Many CFOs have taken note of the valuable customer data that digital technology is generating for the marketing department and have sought a closer relationship with the chief marketing officer, a global EY survey on the changing role of the CFO suggests.
Nearly two-thirds (63%) of the 652 CFOs polled by EY said their involvement with marketing has increased in the past three years, and 54% said they are collaborating more with the chief marketing officer (CMO) to develop new products and services.
A strong relationship between finance and marketing can help a business achieve profitable, sustainable growth in the digital economy, but the CFO and the CMO have to first overcome relationship barriers such as the absence of common tools and processes and continued cultural differences.
“For organisations to remain relevant and thrive, the CMO needs to call into question all aspects of the marketing mix – across products, price, distribution channels, and promotions,” EY says. “The CFO, meanwhile, needs to make the strategic investments that will enable established companies to adapt without cannabalising their inherent strengths, and new companies to leapfrog their competitors.”
Not enough collaboration
Traditionally, CMOs have had a closer relationship with the CEO than with the CFO. Sixty per cent of executive managers polled in a 2014 EY study considered the business relationship between the CMO and the CEO strong. Only 43% said the CMO and the CFO had a strong business relationship.
Although many CFOs have recognised the value of working more closely with CMOs, EY’s 2015 poll suggests CFOs and CMOs still don’t collaborate enough:
- Fewer than half (47%) of the polled CFOs felt they made a significant or very significant contribution to improving customer segmentation and insight, which can help a business differentiate itself from the competition.
- Measuring marketing’s return on investment was a high or very high priority to more than half (59%) of CFOs polled, but only 13% said the agendas of marketing and finance were aligned.
- Of the 20% of CFOs who considered product portfolio optimisation a very high priority, 81% reported close collaboration with the CMO. Of the CFOs who prioritised product portfolio optimisation less, only 47% reported a close relationship with the CMO.
- Only 25% of CFOs said they are collaborating more closely with CMOs because of the shift to digital within the business.
To overcome the barriers and for their relationship to be successful, CFOs and CMOs should:
Agree on the metrics that matter for enterprise value. About one-third (32%) of the CFOs polled said the absence of a clear set of key performance indicators linking financial performance and the marketing agenda is one of the biggest barriers preventing a closer relationship with the CMO.
To come up with metrics that work for both functions, finance leaders will have to be mindful to include hard financial measures and more nuanced, non-financial measures to assess factors such as the value of having a well-known brand name.
Bridge the cultural divide between the two functions. Thirty-one per cent of the CFOs polled blamed cultural differences for keeping finance and marketing from collaborating successfully. To overcome the barrier, CFOs should make both sides aware of their different mindsets and encourage dialogue to help accomplish the business’s strategic priorities while staying within the business’s risk-tolerance limits.
Collaborate on marketing’s analytics transformation. One-quarter of polled CFOs said marketing is too difficult to quantify, but Big Data and advanced analytics are transforming marketing. CFOs can ensure the structures and investments are in place to help marketing manage information security and turn the data into meaningful intelligence.
Team up on the marketing planning process. Twenty-nine per cent of polled CFOs didn’t see the value in collaborating with CMOs, but businesses are looking beyond what has worked and what hasn’t in the past.
In the digital economy, effective marketing planning is essential for driving profitable growth, and finance can create value by helping ensure that marketing’s strategic planning is aligned with enterprise objectives.
—Sabine Vollmer (email@example.com) is a CGMA Magazine senior editor.