We have written extensively about how the role of the Chief Financial Officer (CFO) has evolved into just being focused on accounting and bookkeeping processes to one that is much m more strategic to help the CEO or business owner.
One of the areas that a CFO provides critical value is helping guide a company as to what the correct level is of investment and spending in marketing. Here in the San Francisco Bay Area (and especially in Silicon Valley but also the East Bay), there is tremendous pressure to grow sales at almost any cost.
A recent article on CSuite highlights the potential tension between marketing and finance:
“As marketing spend hits new highs, CFOs demand greater insight into ROI. With very different measures of value, there are huge opportunities for conflict – where is the common ground?”
Companies of all sizes are increasing their marketing budgets to record levels:
“According to Gartner’s recently published 2016-2017 CMO Spend Survey, CMOs are planning to allocate a record breaking 12% of company revenue to the marketing expense budget in the forthcoming year.”
That represents one of the single largest categories of business expenses and investments after labor costs. Yet, often, not enough attention and analysis has been devoted toward understanding what kind of impact and ROI this growing investment in marketing has yielded. This is clearly an area where a
good CFO can add tremendous business value.
While not all marketing costs and activities are directly quantifiable or measurable, there has been a very significant improvement with tools and frameworks like New Customer Attribution and Customer Lifetime Value.
Equally important, a good CFO must always be the guardian of the company’s strategy and business model. The CFO must be able to answer how the increasing spending in marketing is going to help drive overall growth, profitability, and cash flow of the company.
Finding common ground and purpose between marketing and finance is becoming a bit easier these days. More advanced measures and metrics that are connected to financial outcomes and KPIs are becoming more the norm. Close to real-time data, even as leading indicators, can make a huge difference in financial and strategic decision-making as opposed to lagging, monthly data as has been in the past.
“With a shared set of numbers and accurate spend attribution, CMOs and CFOs can embark upon a far better conversation. This is not the holy grail of marketing spend attribution – it is not possible to measure or analyse every aspect of the marketing mix, The number of permutations can be infinite, and a balance on investment into resource vs returns is needed. But who drives these numbers? This has to be a collaboration – CFOs cannot just sit back and wait but must become increasingly involved in the marketing analytics and own a portion of the analytics function. “