Whether your goal is to obtain a seat at the table, or to prove the value of marketing, you need a viable relationship with Finance.
'If you wish to persuade me, you must think my thoughts, feel my feelings, and speak my words' ‐‐ Marcus Tullius Cicero (c. 106‐43 B.C.).
Unfortunately, too often there is a disconnect between the Marketing and Finance departments. This gap can lead to a number of challenges for marketers, one of which involves obtaining approval for the Marketing Budget.
Finance works from the general ledger, which contains all the accounts for recording transactions relating to your company's assets, liabilities, owners' equity, revenue, and expenses. One of the key accounts is marketing, which often contains what are known as subaccounts.
These subaccounts might be labeled as advertising, events, PR, etc. So it's when Finance asks Marketing for its budget, our first inclination may be to organize our investments by these subaccounts and submit our budget accordingly. Now here comes the rub! With this approach we leave ourselves wide open for questions such as:
- Why ads in these pubs?
- Why so many webinars or trade shows?
- Why so much money for the email automation platform?
- Why so much money for new content?
And right away, we're playing defense! We are then at the receiving end of all kinds of suggestions from our partners in Finance for how to reduce our spending. Before we've even gotten out of the gate, our budget is eroding. If this isn't your world, congratulations! If it is, here's the shockerit's your fault.
As marketers, we need to think beyond the subaccounts in the cost accounting system, and understand how the dollars we're requesting are actually going to move business needles. Businesses are based on revenue and profits generated by customers buying our products/services, hopefully profitably. This is the very essence of Marketing.
As a result, we need to think about our budgets in terms of the customers and what they buy. So instead of submitting a budget for activities, imagine submitting a budget that allocated funds into buckets such as these:
- Marketing generated business from net new customers buying existing products
- Marketing generated business from existing customers buying existing products
- Marketing generated business from net new customers buying new products
- Marketing generated business from existing customers buying new products
Obviously these categories don't exist on the general ledger, but this approach enables you to have a different kind of conversation with Finance, most importantly, in terms they understand.
Of course, they will still want to know why we need so much money. But instead of defending an activity, we'll be having a discussion about the business how many customers, which ones, how easy or hard it will be acquire, retain or grow these customers, our competitive situation,and our product innovation situation. I'd rather have these conversations with the CFO or other members of the leadership team instead of one about which tradeshows to attend any day.
Being able to allocate your marketing dollars in this fashion and engage in this conversation requires some different thinking on our behalf. First and foremost we need to see ourselves as business people who happen to be performing a marketing role. Here are three tips for making such a shift.
1. Learn and speak the language of business. Business people think in terms of customers and revenue. Be able to translate what you do into these terms.
2. Leverage the word market in Marketing. As marketers we should have our fingers on the pulse of the market and customers at all times. Be able to translate and communicate market and customer trends and requirements back to the business.
3. Manage performance. Business leaders are accustomed to seeing data and metrics that help them make fact‐based decisions and understand what is and isn't working. Move from measuring and communicating outputs to outcomes and translate these back to how Marketing is generating value and impact.
Once we have clarity around marketing's contribution via customer acquisition, retention and growth, we will also have achieved better alignment with the business , gained insight into how to measure and account for our value and increased our credibility as a business leader.
Plus, we will have created maneuvering room and the ability to select the activities best suited to achieve the desired result. By working with Finance and crafting a measurable outcome based marketing plan, the finance team can help translate the work of marketing into the right subaccounts.
Laura Patterson is president and co-founder of VisionEdge Marketing, Inc., a recognized leader in enabling organizations to leverage data and analytics to facilitate marketing accountability. Laura's newest book, Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom: www.racombooks.com ), is a useful primer for improving marketing measurement and performance.
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