For instance, only 48% of respondents to the 2008 marketing accountability study from the Association of National Advertisers and Marketing Management Analytics said they had "some cooperation" between marketing and finance.
It doesn't have to be this way. In fact, many Fortune 500 companies have begun to officiate over a marriage of sorts between the two disciplines; others are beginning to build a bridge across the chasm. We herewith offer the Top 5 problems from finance's perspective, and solutions for bringing about an atmosphere of cooperation and mutually beneficial partnership.
Reason #1: Finance thinks marketers spend like drunken sailors.
Finance believes marketing is the last outpost of unmeasured, unfettered spending, while every other department shows them hard ROI. Most, when pressed, will admit that marketing is important and may pay back, but it is a vague impression. Not surprisingly, then, executives look to cut marketing spend first due to its size and perceived lack of ROI. In a joint 2008 study by MMA and Financial Executives International (FEI), 60% of senior financial executives surveyed said they did not believe marketing forecasts used for budget input were audit-ready; only 35.4% believed that marketing adequately understood financial controls.
Solution: Spend on marketing, but measure it and be completely transparent. Institute an accountability program that accurately measures how marketing contributes to company success: gaining efficiencies, generating cost savings, driving sales.
Reason #2: Finance asks for ROI; marketers give them "brand value" and "unaided awareness."
If you're in marketing management, count yourself lucky if you're only hearing these complaints from finance, because many marketers are feeling the heat from the boardroom. While you will get few arguments about the critical importance of brand health and consumer perception, nothing drives finance to distraction quicker than fuzzy measures of investment return.
Solution: Use tools to put a dollar amount on the impact of brand investments; provide research on the market value of brand equity. Numerous studies have demonstrated the correlation between brand equity and a company's marketplace value. These studies document how brand value contributes to various financial factors (ability to sustain higher margins, lower new product introduction costs, making cash flows more predictable). However, unless it's given in dollars, few finance teams will put much faith in it. The good news: Tools exist to put a dollar value on an increase in brand equity.
Reason #3: The way marketing buys media is a mess, and can never be unwound.
Solution: Educate finance on how marketing is executed, and they will make the numbers reflect it. Whether it's helping them understand upfront and scatter, accounting for a makegood, or doing a media audit, finance teams that understand how the process works can keep the books in order. The auditors at an industrial manufacturer told marketing they would not sign off on their books unless they changed how they bought media. The marketing team stood its ground and got the auditors on board through a long series of sessions that walked them through media-buying processes.
Reason #4: Marketing's spend forecasts are never right.
Large mistakes in forecasting are common. And this cuts both ways: Executives look at overspending as being irresponsible, while under-spending means marketing left sales on the table.
Solution: Invest the time and effort to get your spending forecasts right. It's challenging, but it can be done.
This solution is largely in marketing's court. I worked with the advertising team at a top U.S. retailer that had consistently missed forecasts, sometimes by 5%+ of the annual budget. Tired of constantly explaining the various reasons for the miss, they set a goal to fall short by less than 1%. Although it took weekly finance reviews and putting a layer of approvals in place, the next year they were within 0.25% of their forecast, and have hit their target every year since.
Reason #5: Even when marketing does give us ROI, the numbers are hard to believe.
Common complaints: "They don't even include fixed costs of marketing" or "They use gross margin instead of profit margin" or "Their ROI measurement is complete voodoo."
Solution: Get finance involved, and they'll be your biggest advocate by vouching for your numbers. Having a finance representative who is active on the marketing accountability team is crucial to the success of the program. Also key: get on the same page with finance in terms of accountability metrics. One major fashion retailer has even empowered a "Chief Translation Officer" to serve as a liaison between marketing and finance.