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Make marketing more productive by leveraging financial disciplines and strengths. Learn how in this 4-Step approach, with a case study to prove its effectiveness.
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Summer 11 08
Don Metznik In this 7-‐page article, financial and accounting professionals will learn how to increase their overall contribution to a company’s success by sharing numerical and analytical techniques, skills, and disciplines with their marketing counterparts.
Creative Logic Marketing | Copyright 2011 Donald A. Metznik | Small Business Advisory | metznik.com
Marketing and the CFO: How Financial and Accounting Professionals Can Add Value to Marketing Services
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HOW FINANCIAL AND ACCOUNTING PROFESSIONALS CAN ADD VALUE TO MARKETING SERVICES.
An unnecessary and unproductive tension often exists in small to midsize businesses (smbs) between marketing and financial/ accounting services*. It obstructs a synergistic relationship. This tension is fed by conflicting perceptions of each department’s roles and responsibilities, and by some classic stereotypes. Removing this tension and creating a complementary relationship will yield significant business benefits. This is how it can be done. STEREOTYPES You’ve heard the stereotypes: marketing is creative, unstructured, emotional, liberal in spending, and speaks a funny language. Finance/accounting lacks imagination, is too highly structured, too analytical, too conservative in spending, and speaks a funny language. These stereotypes are often supported by characterizations that marketing types measure almost nothing while financial/accounting types measure virtually everything. As to roles and responsibilities, finance/accounting exists to rein in marketing and save the corporate treasury, while marketing exists to breathe life and vitality into a department that has no grip on consumer reality. A DIFFERENT CORPORATE REALITY The reality in large corporate suites is different. Marketing MBAs are highly analytical, fond of metrics, and rational to an extreme. “ROI” is always rolling off their tongues. Similarly, the finance and accounting department is embedded in marketing activities from their onset and can be effective analysts of consumer data. It would be a positive development, therefore, for smbs that depend upon marketing success to duplicate the large corporate environment where marketing and finance/accounting work collaboratively toward corporate objectives rather than antagonistically and at cross-‐purposes. There will always be tension, but this tension will be constructive, based, for example, on different interpretations of data, not on the credibility and reporting of the data itself.
You’ve heard that …marketing types measure almost nothing while financial/accounting types measure virtually everything.
There will always be tension, but this tension will be constructive…
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TOWARD A MUTUALLY CONSTRUCTIVE RELATIONSHIP Four steps are required to remove inter-‐department tension and align the efforts of marketing and finance/accounting. STEP 1: DEFINE MUTUALLY SUPPORTING ROLES The first step is to establish a mutual acceptance of roles for marketing and finance/accounting.
Department Old Role Perception What Was missing New Role
Marketing Propose and manage customer and sales programs (narrowly focused on customer and marketplace)
Rationalization of cost and ROI considerations (appreciation for financial analysis)
Produce business success through financially rationalized customer and sales programs
Finance/Accounting Resist important business-‐building marketing spending (narrowly focused on analysis)
Appreciation for customer and competitive realities
Facilitate responsible spending on programs most likely to contribute to business success
As the above table shows, each department needs to expand its focus by accepting the realities of the other department; marketing should share its customer and marketplace orientation and finance/accounting should share its financial stewardship orientation. This role redefinition moves the two functions into a complementary relationship focused on business success.
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STEP 2: DEFINE A COMMON APPROACH Having brought the two roles together, the next step is for finance/accounting and marketing to agree on a common approach that will become a sustaining formula for business success. This approach most likely should begin with the finance/accounting department demonstrating how analytical skills, techniques, perspectives, and disciplines can contribute to the marketing process. The initiative should come from the finance/accounting side because it is closer to the numbers, has credibility with the numbers, and generally has a closer relationship with the CEO/owner. WHAT FINANCE/ACCOUNTING CAN SHARE WITH MARKETING • Comfort with and appreciation for numbers, quantitative
reporting, and analysis. • Familiarity with reporting formats and conventions that help to
produce understanding. • Passion for accuracy and a fear of sloppy numerical work that
can discredit an entire presentation or waste valuable corporate financial resources.
• Ability to find the story within the numbers-‐to interpret the data for meaning.
• Understanding of concepts like ROI, Breakeven, and Lifetime Value and how they can be meaningfully applied.
• Appreciation for reporting and analytical standardization that speeds interpretation.
• Facility with using graphs and tables to help uncover relationships and trends.
• Knowledge of how data can be manipulated, intentionally or through ignorance.
The initiative should come from the finance/accounting side because it is closer to the numbers…
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STEP 3: IDENTIFY WAYS TO INCORPORATE FINANCE/ACCOUNTING INTO MARKETING Here are the specific steps finance/accounting can take to begin to incorporate its various contributions to the marketing mindset: • Identify the type of information marketing needs, and take
responsibility for gathering and reporting it, or at least for setting up reporting templates.
o For example, I try to analyze program results by
comparing data four ways: actual vs. budget, actual vs. prior year, actual vs. recent trends, and actual vs. control or benchmarks (such as categories often have).
• Teach marketing how to present and analyze numbers. • Listen to unmet needs and frustrations of marketing and
determine if these can be solved with data and analysis. • Define standards and analyze for spending recommendation
levels e.g. expenditures over $XXXXX must include:
o A breakeven analysis o Optimistic-‐expected-‐pessimistic scenarios o Return based on 1 year and lifetime expected
contribution (used to help judge risk and reasonableness)
• Where appropriate, introduce, explain, and use statistics, e.g.
tests of significance. • Be a partner with marketing to understand the new areas of
web metrics, particularly as they apply to social media. Learn what metrics exist, where and how they can be applied.
o This is especially helpful with the sales funnel, conversion metrics, and ROI from marketing and sales.
STEP 4: STARTING THE PROCESS Finance/accounting should start the process with a conversation with the business owner/CEO. Use it to explain your objective (to improve decision-‐making and ROI of marketing dollars) and
I try to analyze program results by comparing data four ways: actual vs. budget, actual vs. prior year, actual vs. recent trends, and actual vs. control or benchmarks
Finance/accounting should start the process with a conversation with the business owner/CEO.
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strategy (introducing finance/accounting skills, experience, disciplines, etc. into marketing where appropriate). Propose to do the following: • Conduct an audit of marketing reports already generated and
determine if improvements can be made. • Identify marketing initiatives that should have, but currently
don’t have, appropriate analyses and reports. • Identify the gaps in analysis that exist in quality and quantity. • Identify the areas where a finance/accounting treatment can
help marketing projects and reports create better decisions. DO’s And DON’Ts Finance/accounting should tread lightly; marketing people (especially creative people) can have their egos bruise easily.
NOT DO • Become an advertising expect • Critique creative work, except for how it conforms to
stated creative objectives • Overwhelm marketing with minutia
DO • Look for opportunities to collaborate and co-‐present • Learn qualitative nuances in the work that marketing
does to better understand where and how to contribute.
PERSONAL STORY-‐ HOW I MERGED MARKETING AND FINANCE Early in my corporate career I became VP Marketing at a large restaurant company. This company had an advanced sales reporting capability and a large, professional finance and accounting department. The president had risen from corporate finance.
I inherited a hard working staff that had few analytical skills and a department with a reputation for having mistake-‐ridden reports.
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I inherited a hard working staff that had few analytical skills and a department with a reputation for having mistake-‐ridden reports. In other words, there was little analysis to support recommendations, and what little there was, was not highly thought of. Part of my job was to provide strategic guidance for a marketing budget over $30,000,000. To be effective I needed insights from business data and recommendations that were logically generated and well supported by facts. Initially, the president would meet with my department and include the finance/accounting department, which was also the keeper of the data. My staff would present their recommendations. Too often, finance would find errors of commission or omission. These would be embarrassing at the least, and unproductive at worst. Part of the problem was that finance/accounting had all the raw data, and my staff did not think or analyze like finance/accounting. SOLUTION My solution was to make finance/accounting a partner with marketing and not an adversary; finance/accounting and I would agree on the nature of the reports needed and the extent of analysis required. They would generate reports and take responsibility for accuracy. To formalize this arrangement, I created a sub-‐department called Marketing Financial Analysis that had the blessing of Finance, Operations, and The President. IMMEDIATE IMPROVEMENT The result was an immediate improvement in the quality of work presented, speed of delivery, and acceptance. In fact, the standardization of reporting formats enabled macros to be built, and they became standard operating procedure. This enabled more advanced analyses and clearly contributed to better decision-‐making. We were able to focus on the task at hand and not be sidetracked by support services. By working with finance/accounting, marketing made better presentations, sold its ideas more effectively, and saved a lot of tedious number crunching. This model can be reproduced even in small companies.
To be effective I needed insights from business data and recommendations that were logically generated and well supported by facts.
My solution was to make finance/ accounting a partner with marketing and not an adversary… The result was an immediate improvement in quality, speed, and acceptance…
This model can be reproduced even in small companies.
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MOVING TOWARD A BETTER MARKETING-‐FINANCE/ACCOUNTING RELATIONSHIP There is and always will be a difference between marketing and finance/accounting. Both are separate and equally important components of business. Marketing should not report to finance/accounting, nor should finance/accounting stifle the creative and customer-‐centric responsibilities of marketing. So why am I suggesting that finance/accounting should initiate a sharing of its skills, disciplines, techniques, and perspective with marketing? The simple answer is that numbers are the language of business, and smb marketing must learn this language well in order to optimize its contribution. I believe the initiative to do this is best taken from the finance/accounting side. By having mutually supporting roles and speaking a common language, the marketing-‐financial/accounting combination will greatly aid decision-‐making and contribute to a more competitive, growing, and prosperous business. ABOUT DON METZNIK | CREATIVE LOGIC MARKETING Don Metznik | Creative Logic Marketing discovers hidden business opportunities, educates owners of small and midsize businesses how to develop these opportunities, and develops strategies and programs in marketing, sales, and the Internet consistent with owner goals and values. And he likes financial types. Useful information may be found at www.metznik.com.
* The expression “financial/accounting” is used to reflect the highest level of financial control within a company. This level varies by size of the business, and may reside at the accounting level for smaller businesses.
…numbers are the language of business, and smb marketing must learn this language