4 in 10 Chief Marketing Officers (CMOs) say that they are under more pressure to prove ROI in less time. 8 in 10 also agree that learning the language of finance helps them secure more marketing budgets.

Source: Marketing Charts

So, what does this mean?

CMOs often need extensive budgets to run marketing campaigns throughout the year. Although critical, these investments are not easily approved because Chief Financial Officers (CFOs) expect greater clarity around investment rationales, strategic objectives, and timelines to maximize marketing efficiency and ensure a greater return on investment. With marketing and finance functions operating in silos, arriving at a shared consensus becomes difficult, requiring deeper dialogue between CFOs and CMOs.

Setting up a Cross-Functional team (CFT) fosters a culture of Collaboration, Trust and Transparency and a process of open dialogue is set-in in the price-setting exercise.

This blog will list how greater collaboration between CMOs and CFOs can lead to more significant business results and the steps to forge deeper relations.

Why cross-functional collaboration is essential between the CFO and CMO

CMOs and CFOs have distinct roles and responsibilities, holding different values and approaching projects in their own unique ways. Yet, they share common goals, like fuelling business growth and optimizing resource usage.

A collaborative partnership between CMOs and CFOs can help build mutual understanding, aiding in the creation of strategies that support shared business objectives. When on the same page, they can view marketing as a revenue driver, bringing in more business, not as a mere cost centre that drains resources.

Here are three reasons why cross-functional collaboration between the CFO and CMO is crucial:

• Informed decision-making: Combining cost intelligence with market data can help a CEO make informed decisions about product pricing, market expansion, and capacity utilization. Such collaboration can also ensure the strategic allocation of resources instead of duplicating efforts or overspending on unnecessary solutions.
• Greater revenue: When CMOs and CFOs work together, they play a more direct role in driving revenue and growth. For instance, the CFO can support marketing efforts by identifying conversion goals, business objectives, and budgets. The CMO, in turn, can showcase results, tying back to those business goals and proving the ROI and value of marketing efforts.
• Better resource allocation: A good relationship between CMOs and CFOs also allows resources to be better allocated and budgets to be optimized. Through techniques such as activity-based costing, they can track their marketing costs more accurately. In the long run, this helps in maximizing the impact of marketing efforts.

Actionable steps for CFOs to break out of their silos and provide comprehensive insights

Finance professionals often want to see sales-related benefits capture a larger share of the wallet. Marketing professionals, on the other hand, focus more on intangible goals, such as brand development, which might not reap immediate profits.

Yet, according to research by the CMO Council, only one in five CMO-CFO relationships are truly collaborative. Driving greater value from every penny spent requires CMOs and CFOs to work together to overcome differences in perspectives and bridge barriers in communication.

Here are some actionable steps for CFOs to break out of their silos and provide comprehensive insights:

• Use data as your fuel: Since data-driven marketing strategies enable better targeting, greater relevance, and improved customer experiences, data should be at the centre of every conversation between CMOs and CFOs. Yet, only 18% of marketing leaders believe that finance and marketing have the same access to customer data and transactional information for marketing decision-making. Deeper collaboration can offer better insight into how different functions use data while offering a coherent view across the entire enterprise.
• Ensure alignment on strategic objectives: Marketing and finance may often look at the same data, but they aren’t necessarily aligned on the strategic objectives behind such investments or the metrics used to gauge success. Ensuring alignment on strategic objectives can ensure the best of both worlds: the speciality knowledge of connecting with consumers over the long term and results-focused efficiency. Getting to a common, proactive understanding of marketing goals and metrics and the rationale behind investments will pay higher dividends over the long term.
• Bank on common tools and metrics: Marketers are more likely to consider qualitative data when measuring performance, whereas finance functions are more drawn to quantitative data, weighing cost efficiencies against growth potential. To drive the right strategic decisions, it is essential to use the same tools, focus on the same metrics across the exact timelines, and align them with defined objectives. For example, actionable tools such as activity-based costing tools can help CMOs and CFOs get a detailed break-up of costs, operations-wise, paving the way for informed and accurate decisions. Similarly, focusing on KPIs such as return on total marketing investment and total customer investment can help make the right investment decisions
• Ensure mutual risk assessment: Mutual risk assessment can help CFOs and CMOs adapt to evolving market trends and showcase resilience during economic downturns. By working together, they can adapt financial strategies in response to shifting markets and help their organizations stay competitive. For instance, the CMO can demonstrate how and which technologies can improve customer experience during a market slump, while the CFO can analyze the long-term financial (and risk) implications of these decisions.
• Foster transparency: A successful CFO-CMO relationship also requires both parties to engage in open, transparent, and regular dialogue. They should be prepared to share insights, discuss challenges, and brainstorm solutions. This can help in the regular exchange of ideas while providing a common ground for reviewing metrics, evaluating performance, and recalibrating strategies.

Wrapping up

According to a study by PWC, 70% of marketing campaigns fail to achieve internal reach and frequency targets, diluting ROI.

In today’s volatile business landscape, the roles of CMOs and CFOs are constantly evolving. A strong relationship between the CFO and the CMO is more critical than ever to ensure alignment. Close collaboration can generate a greater return on investment and position companies for the future. It can help elevate profitability, yield greater efficiency, and enable better decision-making while mitigating risks.

Are you looking to transform cost data into strategic insights and position your products in a way that drives sustainable competitive advantage? Do you want your CMOs and CFOs to become outcomes-obsessed and drive greater transformation?

Here’s how ABIS Pro can help you make the right market and pricing decisions.