Four Easy Steps to Wreck the Marketing-Finance Relationship
And Three Ways to Bring it Back Better
I called my friend Brody Merrill a few weeks ago to congratulate him on his new job as CFO at American National Insurance. In the course of reminiscing about working together, we somehow got onto the topic of the best way to destroy the relationship between finance and marketing.
“Start by trying to sell me something,” Brody recommended. “CMOs seem to have ‘sales’ as their default setting, but CFOs are the hardest people in the world to sell to. We’re trained to optimize decisions to create value — to do that, we need facts and time to understand. It’s almost insulting when marketing pushes ideas whose size and scale aren’t supported by facts.”
“That’s good,” I said. As a marketer, I suggested that the CFO should take those personality traits to an extreme. “Tell me I can’t do something — or better yet, that you won’t let me do something — because it doesn’t fit in your model. Bury me with requests for more data, and make your ‘approval’ a moving target.”
“After that, you should go around me, straight to the top.” Brody countered. “Get the CEO to buy into your idea and put me in a position where I have to choose between doing what you want, or trying to change the boss’ mind.”
“Or,” I said, “you could pick a fight with me in a group setting — an executive team meeting, or a business unit review. Poke holes in my assumptions and call for more data… make me look irresponsible.” I thought for another moment. “Works best if it’s a total blindside.”
We had a good laugh and could have gone on a lot longer. But then Brody made a really interesting observation.
“Ultimately, marketing and finance are in the same position relative to the business,” he said. “We’re advisors. Our success is based on our ability to influence — we’re both fighting for status.”
But, we wondered, why are marketing and finance so often fighting each other for that status? Does it have to be a zero-sum game? Is there a better way?
Strategy Unites, Tactics Divide
Earlier in my career, I was as guilty as anyone of not engaging finance until the last minute. I rationalized it a dozen ways, most of which were a variation on the themes of “unconstrained thinking,” and “maximum creativity.”
Eventually, I got smart.
When marketing and finance only come together to finalize tactical plans and assess performance, each side faces pressure that favors conflict over collaboration.
Marketing is already heavily invested in the work, both in the expectations of the company and the resources and effort they’ve expended.
Finance, meanwhile, has to walk a tightrope to maintain its position as a trusted advisor to the business. If they don’t do enough to challenge the work, they risk looking like they’re not adding value. If they go too far in challenging the work, they risk being scapegoated for derailing progress.
But starting (or re-starting) a marketing-finance relationship at the strategic level provides fertile ground for collaboration since it draws on the shared strengths of the two groups and alleviates some of the time pressure.
“We’re both working from the same starting point, and aligning our visions,” said Brody. “We’re watching for trends and trying to understand them so we can create value.” What’s better is that the two groups bring complementary perspectives to the table: opportunity and impact.
And what’s best is the chance to create shared long-term performance expectations and build trust between the two groups. This is especially important, Brody said, when marketing wants (or needs) to go beyond what’s been proven in the past. “Finance is always going to want to calculate, analyze and unpack facts and projections,” he said. “But I know there are times when I’m going to be asked to support things I can’t prove.”
What’s important at that point, Brody said, is “having some definition of success, even if it’s not financial. If the two groups can come to a shared agreement on how that ‘swing for the fences’ effort connects to corporate strategy, that’s at least a foundation.”
Know Your Audience
One of the most important functions of marketing is building a deep understanding your target audience, and engaging them in relevant ways. Personally, I’ve done it successfully with everyone from military recruits to multi-millionaires. But I’d never done it with a CFO.
So I asked Brody what I needed to know about my finance partners — how they think, how they work, and what’s important.
“The default setting for finance and the CFO is generally ‘control,’” he said. “The great CFOs can look ahead to the long-term, but there’s so much pressure from short-term goals and issues.” Plus, he added, “We’re first order people — we want to see the data ourselves. And we especially like to see it first.”
“Before Sarbanes-Oxley, there were a lot of CFOs who were basically accountants sitting behind a firewall and throwing rocks,” he continued. “Now, we’re much more involved in creating the vision and the strategy, and way more accountable for how it’s achieved.”
The next level of evolution is keeping up with the changing definition of “value.” “It’s more than profit,” Brody said. “It’s profit balanced with impact on a variety of stakeholders — customers, employees and communities.”
Finally, I was happy to hear that CFOs are (or at least Brody is) pretty self-aware. “Look,” he said. “While we like the element of control, we also know that nobody wants to actually be controlled. They want to make decisions. As a CFO, I have to be able and willing to create parameters based on corporate strategy, and then be comfortable letting my partners work within them.”
I told Brody I could relate to the idea of having to overcome past stereotypes and continuing to evolve and was surprised to find he was well aware of the effort. “You know,” he said, “marketing people are a lot more analytical and factual than they get credit for.”
Know the Basics
Based on our discussion about the mindset of the CFO, I asked Brody what he’d expect a CMO to know in order to build a strong relationship with finance. I braced myself for a litany of detailed accounting practices, but instead got a simple list.
Brody started with marketing ROI. “At both a campaign and portfolio level,” he added. “I know campaign performance will vary; give me the full portfolio performance so I don’t have to worry on a case by case basis.”
Calculating and reporting marketing ROI also demonstrates a basic understanding of the company’s finances. “Especially cost of capital,” said Brody. “That’s foundational in every other area, and it should be in marketing as well.”
Finally, marketing should understand costs not just for marketing, but for each step in the sales process. Not only does it put marketing costs in context, but it should also shape broader elements of marketing strategy including channel strategy, media planning and product promotion.
That basic understanding, Brody said, “demonstrates that you can be trusted.” And it unlocks opportunities for an even more impactful partnership.
“Finance and marketing should have a shared perspective on the profitability of key customer segments,” he said. “This is where our vision and capabilities can really align, and where we can work together to shape corporate strategies.”
Because I’m a giver (and because I was afraid he wouldn’t ask what CFOs should know about marketing), I gave Brody a thought to take back to his friends at the secret CFO clubhouse: marketing is a process, not an event.
“I’m all in on campaign measurement,” I assured him, “but we’re living in a non-linear, omni-channel world. Unless you’re in a purely transactional business, people move in and out of and backwards and forwards through the buying process. Messages and campaigns build on and support one another over time.”
Brody stopped me before I could get into the stonecutter analogy, and asked what that meant to finance.
In the short-term, I said, “trying to assign product purchases to a specific marketing campaign is nice and tidy from a finance perspective, but it drives you to putting all your money into bottom-funnel activities. Then everyone wonders why the sales pipeline is drying up.” Instead, I suggested that marketing and finance focus on campaign metrics like the volume and quality of leads generated. For extra credit, I said, they could work together on an attribution model that reflects the changed nature of the purchase process.
Over the long-term, I told him, thinking about marketing as an event, or even a series of events, leads to the most exasperating question a CFO can ask.
“What would happen if we just stopped marketing?”
It seems to be a favorite, especially when there are budget gaps, or when finance is especially ticked off at marketing. Fortunately, because Brody is enlightened, I didn’t have to get into the long explanation — he knows that brand equity waxes and wanes over time but buying it back is inevitably more expensive than maintaining it.
I wished Brody well in his new job, and joked that it was too bad we didn’t work together anymore. “I’d just gotten you trained to where I liked you,” I told him.
“Ha!” he said. “I was just going to tell you the same thing.”
Damn, I’m going to miss him.
