The budget war is never a pretty one. More than ever, marketers are being forced to stretch the dollar. With no way out, they now must learn to better collaborate with their finance divisions to find the right recipe for a brand's success and business growth. But by no means is this easy.
While both might have the business' success in their minds, the idea of this success might vary.
According to a Forrester study commissioned by Neustar, despite both marketing and finance teams having the best intentions for the business, there is often a lack of collaboration between the two functions.
The study found that while both marketing and finance divisions understood the importance of the relationship, there are barriers to effective collaboration as both divisions see the business in different ways. While marketing’s goal is to find new customers and improve brand perception, finance’s goals is to keep costs low and profits maximised.
About 78% of respondents felt it was critically important that marketing and finance teams are aligned on business objectives, but few felt their company was well aligned. Only 15% said marketing and finance plan and work collaboratively towards shared goals. Meanwhile, 21% said that marketing and finance set goals together but approach and deliver on those goals independently.
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From the finance perspective, business success is measured in revenue and profit, whereas in marketing, metrics range from awareness and brand equity to new customer acquisition or customer lifetime value.
So what exactly is holding back the relationship between finance and marketing?
Lack of connection between marketing KPI and business KPI
The Forrester survey found that only 36% of companies surveyed considered their marketing KPIs and overall business KPIs to be very well connected. Hence, tension is created between finance and marketing as it causes problems for measuring success.
Only 36% of companies surveyed considered their marketing KPIs and overall business KPIs to be very well connected
This has resulted in a skewed perception of marketing, with 47% of respondents stating that companies view marketing as a cost centre rather than a profit centre. 72% of respondents ranked processes as one of the top three challenges in the way of the marketing and finance relationship. This includes the process in which marketing budgets are decided. 41% of companies said that marketing budgets are determined by the finance team based on a derived number from the revenue/earnings goals. This percentage was higher for c-level survey respondents at 52%.
Hence the report shows that a majority of companies still take a top-down approach to marketing budgets which reduce opportunities for collaboration between the two divisions.
Next are technology challenges, centred around the value a business places on measuring the impact of marketing. 58% cited difficulties integrating systems that track marketing campaigns with systems that track business results as a top challenge.
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However, there is a stark difference in perception between marketing and finance respondents. 55% of marketers believe their department is viewed as a cost centre, while only 40% of finance respondents view it as a cost centre. This means that marketers are experiencing the challenges of being considered a cost centre even though finance leaders do not completely view them as such.
With this in mind, we ask local marketing leads what they find challenging when working with their finance heads.
Clarence Chew, Decathlon’s head of marketing and communications, said the CMO-CFO relationship is definitely one which is important and crucial as it is directly tied to the business growth and P&L of a company.
“When it comes to the marketing budget, CMOs tend to look upon the budget as an investment and CFOs tend to see it as a cost. There needs to be a way for CMOs to bridge those two perceptions and come to a consensus,” Chew said.
At the end of the day, Decathlon’s Chew feels it is the CMO’s onus to foster a good relationship with the CFO to ensure both have a good understanding of each other’s job scopes. But finding ways to build the relationship will differ from person to person.
Take the CFO out for a beer and let a good conversation take it from there.
And marketers are not alone, PR folks speaking at a recent PR Asia conference also said being BFFs with your CFO is vital in getting the marketing and PR wheels turning.
Gaynor Reid, vice president communications Asia Pacific, AccorHotels said making friends with the CFO is often a first priority from the get go. However, this also had to be backed by credible results and as suchit is also important to establish oneself as a decision maker who is part of the strategy process. This is crucial in increasing budget prospects and learning to speak the business language. She said:
You need to present it as to how it will help the business. Don’t just report the strategy, be part of creating the strategy.
Agreeing with her is Lavinia Rajaram, regional head of public relations (Asia), AirAsiaExpedia, who highlighted the importance of establishing oneself as a trusted partner to the business. This is in addition with having a seat at the management level to be able to influence stakeholders.