Sometimes it seems we’ve been talking about marketing and sales alignment forever. While it doesn’t always feel like it day to day, progress has no doubt been made, thanks in part to a rise in both focus and lead management tools available to help.
However, in an age where marketing investments are under greater scrutiny than ever, when CMOs are held accountable to so much more than ever before, it’s time to focus on the relationship between marketing and finance. This partnership is just as important (and frankly, often overlooked), not only because finance holds the purse strings, but also because the CFO continues to take on a much more strategic role in the organization.
The CFO could be a highly influential ally for a marketer, one who could provide more power, flexibility, and a stronger voice within an organization’s leadership team. However, if the CFO sees marketing as a cost center, the result is likely budget cuts, rather than budget increases.
Finance is also responsible for understanding business results (and what results will be) in addition to who is responsible for what. If a CMO wants credit for marketing’s contribution to revenue, the CMO must form a strong bond with the CFO, set expectations of what marketing success looks like, and work closely with the CFO to gain trust.
New Research Uncovers The Gap Between CMO And CFO
My team at Allocadia recently conducted an empirical study on the topic of marketing performance management (MPM)—a practice that includes planning, budgeting, and measuring results of marketing investment. (Note: Access to study requires a short registration.) Alignment between marketing and finance is one of MPM’s key characteristics. Companies that excel at MPM expect their marketing budgets to increase, see significant revenue growth (at least 10% year over year), and have a higher confidence in their return on marketing investment than the average marketing department.
We collected responses from more than 200 organizations across 13 industries, spanning an equal number of B2B and B2C participants. Thirty percent represented revenues of over $1 billion, and nearly half have revenue over $200 million.
What we found underscored a major alignment problem in the industry.
Only 14% of marketing organizations in our study see finance as a trusted strategic partner, and 28% either have no relationship with finance or speak only when forced to.
The study also found strong correlations that underscore the importance of maintaining this alliance, as high-growth organizations were found to be three times more likely to align marketing and finance.
These organizations align on investment tracking, measurement, budgeting, and returns. Fifty-seven percent of organizations expecting 25% or more revenue growth report that marketing and finance often or always work well together to track investments and measurements, compared to only 20% of companies expecting flat or negative growth.
Getting onto the same page about processes and approaches is also important between marketing and finance. Marketing organizations that expect larger revenue growth report significantly better alignment.
In the figure above, 61% of companies expecting 25% or more growth report consistent (often or always) alignment with finance on the measurement of budgets and returns. Those expecting flat to negative growth report the same only 27% of the time.
The most successful marketing departments forge a strong partnership to maximize their resources and demonstrate their continued impact. Forty percent of companies experiencing flat to negative growth say they are rarely or not at all consistent with finance in their reporting. Finally, well over 50% of organizations expecting revenue increases of 10% or more have a strong relationship with finance.
Three Actions To Take Today
1. If you don’t have a strong relationship with a finance counterpart, make this a priority today. Whether that be the CFO, the head of financial planning and analysis, or one of their lieutenants, find someone. They can help you with everything related to investments and results.
2. Bring finance into your planning and budgeting process. This may seem counterintuitive at times, but finance values predictability over anything else. If they understand how much and where marketing is going to spend, they will be more comfortable. If they start to gain trust in your projections, they will give you the opportunity to test and try much more.
3. Discuss marketing’s measurement practices with finance, as well as how marketing performance will be judged. Again, finance likes predictability, so set expectations of what success looks like, then update as progress is made or as changes happen. This will provide finance with an important view that elicits trust. When this trust is gained, they will look at marketing as a strategic partner, rather than as a cost center.