The CFO-CMO partnership is a trending one in today’s digital economy, which is guided by increasing customer expectations and business complexities.
It has become an imperative part of the business environment over time, as companies are focused on growing the top line while effectively managing the bottom one.
The CMO-CFO collaboration garners additional benefits in cases where they use analytics and big data and set common goals, such as increasing customer engagements and growing profits. They must now focus on finding new opportunities among existing customers, products and markets. In the digital context, a strong finance-marketing relationship is what could give an edge to high-growth brands.
As per our 2014 global research study on the changing role of the CMO, only 43% of C-suite executives vouched for the CMO-CFO partnership, while a considerable 60% spoke about the strong CMO-CEO bond. Companies need to wake up to the importance of and benefits from CMO-CFO solidarity. This is all the more relevant in a digital economy, where sophisticated analytics tools provide data-driven, predictive models that seem to be the product of the finance department.
To further explore the potential of this partnership, we interviewed global CFOs and CMOs in our latest study, Partnering for Performance Part 4: The CFO and the Chief Marketing Officer. We also collated insights and information from finance and marketing leaders across global marquee organizations to discover some interesting facts, as follows:
Although most (61%) CFOs have made customer segmentation and insight a priority, less than half (47%) admitted to making a significant contribution to this activity in real time. Knowledge of customer base has come to define an organization’s profitability and competitive advantage. The digital world can become a key catalyst to leverage this. As understood from our Social Media Marketing – India Trends Study (2nd edition, 2014) (SMMITS 2014), 54% of the surveyed brands stated that they gained better customer insights, while 39% were able to provide a better customer experience through customer intelligence gained by social listening. CMOs and CFOs need to collaborate and turn data into actionable insight to drive business strategy, gain a competitive advantage and take data analysis to a deeper level to anticipate trends and behaviors.
Increasing marketing spends in response to changing customer demands and channel proliferation need to be justified by effective measurement methods. However, collecting, managing and mining data for marketing purposes is a complex undertaking.
While more than half (59%) of the CFOs state measuring RoI from marketing as a priority, only 13% actually have the agendas of finance and marketing completely aligned on the issue of measurement methodologies. All returns are not tangible, and, therefore, the CFO and CMO need to agree on KPIs for both individual marketing initiatives and for less directly traceable measures such as brand positioning. The SMMITS 2014 report revealed similar concerns in India, where around 71% of the surveyed brands stated that successfully measuring effectiveness of their previous social media engagements was a key challenge.
Optimizing the product mix becomes a challenge when organizations need to service more customer segments over a number of channels, often resulting in a sub-optimal product portfolio and poor allocation of internal resources. This limits growth potential. Together, the CFO and CMO need to strike a balance between customer-centricity and excessive product proliferation. CFOs play a critical role in understanding areas where organizations are creating or destroying value in their portfolios and in making room for new product innovations.
In addition, 58% of CFOs consider optimizing the product portfolio to be a high/very high priority. Of the 20% that deem it as of very high priority, 81% report closer collaboration with the CMO, reinforcing the importance of a CFO-CMO collaboration to address this issue.
More than half (51%) of the CFOs placed high/very high priority on digital governance. Most of them are aware of the increasing market-growth opportunities due to new digital technologies and the associated risks.
Digital governance is an important area for CFO-CMO collaboration because of:
Cost control: Companies are increasing investment in technology for marketing purposes – including for app development, online presence, advertising and analytics – to better understand customer needs and predict behavior. In this scenario, CFOs need to work closely with CMOs to understand how this cost is being managed, and balance the responsibility of maintaining cost discipline with strategic demands for value creation.
Risk: Marketing personnel is often closely and directly engaged in collecting and managing customer data. The CFO needs to work closely with the CMO to manage associated risks for data protection, privacy laws, reputational risks and mitigation strategies for channels such as social media.
Key steps for effective CFO-CMO collaboration
We have outlined four key steps that could help CFOs and CMOs achieve a successful working relationship:
- Agree on the metrics that matter for enterprise value
- Bridge the cultural divide between the two functions
- Collaborate for marketing analytics transformation
- Team on the marketing planning process
Digital disruptions in our world are increasing by the day, with multiple game changing players entering the market. Traditional organizations are taking note of this and the fact that technology will shape their respective sectors significantly over the next five years or so. CMOs and CFOs need to work more closely now than ever. They must agree to leverage their respective skills sets and facilitate combined data support to ensure they navigate through newer strategies more effectively and are able to generate and preserve value.