Additionally, in 2019, marketing expense budgets in North America fell from 11.2% of company revenue to 10.5%. This is the lowest they have been in years.
An EY survey of more than 300 marketing and finance leaders found that there are several areas the two functions disagree on. When it comes to what marketing should prioritize, CMOs say they prioritize retaining and improving customer relationships. On the other hand, CFOs tend to think marketing should prioritize using stronger data to drive growth.
The two functions also seem to have issues agreeing on targets. 34% of CMOs and 25% of CFOs said they fail to come to an agreement when deciding which targets marketing should be aiming towards.
Despite this, both teams want to mend the relationship. 90% of respondents said they believe marketing and finance need to work more closely together on digital transformation. 83% of respondents said their companies’ marketing efforts would be more effective if marketing and finance forged a closer working relationship.
In order to get the financial backing marketing needs to execute its 2020 strategies, CMOs need to be proactive in their approach to mending relations with finance. Here are three practical steps you can take to get on the same page as your CFO.
A major hurdle every marketing team faces is how to prove the success of a marketing activity by tying it to the bottom line. Convincing finance that their budget was spent effectively when they view marketing as a necessary evil – a cost to be reduced where possible – can be an uphill battle.
“Marketing always seems a bit “woolly” to the finance department,” says Alistair Thompson, who works as an outsourced CFO for a number of companies.
He advises that marketers “be absolutely clear in their own minds about how they’re bringing in customers (or at least marketing qualified leads, if that’s how the process is structured), improving retention, generating referrals or whatever other business objectives the marketing has as that gives a solid basis for shared dialogue with the Finance Dept.”
When you start speaking the language of finance, in terms of quantifiable data that can be traced through to how it adds value to the business, this helps break down the communication barrier that plagues many of these relationships. But what about the marketing activities that are traditionally more difficult to connect to the bottom line?
Let’s look at content marketing, for example. Commissioning an agency to create a lengthy piece of content can often cost thousands of dollars. Over a year, content can eat up a significant proportion of the marketing budget – 29% of B2B and 26% of B2C budgets.
The majority of businesses are still heavily reliant on antiquated formats to host their content. For example, the PDF and similar offer very limited insights such as the number of downloads. If you’re faced with an angry CFO questioning the success of your costly content, downloads aren’t going to mean anything to them.
More modern content formats are capable of offering meaningful insights such as:
These metrics are proof of success to a CFO because they’re actionable and impact the bottom line. Sectional analytics offer insights into highly specific areas of interest among your target audience. In addition, they inform future content creation, and give valuable pointers on how to improve and repurpose existing content. Individual reader tracking reveals true intent of readers, helps marketing offer highly personalized messaging, and provides sales with the knowledge they need to close deals more efficiently.
Better data tracking can help prove the success of a marketing activity retrospectively. However, getting financial support in the initial planning stages can still be challenging. Since marketing and finance are fundamentally very different business functions with the same ultimate goals, it’s often difficult for finance to be able to make the same connections you’ve made in terms of tying activities to those goals.
Andrew Warner, CMO of jobsearch site Monster, says, “One of the things I’ve found through my career is generally, if marketing build ROI models to prove the value of marketing in isolation, it’s always going to be treated with skepticism. There’s the risk it could sound like marketing saying ‘we’re doing a great job’ and finance saying ‘really?’ So then you end up in a them versus us situation.”
To solve this, Monster’s marketing team actually brought finance into the strategic decision-making process to help them contextualize marketing’s decisions. This cross-functional team build on the ROI model and use a data framework that relates back to the business.
“Finance are beginning to see that marketing plays a key role in terms of aligning marketing and business metrics. As a result, the organization is able to be more strategic across all functions. Furthermore, we can have more of an informed debate about some of the decisions,” says Warner.
The CFO, Tom Davidson, and CMO, Zoe Clapp, of UKTV have taken a similar approach to how they collaborate together. As leaders of their respective functions, they have taken the responsibility of building trustworthy relationships. This means they are then able to push the message down to junior members of the team.
“I know that when Tom is making financial decisions he’s thinking about what’s the impact on marketing,” Clapp explains.
“Similarly, when I’m making decisions about the marketing budget or the direction we’re going in, I’m thinking about whether that’s a good use of the company’s money. Is that pushing us in the direction we want to go in? There is that level of trust between us from looking at the company as a whole.”
Lack of effective communication is largely responsible for the marketing-finance rift. The two functions tend to attract very polarized groups of people. Marketers are typically creatives and finance people typically more economists. This is a sweeping statement of course. However, when it comes to vocabulary, the two functions traditionally communicate in very different ways.
In advertising veteran Rory Sutherland’s book, Alchemy: The surprising power of ideas that don’t make sense, he explores the unique position marketing holds within a business. He explores why some of the decisions made by marketing don’t make sense to the other functions.
“We spend very little money and time looking for psychological solutions. This is partly because, in attempting to understand why people do things, we have a tendency to default to the rational explanation,” he explains. “The people at the top of organizations are largely rational decision-makers who are naturally disparaging of psychological solutions.”
The CFO is possibly the most prominent rational decision-maker within senior management. Justifying a marketing activity to them on the basis of how it will make someone feel can be very difficult. But marketers are very aware of the power of emotional levers.
Classic economic theory is an incomplete guide to human behavior. Numerical measures don’t drive all of our decision making, but emotional responses almost always do. Marketers understand the automatic, unconscious, under-rated pull of emotional decision making that drives purchasing decisions.
“Marketing is the science of knowing what economists are wrong about,” says Sutherland. When justifying marketing expenditures to finance, adapting the language can be a powerful tool to get buy-in.
Behavioral economics, although imperfect, are closer to the vocabulary and logic that finance people use every day. It’s a way of contextualizing psycho-logic and irrational emotional decisions in a way that finance can actually get on board with. If you are able to get finance’s support on these activities, the potential opportunity for the business could be huge. In addition, marketing’s profile within the business would be raised.
As Sutherland says, “Only when we abandon a narrow logic and embrace an appreciation of psycho-logical value, will things improve. Once we are honest about the existence of unconscious motivations, we can broaden our possible solutions. It will free us to open up previously untried spaces. We can experiment in resolving practical problems if we are able to discover what people really want rather than what they say they want or feel as though they should want.”
Being able to recognize, understand, and leverage the human aspect of a business is one of marketing’s greatest strengths. Marketing leaders continuously face rational decision makers within their businesses. However, if communication with finance is strong, the ‘irrational’ decisions can be explained through behavioral economics. Further to this, there’s actionable data at the other end to prove the success of marketing activities. As a result, marketing and finance can work together to achieve key business goals and drive growth.
A round up of insights, trends, and tips on the world of content marketing