The relationship between financial directors and the marketing department has evolved over the past few years as marketers have been forced to justify every penny spent. Yet the old cliches of marketers failing to understand the numbers behind their campaigns still pervade in some circles..
While some companies, such as Unilever, have invested in training facilities that ensure cross-department learning, others remain siloed and even compete with each other for budgets.
So what can marketers do to understand their friends in finance? Moreover, what is required for them to be taken seriously in terms of contributing to the overall success of the business?
Here, three financial directors outline what marketers need to focus on if they are to be successful in delivering results as well as great creative.
Eric Samuels, director of finance, EMEA, Intel
How much do marketers know about finance?
I think the two functions need to know more about each other than they currently do. It's not only that marketers need to be more financially savvy, they could benefit from spending some time ensuring their finance director understands how the marketing function contributes to sales and profits.
How do you justify marketing investment?
Sergio Zyman had it right in The End of Advertising as We Know It, when he said the purpose of marketing is 'selling more stuff to more people more often for more money more efficiently'. A smart finance director will evaluate marketing on its ability to make an impact on sales, either in the short term or in the long term. We don't necessarily need proof, but the story needs to hold water. If you say that an investment will help our brand, that is fine, but my next question will be 'help our brand do what?'
What media do you prefer spending money on?
If I had to pick one that I would invest in constantly through any environment, it would be online, because I believe a lot of chief information officers and other IT decision-makers value the deeper engagement they can get from Intel in an online experience, as do many consumers. However, there is a time and place for any media type, and you have to be flexible. For example, we advertised at the Super Bowl a couple of years ago because we had a good ad, we got a great rate, we had a product we wanted the world to know about, and we knew 90m people would be watching. I wouldn't do it every year, but for that situation it was a good idea.
Do you invest in marketing channels that have yet to prove their ROI model? If so, what's the justification?
We do all the time. The justification is you have to take a risk on unproven models to be a cutting-edge organisation and to have a brand that is relevant to your consumers, or you become stale. Also, if you are a financial director, you have to accept that your chief marketing officer is going to propose some unconventional ideas that you wouldn't necessarily propose. While we should be rigorous about ROI, we should not be rigid. The consumer is changing all the time and you have to innovate to stay ahead.
In your view, is some marketing profligate?
Yes, absolutely. It is very easy to fall in love with your own marketing stunt and to forget to ask 'what will this help our brand do?' Pretty soon, you are putting on your own one-act play instead of helping your business. Also, there are types of marketing that may work for one company but are wrong for another; or they may work once but not another time. For example, we reduced our spending on events during the financial crisis because we saw that they were being perceived by the public as executive perks rather than valuable relationship-building activities, and they seemed inappropriate for that time.
How important is marketing to overall business strategy?
Intel's business model depends on making big capital investments years before the market develops, and selling to hundreds of millions of computer users in almost every country in the world in partnership with thousands of hardware and software vendors. We want to ensure our newest technologies are a key purchase consideration when you buy a new notebook for your home or business.
We could never do this with a sales organisation alone. We will always need a strong, relevant brand and a way of communicating with our users that has impact. We will also always need a strong partner marketing programme such as 'Intel Inside'. There may be companies that don't rely on marketing to this extent for their business strategy, but it's hard to imagine operating on a global scale in a high-tech business without it.
How can finance and marketing work together better?
As a marketer you should use finance to build your own financial acumen, while helping your financial director understand how your efforts drive sales and profits. This will be awkward at first because the two professions don't use the same language or analytical tools. In truth, you are both after the same goal, which is to drive shareholder value through sales and profits. Both disciplines inherently prefer a strong, balanced emphasis on the four Ps to an approach that favours the fire sale of the week. So I would encourage you to improve your working relationship by starting to work together. You will find you have more in common than you might have thought.
Ken McCallum, financial director, Match
How much do marketers know about finance?
In my experience, marketers traditionally have little grasp of numbers and why they are so vital to the business. Perhaps as Match is an online business, where activity is constantly measured, our staff have a greater understanding of the concept of ROI.
How do you justify marketing investment?
ROI is the fundamental starting point, although a demonstration of creativity and an understanding of the social context in which we are operating is also crucial. When we look at projected spend, we always want to know how much it will bring back into our business.
What do marketers need to do more/less of in terms of finance?
Marketers need to understand why numbers matter and how they have an impact on the wider business. At Match, we take a holistic approach, which means we encourage staff to have visibility of their activities in the context of the whole business. The answer to what marketing directors should do less of - spend less money.
What media do you prefer spending money on?
We were the first brand in our sector to advertise on TV and have found that it consistently delivers us exposure with value for money. This makes it preferable for me, although I can also see the value in other channels.
Do you invest in marketing channels that have yet to prove their ROI model? If so, what's the justification?
Yes. We know exactly where we spend our money and what works for us, but we are always looking at new approaches. We've already successfully applied our online ROI model to offline media, which has delivered real value back to the business. We're not afraid to test new channels to help us stay ahead of our competitors.
In your view, is some marketing profligate?
It's easy to view marketing as profligate in hindsight, when the results are in and don't meet expectations. However, it is important to keep in mind that no company has a 100% success rate with everything it does, marketing or otherwise. From a financial director's perspective, it's important to know the brand and the market and how they interact to minimise any unnecessary marketing spend.
How important is marketing to overall business strategy?
We are a brand-led business, and marketing and communications investment is key for us. We pioneered this category by significantly investing in above-the-line since 2005, and consequently this investment has led to a real cultural shift in the way people date.
What does the future of marketing hold?
In 2010, we saw a real shift in the number of consumers who are willing to interact with branded pages, and I would expect this to continue as brands develop more relevant and engaging content. The speed at which social media moves allows us to gain a real-time insight into how our target audiences perceive us at any one time, so that we can act quickly to tailor content to their needs.
How can finance and marketing work together better?
It is key to grasp the importance of what one another does. Finance staff need to loosen the metaphorical tie and understand that money does need to be spent to generate a return, and the marketing team needs to understand that a return needs to be proven.
Angela Motha, International finance director, Method
How do you justify marketing investment?
For a brand such as Method, really good marketing is part of a holistic business strategy, it introduces new people to the brand but it also supports the pricing proposition and gives people a reason to trial. Great products, in turn, deliver on the promise of marketing, creating a virtuous circle and a successful business.
What do marketers need to do more of in terms of finance?
On a detailed level, marketers need to plan, set expectations before starting a campaign and then look at the results and learn from them after the campaign. On a more general level, as marketers move up in seniority they need to make sure they understand the business as a whole and marketing's role as a tool to create success.
What is the financial director's favoured approach to marketing?
A plan with expectations that supports the business and can be evaluated, with lessons learned.
What media do you prefer spending money on?
For Method, earned media is the preferred route - a little goes a long way. But it depends on the brand and the objectives.
How closely do you analyse ROI? Does this come from you or the marketing director?
For any company, the ideal would be that the marketing director sets the expectations and criteria for success/expected ROI, and then evaluates collaboratively with the finance team. The evaluation should not look only at the measurable ROI for a specific campaign, but what the activity is achieving outside the ROI as an integral part of building the business.
Do you invest in marketing channels that have yet to prove their ROI model?
As a challenger brand with a budget that's a fraction of our competitors', Method is continually trying new things that can change the game and make the most of our unique positioning. Also, I am not sure that 'proven ROI' models come with any guarantees. What is right for one brand at one time may not be right for another brand or another time.
In your view, is some marketing profligate?
A little bit of everything could be considered profligate. With a small budget, the marketers are close to the numbers and the results that need to be achieved, so it is not likely.
Describe a bad experience with a marketing director.
Working at a big company, I once took part in a budget review where a marketing director was asked to explain his £30m budget without any sales growth expected and he could not give any justification.
He lost a big proportion of that budget, having failed to understand that the marketing budget is an investment in the business on a par with investing in new product development, trade promotions and so on.
Describe an exemplary experience.
Collaboration is crucial to working well together. It works when the big marketing idea does not become the goal in itself, but we collaborate on the practical side of what the campaign will achieve and how that works best within the business.
Financial directors' top five gripes ... with marketing directors
- 'My 10-year-old son understands more about numbers than one chief marketer I worked with at a consumer technology company.'
- 'For most people at the company, lunch means a sandwich and a short break. For some of the marketing department, it means all afternoon "strategising" with the advertising agency.'
- 'The main issues we (marketers and financial directors) disagree on is what ROI means and how it is measured. That and expenses.'
- 'Being "good for the brand" is not a business case.'
- 'When campaign results don't stack up, admit it and then reassess.'
Taken from off-the-record interviews with financial directors
Marketing directors' top five gripes ... with financial directors
- 'There are some financial directors at big companies who have little understanding of what good marketing can do for the brand.'
- 'Financial directors have a common perception that marketers don't understand finance, but the reality is that the situation has improved hugely as ROI models have improved.'
- 'How many CFOs have Twitter accounts ... they need to try to learn more about marketing.'
- 'Marketing is not just about spreadsheets.'
- 'As finance directors are almost always on the board, there can be a superiority complex going on.'
Taken from off-the-record interviews with marketing directors