Key findings about the chief financial officer – chief marketing officer relationship:
- The majority (54%) of the 652 CFOs we surveyed say collaboration with the chief marketing officer (CMO) has increased.
- 63% of CFOs report increased involvement in marketing.
- But CFOs also highlight significant relationship barriers, including the absence of common tools, processes and KPIs and continued cultural differences.
- CFOs see their contribution through a cost-discipline lens, indicating that the shift to a more value-driven mindset has not yet taken place.
Four CFO-CMO relationship success factors:
- Agree on the metrics that matter for enterprise value
- Bridge the cultural divide between the two functions
- Collaborate on marketing’s analytics transformation
- Team on the marketing planning process
It is time for CFOs to give more attention to the CMO.
CFOs and CMOs have not traditionally been close allies. This was, after all, a relationship that could be prone to mutual incomprehension or simmering conflict over budget allocations.
Our 2014 global research study into the changing role of the CMO found that only 43% of C-suite executives felt there was a strong bond between the CMO and the CFO, compared to 60% who felt there was a strong CMO-CEO bond.
But in today’s digital economy, a strong finance-marketing relationship can spell the difference between high-growth organizations, and those that stagnate or are left behind. Business model complexity has increased, and competitors can emerge from unexpected places.
For example, pure web-based service providers are entering many markets without the cost burden of office or sales networks, giving them an instant competitive advantage. In business-to-consumer (B2C) markets, the rise of price comparison sites has put pressure on margins and commoditized products, forcing organizations to re-evaluate their marketing strategies and bottom line.
And whereas historically marketing departments have evaluated their customers’ wants, needs and behaviors through focus groups and correlations between promotional campaigns and sales, now sophisticated analytics tools can provide data-driven, predictive models that look more like an output from the finance department than from marketing.
For organizations to remain relevant and thrive, the CMO needs to call into question all aspects of the marketing mix – across products, price, distribution channels and promotions. The CFO, meanwhile, needs to make the strategic investments that will enable established companies to adapt, without cannibalizing their inherent strengths, and new companies to leapfrog their competitors.
Success in a digital world relies on the CFO and the CMO developing a collaborative, focused relationship.
Setting the foundations: the evolving role of the CMO and CFO
The foundations for a closer relationship between the CFO and CMO are already being established.
EY’s 2014 study into the changing role of the CMO, involving more than 800 marketing and sales leaders and C-suite executives, found that digital technologies have revolutionized the CMO’s job, with empowered and informed customers calling the shots like never before. More demanding customers are requiring new skills for marketers, particularly when it comes to capturing and interpreting data – traditionally a finance-led domain.
Conversely, EY’s 2010 DNA of the CFO – based on a survey of nearly 700 CFOs around the world – also showed that finance was becoming more closely involved in the strategic growth agenda, with a third playing an active role in developing and defining overall strategy. This increased focus on delivering growth and value has brought the CFO closer to marketing’s traditional sweet spot.
A majority (54%) in our survey of 652 CFOs say that their collaboration with the CMO has increased over the past three years (see Chart 1).
Chart 1: Over the past three years, what change has there been to the extent that you collaborate with the CMO?
CFOs point to changes in marketing strategy and new products and services as the top two drivers of greater collaboration between CFOs and CMOs (see Chart 2).
Chart 2: What are the main reasons you are collaborating more closely with the CMO? (Please select up to three)
Kurt Kuehn, CFO at United Parcel Service Inc. (UPS), says a disrupted market environment is driving this increasing alignment. “With channel-shifting and proliferation in the digital world, customers can interface with the company in lots of different formats. It puts pressure on all of us to understand the best way to drive demand and then meet it while being cost-effective.”
The CFO and CMO should collaborate to bring their different skills and perspectives to the common goal of driving profitable, sustainable growth. The stereotypical CFO and CMOs are very different in terms of personality types and skill sets, which may explain the persistence of the divide between the two.
However, we also know that management teams that have diverse thinking perform better. Therefore, the very differences that have so long kept finance and marketing apart, may in fact pay dividends when the challenges of the partnership are managed. For example, finance’s risk management discipline and marketing’s customer-driven innovation capability sit at opposite ends of the scale, and must be balanced.
In recent years, telecommunications companies have invested heavily in a series of spectrum auctions, whereby government-owned airwaves are sold to bidding organizations. In India in 2015, wireless companies invested US$18 billion in airwaves in what was a record-breaking sale of a government-owned spectrum.1
For Airtel, an India-headquartered global telecommunications company, close collaboration between finance and marketing has been an essential part of formulating a bidding strategy and aligning long-term customer acquisition strategy with the spectrum required. “Our CFO is very closely involved with the marketing function, particularly in areas that affect the function directly, like the spectrum auction,” says Mohit Beotra, Chief Brand Officer at Airtel.
Having a clear point of view on the goals and objectives is essential, according to Beotra. “You need to buy the right spectrum at the right market at the right price,” he says. “And that is both a marketing decision and a financial decision.”
1“Record Indian spectrum auction set to spur telecoms consolidation,” Financial Times, March 30, 2015.
Despite the strong rationale for a closer CFO-CMO union, our survey shows that most organizations are a long way from realizing this potential. Firstly, finance and marketing still seem poles apart when it comes to defining mutually understood tools, processes and KPIs (see Chart 3).
Chart 3: What do you consider to be the main barriers preventing a closer relation with the CMO? (Please select up to three)
Teresa Finley, Senior Vice President of Global Marketing at UPS, says that marketers need to accept that they do not always get performance indicators right. “The critique back to marketing is that we talk about revenue and top-line growth, and can be guilty of ignoring margin and quality of revenue and ultimately growth of profitability. Leading indicators – versus lagging profit indicators – are also an important consideration for managing growth performance."
Secondly, the cultural issues that have plagued the relationship between finance and marketing also remain a top-three barrier.
Thirdly, despite the growing emphasis on value creation in the finance role, many CFOs still see cost management as their biggest contribution. “Managing costs and profitability” is seen by 39% of CFOs as the most valuable contribution they make to marketing, while only 25% cite “Ensuring value realization” (see chart 4).
Both cost discipline and value creation will be essential to the success of the CFO role. But clearly there is more that needs to be done to balance the importance of cost discipline with a contribution to the strategic direction of marketing and its role in delivering long-term, profitable growth.
Chart 4: In which of the following areas do you consider your contribution to marketing to be most valuable? (Please select up to three)
So, given these obstacles, what can finance and marketing leaders do to develop a more effective and collaborative relationship? We recommend the following success factors.
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