOs Can Avoid Battle and Initiate a Win-Win
CMOs, wake up to a brutal truth: If you can’t report on ROI, you’re 100% a zero – at least in the CFO’s eyes. You’re a cost. That’s why your stomach sinks below sea level when budget talks roll around. It feels like you’ve lost the money wars before the first battle begins. And frankly, if all you plan to discuss with the CFO is social engagement, brand awareness and share of voice, you don’t have the proper munitions. While these qualitative measures may be fine for a bean bag toss, they’re ill-suited for a spar with the finance chief.
But here’s the good news: You can turn things around. By following three simple guidelines, you can step forward as a strategic advisor, pave the way to a collaborative relationship with the CFO and usher in new thinking for shared metrics in 2020.
Speak the CFO’s language. There’s no global standard for marketing reporting. What a “responder” means for one CMO may be considered a “lead” for another. Why introduce CFOs to metrics with variable definitions – especially when these measures have no relation to the universal reporting standards used by CFOs, such as GAAP and FASB? Finance chiefs want to know about revenue and revenue growth, profit and profit growth, and cash flow. They’re money managers; they place bets on where, when and from the business is likely to make profit. In their minds, CMOs are accountable for returning the money in the marketing budget (and more) over time. Keep this in mind as you report marketing’s contributions. Use the same health metrics as the CEO reports during the quarterly business review. Convey your marketing results at an enterprise level; don’t start off with campaign outcomes. The CFO wants to know if the business is growing or not. Address this first, then follow with drill-downs to explain the why and how (as needed).
In the best of all possible words, CMOs and CFOs share the responsibility for marketing performance.
Share select nonfinancial data, but only when relevant. While financial data should be the crux of your conversations with the CFO, some nonfinancial marketing metrics may occasionally pique the financial chief’s interest. These metrics may include customer acquisition and retention rates, up sell yield, Net Promoter Score (NPS) and market share. Path of purchase data might help the CFO with capital investment decisions. For example, if your data shows customers who purchase Product A are 85% more likely to buy Product B than Product C, CFO may decide to invest more in manufacturing Product B than Product C.
CFOs don’t always understand the gray areas surrounding the numbers. Look for opportunities to shed light on financial results. Let’s say customers in Florida aren’t buying one of the business’s most popular products. CFOs may not understand why. Maybe there was a shift in the Consumer Price Index or the area was hit by a tropical storm. As the voice of the customer, you have the opportunity to contextualize revenue within the buyer’s world.
Think like an investor. Many CMOs try to “educate” CFOs on marketing metrics rather than learning more about finance. If CMOs had a better understanding of capital, liquidity and balance sheets, it would be easier to grasp what it takes to meet growth return goals as well as their own responsibility in reaching that goal. However, CMOs generally see a small portion of the P&L. CFOs need to make transactional data available to CMOs. Then they can share how capital works and how decisions are made on its use. With this knowledge, CMOs will begin to understand the pressure on the executive leadership team and the board to meet growth returns. Imagine a CMO telling the CFO, “If you give us this money, we’re not going to give you the return you need by the end of the year. You’re better off spending it elsewhere.” Ideally, this is the way the CMO-CFO relationship should work.
In the best of all possible words, CMOs and CFOs share the responsibility for marketing performance. Success requires the integration of both executives’ skills. Once marketing and finance chiefs develop a strong rapport, they have an opportunity to co-create growth metrics for the future. What’s the investment and return in driving the buyer’s journey? As stewards of the customer experience, CMOs should have a strong voice in defining what matters and how this is measured.
Before this collaborative vision can become reality, the CMO-CFO relationship must grow beyond budget meetings. A good first step for CMOs is to look at their activities through a business health lens. This is the common view you and the CFO should share; let this context guide your conversations.
The next time you arrive at the CFO’s door, be prepared to answer these two questions: “What’s the value of the last dollar spent?” and “What will be the value of the next dollar spent?” Arm yourself with clear, data-driven responses, and you’ll win an armistice for marketing.