Marketing talks about customers, demand, brand, channels and conversion. Finance talks about revenue, margin, return, risk and capital allocation. Everyone would quite like profitable growth. Then budget season arrives and apparently they’re on opposing sides again.
There’s been plenty written about CMOs needing to become more commercial to earn greater credibility with CFOs, CEOs and boards. I’ve always found that slightly unfair. Good CMOs are growth people by nature. They spend their careers thinking about where the next customer, market or revenue opportunity might come from. They don’t suddenly become commercial because somebody teaches them how EBITDA works. The challenge is translating the growth opportunities they can see into the language the rest of the business uses to decide where money should go.
A genuine disconnect
There is a genuine disconnect. Recent McKinsey research found 70% of CEOs measure marketing impact through year-on-year revenue growth and margin, while only 35% of CMOs rank that among their top metrics. It’s hard to have the same conversation when you’re keeping score differently, and for years Marketing’s solution has largely been to get better at proving what happened after the money was spent.
So now we can tell you what last quarter’s campaign generated, what it cost to acquire a customer, which channel converted and, depending on which attribution model we’re emotionally attached to this month, who gets the credit. Marketing has become extraordinarily good at explaining the past. Unfortunately, the money the CFO is deciding where to put is next month’s.
Marketing has become extraordinarily good at explaining the past. Unfortunately, the money the CFO is deciding where to put is next month’s.
When the measurable starts to look like the valuable
The pressure to prove marketing’s value has created another slightly awkward problem. The things easiest to measure can start looking suspiciously like the things most worth doing. Performance marketing speaks Finance beautifully because it arrives with a neat set of numbers attached. Brand, creativity and longer-term demand creation tend to turn up with a slightly less satisfying answer to “exactly what did we get for that?”, despite often being responsible for why somebody clicked the performance ad in the first place.
The danger is that Marketing learns to speak Finance so fluently it forgets how to speak Marketing. Keep following that logic and you can end up with a beautifully attributable marketing strategy and a gradually disappearing brand.
Keep following that logic and you can end up with a beautifully attributable marketing strategy and a gradually disappearing brand.
The common language isn’t finance. It’s growth.
Which is why I don’t think the common language between the CMO and CFO should be finance. It should be growth.
The CMO doesn’t need to become a junior CFO, and the CFO doesn’t need to discover their inner creative director. Marketing brings customer understanding, creativity, commercial instinct and a view of opportunities the historical numbers may not contain yet. Finance brings discipline around economics, return and risk. The opportunity is to give both a shared view of what those things might mean for the future of the business.
Historically, that’s been difficult because most of the intelligence available to both functions has pointed backwards. Increasingly, it can point forwards. Customer, marketing, sales, product and financial data can be brought together to forecast revenue, understand the variables driving it and model the commercial consequences of different decisions before the money is spent.
We’re already doing this with businesses where those data sets historically sat in different systems, owned by different functions and occasionally appeared to describe entirely different companies. Once they’re connected, the conversation can move from “what happened?” towards “what happens if?”
From “what happened?” to “what happens if?”
What happens if we move investment between channels? What if acquisition costs rise, conversion improves or retention shifts? Where does diminishing return begin? What happens if we invest in a different customer segment? And ultimately, where is the next dollar most likely to create more value?
Prediction isn’t certainty, obviously. Anyone offering to tell you precisely what your revenue will be 52 weeks from now should probably be asked for next week’s Powerball numbers while they’re there. The point isn’t to remove uncertainty. It’s to give good commercial judgement considerably more intelligence to work with.
And that changes the budget conversation. Instead of Marketing arriving with a budget request and Finance deciding how much of it survives, both can look at the commercial consequences of different choices before committing the money. That starts to feel rather less like an annual negotiation and rather more like running a business.
Participating in capital allocation
If a CMO can walk into that conversation with an expected revenue trajectory, the variables driving it, several investment scenarios and a view on where the next $500,000 is likely to generate the greatest return, they’re not simply defending marketing spend anymore. They’re participating in capital allocation.
McKinsey has been making a similar argument for some time, describing stronger CMO–CFO relationships as investment partnerships. It’s an important distinction because for years Marketing has been asked to justify the money it spent. The more interesting opportunity is helping the business decide where to spend the money it hasn’t spent yet.
That doesn’t mean every marketing decision gets fed into a model until the spreadsheet gives us permission to make it. Quite the opposite. A shared view of growth should make conversations about brand, new markets, experimentation and longer-term investment easier, because they’re being considered within the economics of the whole growth model rather than judged entirely on whether somebody clicked something last Tuesday.
The common language between Marketing and Finance isn’t finance. It’s growth.
Why we still employ marketers
There’s still judgement involved, and there should be. A model can identify patterns, forecast scenarios and process more variables than any leadership team could sensibly hold in its collective head. It can’t know that the slightly mad creative idea is going to work before anyone has tried it, or that a market is about to behave differently from everything contained in the historical data. That’s why we still employ marketers rather than giving the CFO a bigger spreadsheet.
Perhaps that’s the bigger opportunity for the CMO. Marketing has spent years proving its commercial value by demonstrating what its investment produced. Increasingly, it can help the business predict where growth might come from, understand what could change it and decide what to invest to capture it.
The CMO doesn’t need to become more like the CFO, and the CFO doesn’t need to become more like the CMO. The opportunity is to bring what each sees into the same view of growth.
Because the common language between Marketing and Finance isn’t finance. It’s growth. And once both can see what might happen next, the more interesting conversation isn’t what Marketing spent last quarter. It’s what the business should invest in next.
Sources
- The CMO’s comeback: Aligning the C-suite to drive customer-centric growth — McKinsey & Company. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-cmos-comeback-aligning-the-c-suite-to-drive-customer-centric-growth
- Marketing’s moment is now: The C-suite partnership to deliver on growth — McKinsey & Company. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/marketings-moment-is-now-the-c-suite-partnership-to-deliver-on-growth