The increasing importance of a CFO-CMO marketing | finance partnership

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Joe Dell’ Aquila [email protected] 203.322.3642 Harry Falber [email protected] 203.557.4150 www.tradeareamarketing.com ©Trade Area Marketing Group, llc 2013

The increasing importance of a CFO-CMO partnership

1.   Why the new importance of a CFO-CMO Partnership?

2.   Issues facing today’s CMO & how the CFO can help.

3.   Understanding the most disruptive, destabilizing, & painful change in modern marketing.

4.   The CFO’s important role in agency relationships and new agency search.

5.   Wrapping it up & two take-aways.

Today’s Topics

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1. Why The CFO is becoming more

important to the CMO as a partner

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The CMO really needs your help

!  Marketing is more complex. !  Demands on the dollar are greater than

what’s in the wallet. !  More often than not, she is learning new

landscapes on the fly. !  There are too many experts and not

enough generalists. !  He lives in a world of possibilities and

abstracts…the CFO is an advocate who can help bridge the gap into a world that wants quantification.

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2. Issues

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!  CEO pressure for short term results.

!  Difficulty in generating marketing metrics.

!  Greater difficulty in generating communications metrics.

!  Lack of real understanding of how agencies make money.

Issues Facing Today’s CMO

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!   Many CMOs not truly knowledgeable in understanding creative development over all platforms or all media.

!   All too many agencies just hang out a “shingle” (digital for instance).

!   What you see is not what you get (outsourced agency talent).

!   “Big Data” has moved from buzz word to most misunderstood or misused research.

Issues Facing Today’s CMO

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!  Unprecedented financial concern and even greater scrutiny.

!  ROI demands. !  Search for measurement. !  Short vs. long term. !  Confusion over what’s real in advertising. !  Confusion about what is advertising.

Issues Lead To Budget Pain

While every department feels it, only one isn’t defined by “weights and measures”

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3. The most disruptive change in

modern marketing

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The major destabilizing culprit

at both client and agency

Digital

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What is Digital? What Isn’t Digital?

Does this define

Digital?

Maybe. Maybe not.

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50 ways to leave your stakeholders…confused!

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!  The greatest sales tool the world

has ever seen? !  A technological scam, perpetrated

by propellerheads who have never seen a marketing plan?

!  A “flash in the pan” that will be the

marketing world’s next hula hoop?

What is Digital Marketing?

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It is simply…

!   a new medium that is as weak or powerful as the idea contained within it,

!   and the way it is targeted to current or prospective consumers.

Actually…none of them!

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!   New disciplines, for you to learn (and keep relearning) with few measurements or financial metrics.

!   The intersection of big data and new media

technology has greatly expanded the role of marketing as a driver of enterprise value creation.

!   This new driver defines the critical importance of

a closer peer relationship between CMO and CFO in order to drive strategy and improve the financial health of the enterprise.

!   Internal economics…increased marketing “Capex and Opex”.

!   Changing economics at ad agencies & their compensation requirements.

But as CFO, Digital has or will have a direct effect on your managing P&L

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The CFO’s role in:

!  CMO-CFO Relationships !  Marketing !  New Agency Searches

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!  See yourself in a role of advisor not inquisitor when speaking to your CMO peer or his subordinates.

!  Financial Coach: Make sure your CMO understands the changes and their impact on P&L.

Significant change in the CFO’s marketing playbook

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! Make sure the CMO knows, and you reinforce, that you and your team view marketing as an engine of growth as opposed to a “cost center”.

! Lead discussions so they shift from "where can we trim spending" to "how we can optimize spend and justify when and how to increase our investment?”

Collaboration: The Evolving Partnership

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Strengthening the Partnership

!  Actively develop cross-functional teams with open communication objectives.

!   Understand the CMO perspective on drivers of

customer value, that are both tangible and intangible.

!  Develop a common set of metrics addressing

performance of marketing investments that can be understood by all.

!  Establish accountability for marketing ROI, with measurable performance objectives.

!  Recognize the need for and importance of “unquantifiable” creativity and innovation to enhance brand and customer experience.

How to effectively bridge the gap with CMOs

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!   Insure that your finance team's forecasting work operates at granular level based on strategic needs by region, vertical, or customer segment as you and CMO agree in advance to.

!   Work with the CMO to create a common lexicon for your teams, so both speak the nuances and complexities of marketing objectives, with the more objective and finite metrics of finance, that perhaps have more elasticity than would be seen as the outcome of a production line.



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Make sure all marketing-finance conversations address, at the least, these three topics:

!   Spend by target audience: who are we trying to reach?

!   Marketing investment by objective: when are we trying to reach them*?

!   Marketing spend by vehicle: how will we reach them*?



*Them = the existing, ex, or potential customer, client, partner, or influencer. Sometimes, the shareholders, stakeholders, PE firms, investment banks, media, retailers, distributors, but not your bragging rights to the wife.

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Your CMO and brand team are begging for understanding. Follow These….

…3 Golden Rules

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Asking questions of discovery tend to work well, such as:

!   “What can we achieve with good marketing?”

!   “How well is our current marketing performing?”

!   “How can we improve the payback we’re getting?”

Golden Rule One

Acknowledge that good marketing does create shareholder value

!   Frame questions supportively

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Embrace Ambiguity and be willing to accept “I don’t know” as an answer from marketing in the near term……(difficult as this might be for most CFOs)

!  provided it is followed in short order by “…but here is what we can do to find out.”

!  You will be seen as the stable, measured voice of management helping to embrace uncertainty, especially in the early stages of marketing measurement when the unknowns will outnumber the knowns.

Golden Rule Two

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Be patient.

!   Don’t assume that applying time pressure will speed discovery. More likely, impatience will be met with passive-aggressive resistance which will surface many more complex obstacles than you or the rest of the finance team have the time or ability to conquer.

!   Premature demands for precision will backfire in the form of higher weighting of the more measurable marketing elements such as web site traffic .

Golden Rule Three

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!   you’ll get much closer to the answers you’re seeking, much faster, with greater accuracy

!   You’ll have improved your company’s and your marketing department’s chance to achieve goals exponentially

!   You’ll have contributed immensely in creating a positive environment in your agency that will deliver exceptional results

The CFO-CMO Bottom line

If the spirit of your inquiry is interpreted as a quest for insight rather than an attack,

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CFO And The Agency

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Natural allies, not antagonists

!  CFO defines reality for CMO

!  CMO creates vision within defined parameters

!  Agency is source of vision execution

The Bermuda Triangle: CMO | CFO | “The Agency”

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!   Temper procurement department. !   As cheap widgets can cause a product to fail,

so can cheap creative and insight.

!   Agency must make a fair (not usurious) profit

!   Help CMO learn how to challenge and and manage procurement while challenging & managing, on her own, agency service costs

!   CFO should work with marketing to insure that creative quality and business sense, not price, is the requisite for an agency

For the CFO to help achieve an agency’s success

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!   You should always have a role on the agency evaluation team !  Resist the conventional role of inquisitor !  Embrace the role of being cheerleader

!   You should always play a major role in compensation terms and system !  Do not leave this to a procurement

line employee !  Be supportive of the agency’s need to

make a reasonable profit

CFO And Agency Selection

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!  Try and understand your company’s demands as a client !   (lots of last minute work and changes,

multi-department “freebee requests”, shift in-house routine brand work to agency staff, ex: dealer & retailer promotions, events)

!   Contribute to defined Scope Of Work (SOW) upon which the agency will be compensated

!   Consider helping CMO craft “invitation to compete” which states what is involved for new agency so you both can evaluate agency’s SOW that fee is based on


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!  Resist the temptation to offer creative judgments

(or offer them privately over coffee. Let marketing always do the feedback. Reinforce to the CMO that you will always keep opinion private between each other)

!  Vet the agency’s numbers on staffing and overhead

!  Understand all the components of agency overhead

!  Buffer the procurement group


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5. Wrapping it up..

..and the take-aways

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!   The economic change wrought by the rise of digital marketing

!   The dilution of effective channels to reach both b-to-b and b-to-c customers

!   Creative confusion !   Marketing has become even more

of a scapegoat !   The rise of immediate negative

response in social media (from blogs, to twitter, to Facebook, to huffpost et al)

!   Ire of board and stakeholders to new visibility

Wrapping it up: Why the CFO is now a friend of Marketing

The CMO and her agencies are under more pressure than ever

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!   Staff based fee systems. !   The problems with generating realistic

incentive compensation. !   The increasing velocity of account switching

which can devastate them, and cost you money. !   Client approval processes have become

increasingly difficult to manage. !   Marketing direction has become ambiguous, and

more often than not marketing team members have not been trained in advertising, media, or even financial controls.

Wrapping it up: Why the CFO is now a friend of The Ad Agency

Agencies are under more pressure than ever

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Support from the CFO is the ONE and ONLY concrete vote of confidence, as it is defined by role consensus as financial acumen, not just opinion.

Wrapping it up: Why the CFO is now a friend of Marketing and its Agencies

The fact is:

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Wrapping it up: Two Important Take-Aways

Trust and respect: Two attributes that most agencies no longer expect from clients, and marketing teams no longer expect from colleagues

!   Take-away One: Both marketing and the agency will walk through walls for those that give them trust & respect.

!   Take-away Two: And first in line to give them what they need to produce best-in-class marketing and advertising can be the CFO and her team….

The stabilizing voice of the client

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About Trade Area Marketing Group

We're a hands-on advisory and consulting service working for private equity firms, business-to-business and business-to-consumer corporations as well as advertising agencies. We work in four primary service areas:

CEO & CMO advisors for advertising, media, digital, direct marketing | direct response | public relations | licensing | media |sales promotion agency searches, client:agency compensation agreements on-boarding | relationship development

Advisors to Private Equity investors with existing or new portfolios in advertising agencies looking for mergers or acquisitions

Advisors to agency management for mergers, acquisitions, exit strategies

CEO & CMO consultants providing on-site management for international or domestic corporate/brand strategy and marketing plan execution in critical situations

More detailed information can be found on our website www.tradeareamarketing.com

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Joe Dell’ Aquila [email protected]

203.322.3642

Harry Falber [email protected]

203.557.4150