A “critical barrier” exists between CFOs and CMOs when it comes to how marketing budgets, meaning the two sides are not always aligned about what marketing is meant to achieve and how to measure its impact, according to a new study.
Commissioned by Toronto based media consultancy Empathy, Breaking the CMO-CFO Language Barrier is based on interviews with 28 Canadian CFOs and CMOs conducted by Leger. The study was conducted in partnership with the CFO Centre, McMaster University’s Master of Communications Management and the Toronto chapter of the American Marketing Association.
The report concludes that while CFOs and CMOs tend to agree on their company’s overall business objectives and performance, the plan for how to get there can often “get lost in translation,” hindering marketing’s role within the organization.
The gap, says the study, is a result of how CFOs and CMOs perceive what marketing is meant to achieve, and how to measure its impact. While 91% of CMOs believe they have adequately demonstrated ROI in previous campaigns, just one-third of CFOs agree, and while 82% of CMOs say they are confident they can predict future ROI via their marketing, 24% of CFOs see it as their greatest challenge.
“Our data shows that marketers believe that they have done a decent job of justifying past investments and are confident they can do so again in the future,” said Empathy CEO Mo Dezyanian in an email interview. “CFOs are far more skeptical on both accounts. There is a crisis of confidence [and marketers] should work to alleviate that.”
One of the biggest obstacles is the lack of a common language between marketing and other departments within an organization, said Dezyanian. “Marketing language is specific and not the same as business language. We can change that,” he said. A simple example is how a common marketing term like “brand loyalty” means reducing customer churn in business terms.
The study suggests that there is also a disconnect between the marketing and finance departments when it comes to establishing KPIs, with nearly two-thirds (64%) of CMOs saying they have the necessary information to establish KPIs, compared with just 47% of CFOs (another 18% of CFOs indicated that they don’t know).
Both sides agree that organizations are “under-resourced” when it comes to insights and analytical talent, said Dezyanian. “We need to invest in people who can interpret the vast amount of data at our disposal and do so ‘bilingually’ in marketing and finance speak.”
The disconnect between finance and marketing can be exacerbated if money tightens up during a crisis, with the 65% of CFOs saying they adjust marketing budgets based on cash flow, compared to just 27% of CMOs. Nearly one-fifth of CMOs indicated that they try to protect long-term brand value during a crisis, which the study said is not a priority for CFOs.
While some experts say it is best for businesses to keep marketing during a downturn, CFOs are often under enormous pressure to ensure the company’s financial health as revenues fall. “As marketers we need to do a better job addressing the urgency around budget management in a crisis,” said Dezyanian. “The question isn’t whether we should spend money or not. The question is where do we get the money to spend. We have to dig deeper.”
The CFO Centre principal Kent Smallwood said that success in the new business environment requires overcoming what he called the “historical barriers” between CFOs and CMOs. “It is imperative that we actively invest time and energy to embrace a shared view of how we will reliably convert marketing spend into revenue and profit,” he said.