- Closing the gap between the marketing and finance teams will optimise business performance.
- Investing in brand building advertising will help your business remain competitive and add value.
- Three essential components that influence the success of a marketing team include trust, power and skills.
“If there’s one thing that marketing people do that accountants definitely know about it is that they spend the marketing budget,” says Patrick Barwise, emeritus professor of management and marketing at the London Business School.
Beyond that, finance teams tend to be a little shaky on exactly what their colleagues in marketing do, or why they do it. And this can lead to missed opportunities in a business, Barwise says.
“The marketing-finance axis is a huge potential driver of business value, shareholder value.“
And having a CMO [chief marketing officer] in the top team does, on average, help drive business performance.”When the finance team and the marketing team work well together it is possible to have very “fruitful conversations” about what the business can expect back when the marketing team “spend the marketing budget”.
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Such conversations are not straightforward because nobody can predict the future.
“Investing in brand building advertising is going to be a judgement call at the end of the day. But if you don’t invest in the brand or in the business, in the long term the competition will eat your lunch."
What the CFO needs to understand about marketers According to Barwise, accountants and marketers are, by and large, different personality types. This can lead to conflict or misunderstandings between teams. In his book The 12 Powers of a Marketing Leader (co-authored with business consultant Thomas Barta) Barwise describes “the three gaps” that influence the success of a marketing team within an organisation.
"If you don’t invest in the brand or in the business, in the long term the competition will eat your lunch."
The “gaps” develop because marketing teams talk about an uncertain future, they don’t have the ability to implement their own plans, and a lot of what they do can’t be measured, he says. The first gap is one of trust, driven by marketers’ focus on the future and often fuelled by evasiveness on the part of marketers when finance teams try to assess the return on marketing spend.
“If someone tells me they know what will happen in the future I am rightly sceptical,” Barwise says. “The reason why it is difficult to get a straight answer – sometimes from even a good marketing person – is that it is difficult to predict the future. ”
The second gap is in power. Marketing teams generally do not have the power to implement their ideas alone. For example they may need buy-in from other departments in order to create a clear message. Or they may need customer-facing staff to come on board with plans to improve the customer experience – and seldom will those people report to the CMO.
“What a good marketer is trying to do has to be done through persuasion. I avoid the term internal marketing – it implies the marketing people have the right answer and they have to sell it.”
The third gap is in skills, largely driven by the rapid pace of technological change. Technology is disrupting marketing to a massive degree, from the way people are exposed to marketing – on their mobile devices for example - to how they interact with it – for example creating product reviews online. In a disrupted environment, marketers have to innovate – and make it up as they go along.
Barwise describes this as a “test-and-learn mindset”.
How can finance help?
“There’s a myth among marketers that the CEO and CFO only care about quarterly earnings and don’t understand brand value. ”
In fact, Barwise says, finance people understand the value of a brand and of advertising. But some evidence is hard and some evidence is soft and not everything can easily be measured. Finance can help the marketing team identify key metrics and develop ways of measuring them. Barwise recommends a focus on big items (as measuring small items can be more trouble than it’s worth), an acceptance that there is going to be some ambiguity in the measurement, and regular reporting of both success and failure.
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If the marketing team becomes comfortable with the system of measurement, it can have unexpected benefits on the budget as the team takes on an “investor mind-set”.
“A marketer can astonish people if they say ‘we want less money’,” he notes.
Marketing facts of life
As a marketing expert, Barwise is adamant marketing works and is essential to business health. He cites Grey Goose vodka as an example of how a strong brand can drive profitability. Under blind tasting conditions people can’t tell the difference between different vodkas “even before they have had a few”, he says.
“So long as the product isn’t poisoning anybody and you have trade marketing as good as the others in your market then what determines value is the quality of your branding. Grey Goose vodka was created by one guy in eight years and sold for US$2.2b to one of the big food companies.”
But not all branding is as successful – or as necessary. His employer, London Business School, for example, has a high quality brand but the quality of the teaching and research is more important to its ongoing success than the quality of its marketing.
Marketing in the broad sense of customer focus is important, he says.
“Marketers obsess too much about being distinct from the competition. If you are going to choose between having the best customer service and being different from the competition, choose the first of those. ”But customer focus should mean giving the customer what they want more than targeting the customer with marketing. In this instance, he says, social media is often being used poorly.
“All the hype about social media in marketing is social media as an advertising channel – and I think that is overhyped. Some of the stuff the techies get excited about, the idea I’m walking down the street and I go past McDonalds and my phone tells me I can get 20% off a Big Mac."
Barwise shakes his head sadly. “Get real.”
The real value of social media is in the potential for customer insight, he says. “Also in customer relationship management."
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But the data produced by the internet needs to be filtered through experienced minds rather than taken at face value when incorporating it into a marketing strategy. The key here, he says, is to understand that the customer decisions behind the data may be driven as much by emotion as by logic so the data cannot be interpreted as describing logical behaviour.
“What happened with Brexit, what happened with the US election, I hope it is not controversial to say that emotion played quite a large part - rather than evidence-based decision making, shall we say. Those of us in the evidence-based school have been left with a lot of custard pie on our faces.
“The internet gives you the ability to do that [analyse data] to a great degree. There is a risk that pushes you towards short-termism.”
While marketers tend not to be that influential due to the trust gap, the power gap and “this horrendous skills gap”, there are strategies that can help them gain organisational influence. One is to mobilise the boss. Another is to develop a good relationship with the finance team.
“A good CFO will be very up to speed on what is worrying the board.”
He describes The 12 Powers of a Marketing Leader as a leadership book rather than a marketing book and says a core message of it is the requirement to manage upward as well as inspire your subordinates and motivate yourself. In that, he says, finance teams may find they have more in common with marketers than they suppose.
“I would argue that as a finance leader you are in a parallel situation.”
This article first appeared in the April/May 2017 issue of Acuity magazine which can be read in full online for free here.