The relationship between finance and marketing can be fraught with tension. John Wanamaker, founder of one of the first major retailers to use advertising agencies, summed it up well: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Finance leaders like clear, quantifiable outcomes and marketing investments are often hard to measure. This means marketing is regularly regarded as a cost centre rather than a value driver, making it difficult for CFOs to get on the same page as their marketing peers.
And it appears the feeling is mutual. Only one in five CMOs (22%) rate their partnership with CFOs as truly collaborative, according to research by the CMO Council and KPMG. Over a quarter describe the relationship they have with finance as indifferent and 7% label it hesitant.
“Many have forgotten the fact that they are working towards the same goal of short-term wins and long-term brand equity,” says Karla Smith, CFO of Ogilvy UK. The advertising agency has delivered campaigns for major brands, including Coca-Cola, Dove and Cadbury.
Smith has spent more than two decades working with marketing leaders across multiple industries. This has given her a unique perspective on the friction that often arises between the finance and marketing functions and, more importantly, what it takes to fix it.
Bridging the gap
Clear communication is the fastest way to reduce potential conflicts, according to Smith. “Consistently transparent, honest and jargon-free conversations are critical in helping understand each other’s constraints and priorities,” she says.
It is the lack of certainty that makes risk-averse finance professionals very uncomfortable
The two leaders can often be “a bit of a mystery” to each other, she explains, so education is key. CMOs need to educate finance on marketing strategies and the impact of macro factors on consumer confidence and CFOs should update marketing on their priorities, such as financial cycles, investor expectations and budget constraints.
“Spending more time together is a good place to start,” Smith stresses. “Joint planning sessions can help create a marketing strategy that implements both short-term financial reporting requirements and longer-term marketing priorities.”
Regular catch-ups can also give both leaders a chance to evaluate ongoing marketing strategies or discuss new opportunities. Important conversations should never be left until budget planning begins, Smith warns. “CFOs don’t like surprises. If there’s a new strategy the CMO wants to try, they need to build it gradually into the conversation over the next 18 months and provide a clear idea of the end goal.”
The challenge of measuring marketing ROI
Coca-Cola, which is an Ogilvy client through the WPP Open X model, increased marketing investment in Q3 2023 and was able to achieve higher revenue during this period. Clearly, marketing can be an investment, not just an expense. But convincing finance departments can be challenging. During her training as an auditor, Smith was taught to see marketing as a discretionary cost. “It’s almost like it’s in the CFO DNA,” she explains.
CFOs will be reluctant to give CMOs large budgets for media spend if they can’t show a clear return on investment. Smith says: “There are multiple marketing channels and not all of them are measurable in a demonstrable way. Companies cannot always determine which touchpoint has led a customer to make their purchase. It is this lack of certainty that makes risk-averse finance professionals very uncomfortable.”
Working with a group of creatives presents an interesting opportunity for a finance leader
CMOs and CFOs need to agree upon a set of performance metrics that the CMO can then track and analyse to demonstrate the value of their marketing over time, Smith says. “Make sure you have a clear outcome in mind and put stop-and-check points in place to hold each other accountable,” she adds. “If you haven’t seen X, Y or Z happen within a certain timeframe, then agree to pause.”
Finance leaders are responsible for updating the board and investors on the business’s progress towards company objectives. Making sure any marketing investments and results are clearly linked to these broader goals can create alignment with the CMO and CFO.
Smith believes that industry bodies are an important resource for providing finance leaders with a more “nuanced understanding” of the marketing industry. She sits on the Institute of Practitioners in Advertising’s (IPA) finance committee which frequently discusses new ways to set marketing budgets.
“This looks very different across industries,” she says. “Some base it on their revenue growth objectives, others base it on the previous year spend. It would help their business growth is CFOs come together on this and share ideas pushing each other our of the comfort zone of risk aversion.”
Taking proactive steps to better understand the marketing world can help CFOs facilitate more meaningful conversations with their marketing chiefs.
Time for a rebrand
For Smith, the chasm that exists between CMOs and CFOs is partly the result of a long-held perception of finance as the “traditional and boring” compliance function. “We need to rebrand ourselves as commercial thinkers who are interested in growing the business, rather than just controlling it,” she says.
Channelling this new persona can improve collaboration, but changing people’s attitudes and perceptions is not easy. Smith has seen success with providing commercial training for staff. This consists of workshops and role-play activities that allow employees to gain experience and understanding of key business functions outside their usual remit.
“This has really helped to warm people’s perception of finance,” she says. “It has also given me the opportunity to experience how I would make decisions if I was in marketing or another department.”
Being present at company meetings and telling stories, rather than simply relaying numbers, are some of the other ways Smith challenges people’s perception of the CFO role. “It’s important to really listen to what colleagues need and try to work out how to support requests, rather than dismissing them straight off the bat,” she adds.
Ogilvy’s finance team also undergoes regular business-partnering training that teaches them how to communicate more effectively with different departments.
A career in the creative industry has taught Smith a valuable lesson about being more open-minded and adaptable as a CFO. “Working with a group of creatives presents a very interesting opportunity for a finance leader. They usually end up challenging your processes and ways of thinking, which I think is very healthy,” she says.
Creativity is not something that is typically talked about in finance circles. But Smith believes it is key to helping firms stand out in saturated markets, especially during high-spend periods like Christmas. CFOs, she argues, would do well to embrace it. Not least for the sake of their marketing team.
