As marketing spend hits new highs, CFOs demand greater insight into ROI.
With very different measures of value, there are huge opportunities for conflict between marketing and finance.
Where is the common ground?
With a background as both CMO and CFO for organisations such as eBay, and now CFO for Optimizely, I like to think I’m uniquely placed to understand how best to overcome the natural tension between finance and marketing.
In fact, consensus is not only possible, it is essential.
CMOs and CFOs can work together from a single, shared set of numbers, backed up by an “experiment and learn” approach that qualifies the impact of marketing and attributes spend.
Same goals, different emphasis
According to Gartner’s 2016-2017 CMO Spend Survey, CMOs are planning to allocate a record breaking 12% of company revenue to marketing in the forthcoming year.
Yet while the shift towards marketing-focused spend has defined the last decade or so, CFOs have not necessarily been getting the feedback from marketing that they need. How many of you have real confidence in the value of this huge slice of business investment?
Tension between CFOs and CMOs is far from unknown. These days Marketing is becoming as much of a science as an art, and both marketing and finance share the same goals. Both teams are driven to ensure the conversation a company is having with its customers through its marketing channels is effective.
There is, however, still the problem that not all marketing activity is inherently measurable and few of the measures adopted by marketing translate neatly into pure ROI metrics.
Without doubt one of the CMO’s toughest challenges is to determine where to spend that marketing budget and whether the marketing activity is effective. CMOs need to find a way to dovetail the traditional measures used to assess performance with data led metrics. CMOs and CFOs need to create a shared understanding – but how?
Experiment and learn
Experience proves that with the right approach the needs of both CMOs and CFOs can be addressed.
Online experimentation techniques such as A/B and multivariate testing enable CMOs to gain quick, accurate insight into the value of specific marketing activities.
By showing a different experience according to the audience and assessing the performances, both CMOs and CFOs can begin to understand the potential ROI from various marketing activities. This ability to explore and experiment with different variations of the online experience allows CMOs to determine audience reaction.
This insight enables CMOs to know what is or is not going to be successful before any aspect of the strategy is deployed in full – and demonstrate that value to the CFO.
With a shared set of numbers and accurate spend attribution, CMOs and CFOs can embark upon a far better conversation.
This is not the holy grail of marketing spend attribution – it is not possible to measure or analyse every aspect of the marketing mix. The number of permutations can be infinite, and a balance on investment into resource vs returns is needed.
But who drives these numbers? This has to be a collaboration – CFOs cannot just sit back and wait but must become increasingly involved in the marketing analytics and own a portion of the analytics function.
With the growth of the Digital CMO, the use of “test and learn” to qualify the impact of marketing and attributing spend is set to become a standard component of the marketing organisation.
Work from the same sheet
There is always going to be some difference of opinion over one or more aspects of the marketing strategy.
But the truth is that CFOs should be able to rely on CMOs to prove the value of that 12% of revenue. Marketing simply cannot be a budgetary black hole when spend is so high – and accurate spend attribution is the key to creating ever closer alignment between CMOs and CFOs.