A century after merchandiser and advertising expert John Wanamaker’s 1922 passing, modern technology would have provided clarity to the adage attributed to him: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Chances are that his CFO would have appreciated an answer, too. Today, the murkiness around where marketing dollars are going and the effectiveness of a company’s multitude of marketing campaigns can be thoroughly analyzed, largely due to the broad use of digital marketing.
Spending in digital marketing takes up 57% of marketing budgets and continues to grow, according to The CMO Survey, and has opened up a flood of data points about prospects, customers, and their behavior when interacting with websites, social media, and ads. A disconnect persists at many companies, however, as CFOs and chief marketing officers (CMOs) are often looking at different metrics and pursuing different goals, and hit a rift at budget time.
CFOs can no longer afford to overlook this gap. Marketing budgets are taking up more space, 9.5% of total company revenue, according to a 2022 Gartner survey of CMOs and marketing leaders. How can CFOs have confidence in marketing budget allocations and return on investments from the dollars CMOs plan to spend? A lot depends on the CFO-CMO dynamic and whether these two senior leaders can get on the same page. Fortunately, the glut of available data can help.
The CFO-CMO Disconnect
As long as the trope of all CFOs being belt-tightening bean counters persists, so too will the view of many CMOs being big spenders with little accountability. In reality, the two roles are usually more strategic and complex than that: They are both operating toward a common overarching goal — the company’s success — but their interpretation of what success means and the ways to get there may greatly differ. What can align these senior leaders is data, and today, there is no shortage of it.
In fact, most companies are data-rich but intelligence-poor (sometimes referred to as DRIP) as the ability to measure marketing performance has never been better, thanks to the rise of digital marketing and direct-to-consumer marketing, in addition to more intuitive use of customer relationship management systems. DRIP companies need to put in the work to determine what data is the most relevant and impactful to the business, a determination that would be easier to reach if the CFO and CMO can achieve alignment.
Getting on the Same Page
To find a mutual understanding, resolve any rifts, and ultimately agree on the most relevant data, CFOs should take these steps.
1. Build trust. In many ways, what the marketing organization is able to do under its budget allowance, and under its primary mission to bring in revenue, depends on the CFO’s trust in it. Does the company believe in the marketing organization, and its ability to create value? In my experience as a marketing leader, despite all the information and tracking capabilities marketers bring to the table, non-marketers tend not to believe what they are being told, which adds to the sometimes contentious relationship between the finance and marketing functions.
2. Understand the CMO’s priorities and be sure they understand yours. Marketers build in accountability from the start and are paying attention to many factors, including customer acquisition cost, gross sales from marketing, customer profitability, impact on existing customer retention rate/customer lifetime value, marketing return on investment, or media return on advertising spend. Understanding what your CMO is paying attention to and why can elevate these conversations toward how the metrics can be tied to the company’s larger strategic goals.
3. Decide on a measurement approach. Marketing attribution solutions exist that determine exactly what digital marketing activities led to conversions (i.e., a prospect reaching out to the company and ultimately becoming a customer). By collaborating on the selection of such a system or agreeing to a particular approach, perhaps with the help of the chief information officer based on each other's expertise, the CFO and CMO can come to an agreement on what’s driving sales and the effectiveness of marketing.
Ultimately, to find common ground, pointed conversations need to happen. This critical step can start with the CFO.
Fred Ehle is vice president of the marketing solutions group at RoseRyan, a ZRG company that provides on-demand finance and accounting and marketing leadership and consulting services. He formerly led marketing organizations at Jockey, Redbox, McDonald’s, and PulteGroup.