Often pitted against each other, coming together of marketing and finance resources are redefining the growth of companies today. A successful and strong CMO and CFO alliance hinges on the CFO understanding consumer demand and marketing initiatives objectives and a CMO who works through data.
In partnership with Kantar, Google recently spoke to dozens of Fortune 1000 company leaders and marketers across industries about this topic. During those conversations, one alliance emerged as the most critical: the CMO and CFO power pair.
A majority of top executives said that their most senior-level marketing leaders not only have strong relationships with their CEOs but also with their CFOs. We also heard that leaders of digitally advanced companies reported much higher levels of synergy between their finance and marketing teams than did the leaders of digitally emerging companies.
Experts in the industry that Storyboard18 spoke to highlighted that over the years, the pressure on budgets and business outcomes have put pressure on the CMO to also be a co-owner of delivered ‘numbers’. This, in turn, has brought the CMO in closer proximity to the CFO, who is primarily responsible for keeping the number delivery on track.
Symbiotic relationship
In new age companies, the relationship between finance and marketing is evolving into a more symbiotic one where they come together to work towards the growth of the business.
“Today the calculation of return on marketing spends is much easier and more efficient than what it used to be a couple of years back,” says Smita Murarka, who is the chief marketing officer of Duroflex. “This has built new bridges between the two functions,” she adds, saying that at Duroflex, the two teams work collaboratively towards planning a campaign and even on analysing the results of the campaign.
Murarka shares that regular conversations with the company’s finance team helps her team have data driven insights about the impact of marketing efforts on the business.
“The insights also help us plan the areas where we can focus our efforts more efficiently,” she adds.
The Google-Kantar study quoted above states that CMOs who can translate their marketing metrics into business impact—such as tying incremental investment to a certain sales growth percentage year over year—are 37 percent more likely to report revenue growth compared to leaders who communicate strictly in marketing language.
Shared insights
For online hotel booking platform OYO having a CFO that works closely with the brand and marketing team not only helps the company with strategic insights but also ensures that the marketing budgets are being leveraged wisely.
Mayur Hola, head of global brand, OYO says that their finance team is like members of the extended marketing team, in fact “our star players”. The company’s strategic finance team works closely with the marketing team from the very initial stages of the company’s campaign.
“They understand the scale of marketing allocation that works best for the business. And together we work to make our campaigns super-efficient and not wasteful. And finally, our group CFO Abhishek Gupta is the biggest champion of the brand. These are folks who are hard-nosed when it comes to finances and totally understand what investment in the brand will reap. As such they sow. In a nutshell that is the ideal relationship and we’re fortunate to enjoy the same,” he notes.
Key challenges
One of the biggest challenges, which could possibly be dubbed as a major bone of contention, for CMO-CFO function is how RoI is calculated.
Duroflex’s Murarka believes that analysing everything in terms of RoI is something that comes naturally to finance. However, sometimes, it is important to understand that ROI is not always tangible, it is not always something that can be put into numbers.
“The outcome of marketing efforts is the growth of the business, but it is also customer loyalty, it is also brand salience. Building them takes a significant part of marketing efforts as well as spends, and they are as important as sales for a business,” she explains.
Marketing, being one of the larger expense lines, has always been seen as a cost, expendable, whenever there is any profit pressure or need to cut costs.
Ajay Kakar, chief marketing officer, Aditya Birla Capital Limited notes that for a company that believes in keeping the customer at the forefront, today, there is need and pressure for the CMO and CFO to be aligned about the ‘cost-benefit’ of the marketing budget.
“To borrow from an accounting vocabulary, I believe that marketing budgets and agendas should be categorized as balance sheet and/or P&L items – those that will take time, but deliver on agreed-do outcomes, and those that will have immediate or attributable outcome within the same calendar year. The CMO-CFO jodi therefore has to work together, from vision, to strategy, till execution and outcome. And presenting a joint face to the management and board is the need of the hour,” he adds.
Upskilling and keeping up with times
Pradeep Mishra, CFO – Duroflex admits that while finance would want to measure everything through the ROI lens, it is often very difficult to quantify the long term impact of brand building activity of the marketing function.
“Understanding the two activities and balancing them with the financial objectives is a very important activity. And, when there is a conflict between the two teams, both teams should learn and understand how to balance long term value creation vs the financial targets every year,” he notes.
Mishra also emphasises the need for finance teams in companies to upskill themselves and better understand the evolving digital space, customer tracking etc.
“The skills needed now are totally different from what finance were trained into and this will be fast evolving at the pace of changes in the likes of the customer and changes of his requirement, so it is going to be a progressive journey to constantly reskilling oneself,” he concludes.
As brand building and marketing becomes more specialised and highly trackable in a digital-first world, data driven insights can bring marketing and finance resources together to achieve key business goals. Their unified efforts can turn the fortunes of the company that is looking to achieve sustainable growth. A Jodi No.1.