The FINANCIAL — Although the relationship between the chief financial officer (CFO) and the chief marketing officer (CMO) has become closer and more collaborative in the last three years, in many organizations it is not happening quickly enough to adapt to a digital world, according to an EY global survey of 652 CFOs and a series of in-depth interviews with CFOs and CMOs.
The findings of the fourth instalment ofthe Partnering for performance series indicate that a lack of common processes and continued cultural differences remain significant barriers to the relationship.
Woody Driggs, Global Customer Advisory Leader at EY, says
“CFOs and CMOs have traditionally been distant allies. Yet in today’s digital economy, a strong finance-marketing relationship can spell the difference between high-growth organizations, and those that stagnate or are left behind. For organizations to remain relevant and thrive, the CMO needs to call into question all aspect of the marketing mix and the CFO, meanwhile, needs to make the strategic investments that will enable established companies to adapt.
“CFOs and CMOs that can overcome historical barriers and really collaborate on these issues will set their organization apart from their competitors.”
Customer intelligence is key
Almost two-thirds (61%) of CFOs surveyed have made customer segmentation and insight a priority, less than half (47%) feel they make a significant contribution to this activity. The knowledge into an organization’s customer base lies at the heart of its profitability and competitive advantage. According to the report, CFOs should play a critical role in turning data into actionable insight, while managing significant data risks.
Digital governance is significant
Half of the CFOs surveyed (51%) say digital governance is a high or very high priority. The CFO has a vital role to play in building a governance model that enables the organization to make the right investment decisions across the competing interests of different business units, functions and geographies. Of the CFOs who make digital governance a very high priority, over half report EBITDA growth of over 10% over the past three years.
Julie Teigland, EY’s Europe, Middle East, India and Africa (EMEIA) CFO Program Leader, says:
“With a European regulatory framework for data management and privacy on the horizon, the need for finance and marketing teams to work together closely has increased. If a company misuses customer data, they may be subject to financial penalties as high as 2% of annual global turnover, as well as reputational and criminal damage. The CFO needs to work with the CMO – as well as the CIO and other members of the executive management board – to ensure there is an adequate governance framework in place to protect customer data and comply with legislation in whichever jurisdictions they operate.”
Working together on marketing ROI
Increasing marketing spends in response to changing customer demands and channel proliferation in a digital world must be justified by effective measurement methods. While just over half (59%) of the CFOs in the survey say measuring ROI from marketing is a priority, only 13% say that the agendas of finance and marketing are completely aligned on the issue of measurement methodologies. CFOs say that measuring marketing ROI is the number one area where they feel they need to make a bigger contribution. However, it is important to recognize that not all returns are easy to measure, and the CFO and CMO need to collaborate to agree KPIs for both individual marketing initiatives and less directly traceable measures like brand positioning.
Optimal product mix another driver
Fifty-eight percent of CFOs consider optimizing the product portfolio to be a high or very high priority. Of the 20% that consider it a very high priority, 81% report closer collaboration with the CMO. This illustrates the importance of CFO-CMO collaboration to address this issue. As per the survey, the CFO and CMO need to strike a balance between customer-centricity and excessive product proliferation.
Opportunity for growth
The report outlines how CFOs and CMOs can increase the effectiveness of their collaboration:
Agree on the metrics that matter for enterprise value
Bridge the cultural divide between the two functions
Collaborate on marketing’s analytics transformation
Team on the marketing planning process
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