Collaborate With Finance To Prove Marketing’s Business Value
Every year, Restoration Hardware sends me their infamous 5 pound catalogue filled with beautiful furniture, hoping I would defund my kids college accounts and buy a 12 foot long harvest table. I estimate it costs $3 to $4 to mail this enormous catalogue, almost double the standard catalogue postage costs. And that doesn't even include production costs, like design, photo shoot, agency management! With Restoration Hardware's stock tumbling 60% in 2016, it's borderline irresponsible for the CMO to produce this catalogue. I wonder: is the CMO and CFO working together to manage marketing costs and determine if their marketing efforts—like this catalogue—is driving incremental revenue for the business? Probably not.
Marketers must be held to a rigorous performance standard, where they're measuring the financial impact of their digital, mobile, and direct marketing efforts. In our recently published report, "Collaborate With Finance To Prove Marketing's Business Value," we've outlined the current state of the marketing and finance relationship and identify three best practices that marketers need to adopt to make sure they're working collorbatively with their finance colleagues to ensure their measuring up to the business KPIs.
What did we find?
First, Marketers must become financially savvy. But it's not in their DNA, right? Well, they need to change thier mindset. They must join forces with their finance colleagues to understand business goals, align their performance language, and agree upon metrics that will show marketing's value. Marketers need to lose the "click through" rate mentality, and embrace revenue driven metrics. We double dog dare you to ask your CFO to boost marketing budget because of that impressive 0.05% click-through rate. Guess what? It's not going to happen.
So, what should a marketer do? Here's a sneak peek to some best practices in developing a harmonious relationship with your finance counterparts:
Employ a marketing finance expert to bridge the marketing and finance gap. This individual will have a background in finance and marketing, bringing expertise in budgeting, accounting, and balance sheets. Their expertise will help marketers calibrate those hard KPIs, like ROMI and ROAS.
Involve finance in the marketing planning process. You can’t measure campaigns to business goals if you don't understand the metrics that matter to the business. Financial professionals that are included in the marketing planning process can set the right metrics and KPIs to measure, help to develop forecasts, and determine if a marketing initiative is going to be profitable.
Bridge finance and marketing systems together. Marketers and financial professionals that have access to marketing performance and transaction data will help to gather the necessary information to calculate incremental lift, revenue and true costs.
Engaging with finance will help legitimize marketing even more and build a stronger business case for more budgets, allow for more flexibility with marketing tests, and encourage innovation. Email me with your comments or contact us if you need help building the marketing and finance relationship.