The need to accelerate growth has driven a shift in the ways in which the C-suite functions. This is especially true of the relationship between the Chief Marketing Officer (CMO) and the Chief Financial Officer (CFO).
As organisations explore new growth opportunities, CFOs are required to play a more strategic role that includes allocating resources to areas that could meaningfully boost profitability.
And in an age of hyper-personalisation, CMOs are earning a more prominent seat at the decision-making table as their role allows businesses to reach customers at a time when the pandemic has left people feeling disconnected.
Close collaboration between the CMO and CFO can accelerate revenue growth and unlock incremental financial improvements of 20% to 40%. Here’s how the CMO and CFO can work together to drive business success:
1. Mutual understanding leads to strong partnerships
CFOs and CMOs need to have a deep understanding of each other’s competencies, objectives, and the methods they use to achieve success. Only then can the CMO and CFO set mutually agreed KPIs that drive directional success.
“A partnership starts with an appreciation and respect for each other’s specialisation,” says Faye Mfikwe, CMO at First National Bank (FNB) South Africa. “It’s about being intentional when learning from each other, which enables us to speak a common language on strategic business metrics.”
The CFO can augment and add value to marketing discussions as they fully understand how the board measures and considers investment decisions
Her CFO counterpart, Markos Davias, adds: “We are able to develop agile and inclusive strategies by building a personal relationship where we’re comfortable taking the time to explain our decision-making processes to one another.”
For example, by having a deep-dive conversation with the CFO — using common language about how digital advertising, upper-funnel activity, and attribution works — the CMO can demonstrate why it’s important to invest in these areas and secure buy-in. From there, they can develop clear and cohesive performance metrics to ensure the overall marketing strategy is aligned with the company's business objectives.
The CFO can augment and add value to these marketing discussions as they fully understand how the board measures and considers investment decisions.
Key takeaway: In working towards common goals, you need to have a shared language. Develop a set of metrics that align both functions and outlines the business impact to the CEO.
2. Leverage data to co-create a measured growth strategy
Once objectives are aligned, the CMO and CFO can lay out a robust plan to achieve business KPIs. Here it’s important for organisations to take a data-driven approach to collaboration in order to deliver on growth strategies.
“If the CMO’s office isn’t feeding the right analytics into the CFO’s broader strategy, such as sales trends or quote-to-sales conversion rates, you miss out on an opportunity to be adaptable and client-first,” says Prav Govinder, CEO of Discovery Connect, the direct sales division of South African healthcare and financial services company Discovery.
CMOs are trained to present data and tell stories for their audiences — finance must leverage this skill more often
Discovery CMO, Firoze Bhorat, agrees that data is key. He explains: “Through data-driven insights, we’re able to discern where an increasingly digitally-enabled insurance and banking industry is headed and, through collaboration with the CFO and CEO, we’re able to tap into new markets and position the business for the future.”
“Last year, we introduced the first remote healthcare device in South Africa. Though the initial uptake wasn’t necessarily high, based on consumer trends the CEO and I are seeing, we know we need to lead the way by creating a market for this technology today for the consumer of the future,” adds Bhorat.
“Data and analytics help businesses augment an idea into a tangible reality, then you can adapt your growth strategy accordingly and determine where and how to invest for future growth,” adds FNB CMO Mfikwe. “It is critical to understand data and the story it tells. CMOs are trained to present data and tell stories for their audiences — finance must leverage this skill more often,” says FNB CFO Davias.
By doing this, the CMO and CFO can present a joint growth strategy to the CEO and board. This can include measurable and trackable metrics that ladder up to the profit and loss statement, demonstrating marketing's contribution to profitable growth.
Key takeaway: Leverage data and insights from the CMO and CFO functions to present an amalgamated view to the board of where the business should continue to invest. This ensures success for everyone.
3. Improve the budgeting process
Traditional budgeting systems often revolve around projecting sales volumes and revenue, and setting a fixed marketing budget. However, this is a short-term view of marketing as a cost, rather than an investment, and can be detrimental to achieving business objectives.
“You have to look at the economics of digital advertising and client acquisition against future cash flows,” says Discovery Connect CEO Govinder. “The ability to scale budgets as needed can give the CMO the space to reach the right clients and build lifetime value. This should be seen as an asset rather than an expense.”
It’s important for CMOs and CFOs to develop a test-and-scale strategic framework together
Having a flexible budgeting approach helps businesses maximise opportunities that arise. At FNB, the strong CMO-CFO partnership is not only manifested through joint dashboards, but also by marketing having its own CFO helping to optimise the budgeting process. Additionally, if the marketing department needs more budget, they develop a business case together to demonstrate the expected business impact.
FNB CMO Mfikwe adds: “One of the biggest causes of breakdowns in the relationship between the CMO and CFO is marketing teams not being able to utilise data and insights to articulate and demonstrate incremental value for additional budget requirements.”
Key takeaway: With agreed success metrics in place, justification for additional budget that drives profitable growth is easier for the CMO and CFO as leadership is clear on the expected ROI.
4. Track, test, and evaluate progress
A critical step in ensuring the partnership between the CMO and CFO drives the desired business results is to consistently review progress being made on mutually agreed KPIs. This allows both teams to identify what’s working and what’s not — and quickly adjust objectives and strategy as needed.
“A continuous evaluation of the tactics we deploy helps us test, track, optimise and stay as agile as possible,” says FNB CMO Mfikwe. “Marketing metrics form part of key business metrics influencing and guiding management and finance decisions. These are reported and included in the CEO and finance reports. When we measure success and failure, everyone is involved.”
When CFOs and CMOs understand each other’s disciplines — and work towards common goals — the whole business reaps the rewards
Discovery CMO, Bhorat adds that CFOs (and, by extension, CEOs) should set aside resources that give CMOs the space to run test-and-learn experimentation in building the brand. “The idea is that, through sustained experiments, we as CMOs can be innovative in our marketing approach, scaling the initiatives that work and discarding those that don’t,” he explains. “Built into this is an understanding that there might be a 50/50 hit rate, with each experiment being a well-considered, calculated risk.”
Agility is critical to maximising market opportunities as they present themselves. That’s why it’s important for CMOs and CFOs to develop a test-and-scale strategic framework together. This allows them to pursue growth opportunities for a product in a measured and low risk manner, and then scale if mutually agreed KPIs are achieved.
Key takeaway: As you roll out your plans, both the CMO and CFO must keep tracking performance against mutually agreed upon KPIs. This allows you to scale, pivot, or re-strategise as needed.
Traditionally marketing and finance have worked in silos. However, to deliver superior business results, it is imperative for them to collaborate closely. Because when CFOs and CMOs understand each other’s disciplines — and work towards common goals — the whole business reaps the rewards.