By Maria Geokezas, Chief Operating Officer at Heinz Marketing
Since the marketing budget is a significant expense for organizations, it’s no wonder why CFOs want to be more involved. Of course, solid financial management enables a business’s marketing and advertising function to stay on track and helps avoid any financial blunders that may cost the company.
However, it becomes an issue when the two departments don’t understand how to communicate in terms everyone understands. Because finance functions as the analytical partner to marketing creativity, there can be a disconnect between the perceived goals.
CFOs have to translate business functions to specific financial goals, while CMOs must focus on driving new growth, even when the initial figures might be higher than anticipated. This can create unnecessary tension within the organization.
So, how can marketers effectively communicate with the finance department to establish joint outcomes that work for all parties?
Defining the Costs
It’s essential first to account for the costs associated with marketing in the modern age. Gone are the days of single-channel marketing campaigns where there are one-time, straightforward costs. Instead, marketing teams must adapt campaigns across channels, each with its own financial challenges.
In the past, where CFOs may have accepted a general overall marketing budget, that’s no longer the case. Now, with the data available, budget planning has become much more nuanced. This is especially true as marketing budgets continue to increase—up to 9.5% of the total budget.
While the average marketing budget is on the rise, it’s generally not enough compared to the increasing demand.
Currently, marketing teams must stretch their budgets to cover:
- Omnichannel advertising and media buying
- Creative development
- Content creation
- Data and analytics
- Customer relationship management technology
Interestingly, a survey by Ernst & Young indicates that technology accounts for 29% of the marketing budget while only 24% goes to labor—leaving less than half to account for everything else. And what’s more, the majority of CMOs hope to increase spending across all categories.
Even more insightful, that same survey found that 60% of CMOs and CFOs feel that marketing funds are discussed too late in the cycle when distributing the budget.
Plus, when you consider that costs for advertising and media buying on social and search platforms fluctuate – sometimes dramatically – it adds a level of difficulty to the finance-marketing relationship.
Now, we have to ask, how can organizations find the proper budget to cover marketing costs that are constantly evolving to encompass more channels and advancing technology? In many companies, the answer to that question lies in the data.
Metrics and Best Practices
Financial departments operate on hard figures, and when marketing departments can deliver accurate metrics, they start at least speaking the same language. Marketing departments must own their data so that they can use it to campaign for their marketing expenditures.
First and foremost, the CFO needs to understand the marketing strategy used to outline the appropriate metrics. For example, a product-led strategy won’t share the same metrics as account-based marketing, but a CFO may not be aware of what metrics are meaningful without guidance.
Before joining a budget planning session, you should know your metrics for lead and customer acquisition for every channel you’re currently using, as well as your customer lifetime value, retention rate, and any strategy-specific metrics that demonstrate where the marketing budget is going.
Once you can accurately describe how the marketing strategy is currently playing out in dollars and cents, it’ll be easier to reach a financial agreement than if you try to communicate based on generalities and rough estimates.
However, data shifts, so it’s impossible to guarantee the same metrics moving forward when creating a future marketing budget. Therefore, you must adopt other best practices to build a unified marketing budget with room to evolve.
Some best practices that can help bridge the finance-marketing divide include:
- Tracking Market Trends — Market trend research helps teams spot opportunities to get leads at lower costs.
- Modeling Campaign ROIs — Modeling the return on marketing investments paints a picture of the potential upside based on similar campaigns.
- Establishing Good Test Methodologies — Developing a standard for testing new platforms and campaigns creates confidence that you aren’t needlessly wasting money.
- Coordinating On Campaign Planning — When you coordinate campaign planning, it creates a unified experience for all involved parties so that nothing feels forced on either side.
- Gaining Approval on New Spending Requests — Getting the go-ahead on new spending requests is a common courtesy effort that goes a long way in maintaining rapport.
Marketing departments that prioritize knowing their numbers and working as a unit with finance will experience greater success when it comes time for budget allocation. Ultimately, the CFO has the final say on where the money goes, so it only makes sense to improve your financial literacy and operate through data and best practices.