- The marketing budget is the largest single source of a company’s discretionary spend, and Finance holds the purse strings to those dollars. When they need to adjust company’s cash spending, the marketing budget is simply the easiest item to trim or boost on short notice.
- Strong CMO/CFO alignment is the best way to improve Marketing’s perception in the business. With that inter-departmental dialogue open, the CMO can prove to the CFO that marketing is more than just a cost center — it can be a profit center, helping to drive revenue.
In the case of Hortonworks, Carey is an advocate for Marketing who sits in finance, able to provide “the truth” about Marketing’s ROI to the executive staff. Even for organizations without someone acting as this conduit, the onus is on marketers to get Finance on their side. With ally in place, marketers are better equipped to make the case for why their marketing investments are essential revenue drivers — not just nice-to-haves.
Check out our infographic: Three Essential Conversations Between the CMO & CFO
- Marketers live and die by the numbers. More than ever before, marketing is a quantitative discipline. We live and die by leads, pipeline, revenue — and, of course, our budgets.That’s why it’s so important for marketers to be ultra-clear at all times about how we’re spending, how effective that spend is, and how we’re contributing to ROI.
- Collaborating with Finance, and tracking investments and measurements, is a behaviour of high-growth organizations, according to Allocadia’s original research. The organizations in our survey were three times more likely to do this than low-growth ones. Coincidence? We think not.
“I recommend bringing the finance partner as close as possible to the marketing team… almost consider them an honorary marketing team member.”
— Ken Evans, Senior Director of Marketing Operations, Fuze
Hortonworks’ Carey Rutigliano is more than an honorary marketer — he’s embedded in that team. But according to our research, he seems to be more the exception than the rule: only 14% of marketers say Finance is a trusted strategic partner, while 28% have little or no relationship at all.
However, as important as it is, the Marketing/Finance relationship isn’t necessarily an easy one to improve. Why? Because Marketing is often a target when the company has to make hard decisions about spend reductions. As Allison Cerra, CMO of McAfee, Marketing is the most visible discipline in the C-Suite”. When budgets are on the chopping block, tensions can run high.
- Figure out marketing’s share of the annual revenue target.
Marketing, Sales and Finance need to sit down, agree on the revenue target (and pipeline), and how much each organization will contribute to it. At the beginning of the year, this will help Marketing understand its share of the load, and plan accordingly. During the year, marketers will be able to track against their goal and make adjustments as needed, ramping up more campaigns or activities if they're behind. At the end of the year, everyone will know how much business is connected to what Marketing did.
- Achieve clarity on any other KPIs by which marketing will be measured.
For the same reason, it’s worthwhile for Marketing and the CEO, CFO and/or Head of Sales to agree upon any other measures by which marketing should be judged. These will vary from organization to organization, but may include things like brand awareness, market intelligence, customer loyalty, and sales enablement.
When it comes times to assess Marketing’s effectiveness, there will be no ambiguity about which metrics apply, since the conversation will have already taken place.
- Align Marketing’s cost centers with Finance’s general ledger (GL) accounts.
There is often a disconnect between the way Marketing looks at expenses and the way Finance does.
Take the example of a $250k invoice from an advertising agency. Finance folks look at it and think, “wow, that’s a lot to pay one agency,” whereas the marketers know that it’s a prepayment for an entire year’s worth of advertising spend, spread strategically across a variety of different campaigns and regions.
Finance might have one GL account for advertising, but Marketing will allocate the $250k across a number of line items in their budget — or even across multiple budgets.
Both of these methods make sense; the challenge comes in aligning them. (That’s where Allocadia can help, making this connection automatically.)
- Define and manage the process for amortizations and accruals.
Amortizations and accruals are two methods of specifying the time period to which a marketing investment applies. Without a clear processes for managing them, chaos can emerge and tensions can arise.
Finance should let Marketing know how they should submit invoices and POs and communicate any nuances about them: when they apply, for how long, and to what. In turn, Marketers should communicate how Finance should recognize marketing expenses within its GL.
This is a technical —yet crucial — conversation, and another area where Allocadia can offer tremendous value. Find a common language.
- Define and understand customer value.
In the SaaS world, executives and their boards talk about Customer Acquisition Costs (CAC) and Customer Lifetime Value (CLV), among other performance indicators. It’s vital that Marketing understands how the company values a new and existing customer, and it’s usually Finance that leads the discussion and does the measurement. Over in Marketing, you can help Finance understand the value of referrals and loyalty programs, and other advocacy efforts underway. Bottom line: it’s vital that Marketing and Finance have open discussions about how customer value is both defined and measured.