Ten years ago, Chief Marketer published our article Marketing and Finance: From Adversaries to Allies. We posited that the surge in global competition, increased commoditization, market fragmentation forces companies to create better processes and address controls in order to reduce risk. At the time, we heralded in the “Age of Accountability,” claiming that marketers needed to forge stronger relationships with Finance and move from thinking of Finance as an adversary to that of an ally. Since then, there have been numerous articles on the importance of the CMO-CFO relationship. As recently as a few months ago, there the American Marketing Association publication produced an article on this very topic.
The key for both parties to be in accord is to work from the same sheet of music – the strategic plan. The strategic plan reflects your organization’s melody. Melody is the most important part of music. It is the tune of the song. While CMO and CFO and their respective teams each have their own responsibilities for creating value within the organization overall success for the enterprise requires these two organizations work in harmony. In music, melody and rhythm can exist without harmony. French composer Jean-Philippe Rameau, in his Traité de l’harmonie, suggested that all harmony is based on the “root” or fundamental note of a chord. Harmony adds depth and meaning. It is the interplay of tones or chords that accompany the melody. In music, harmony refers to the extensively developed system of chords and the rules that allow or forbid relations between chords. When Finance and Marketing are in harmoeny they enable the organizations success and create value for customers.
The Notes in the Music of Business
In his book The Practice of Management, Peter Drucker wrote, “the purpose of business is to create and keep a customer.” Enterprises play their unique sequence of notes, or melody, to profitably achieve this purpose, reap revenue and customer equity, and produce shareholder value.
Marketing is directly responsible for helping the organization acquire and keep profitable customers, the lifeline for revenue and growth. Strategy and reputation are critical to finding, keeping and growing the value of customer. Each time Marketing improves customer lifetime value and increases the rate of product/service adoption, we positively impact cash flow and growth. When we reduce customer acquisition costs and customer churn we positively impact cash flow and growth. The closer Marketing can tie activity and investments to results and help reduce risk the better.
CFOs are results-oriented and responsible for managing and mitigating financial risks. Reputation risk is one of a company’s biggest strategic dangers. An organization’s reputation is part of its intangible assets. Reputation impacts a company’s market capitalization. Differences in reputation can explain why organizations that apparently should be worth similar amounts can differ so widely in valuation. It is important that CFOs understand what Marketing is doing to enhance reputation and customer trust and how these translate into customer acquisition, retention and growth.
How Do You Create Harmony?
We cannot over-emphasize how important it is for Marketing to understand the Finance mind-set and sing in the key of business. The 16th annual MPM study revealed that many Marketers are perceived to lack business acumen, receiving an overall score of 6 out 10 for understanding the business.
One way Marketers can overcome this perception is to reframe Marketing performance in the key of Finance and act like a strategic business owner. If you are part of the Marketing leadership team and you aren’t acting like an SBU owner, it’s time to change your tune. Only by recognizing that we are members of the business team will Marketing professionals be able to harmonize with the CFO and Finance team. In most companies, the SBU owner collaborates with Finance to develop performance metrics for their business. Marketing should operate in the same fashion.
Marketing engage Finance in the Marketing planning and measurement process from the outset. Incorporate Finance into the composition of the strategy and plan. On the flip side, Maria Izurieta, CFO of 3Pillar Global, reminds us that the CFO is now the ‘go-to’ person for the CEO or other C-level executives to provide a 360-degree view of the real health of the business. She declares that for “CFOs to be successful, above all else we will need to be collaborative to build strategy, culture and operational efficiencies to achieve enhanced business performance”.
CFOs, like CMOs are now expected to create value in the organization. Oracle, in The Digital Finance Imperative, found that like CMOs, CFOs crave sufficient data about the customer-oriented issues they feel are most vital to the business. CFOs are also working on changing their language to be about business plans and key performance indicators rather than financial statements.
Start with these three steps to create harmony:
- Collaborate on the metrics that help drive customer equity and value
- Support the increased usage and skills in Marketing for analytics, and
- Team up on the Marketing planning process
© 2017, Laura Patterson. All rights reserved.