More marketers must develop a stronger relationship with finance if they are to improve their marketing effectiveness and enhance their evidence-based decision-making. This is the overarching finding of a new IPA report, ‘Building Bridges with Finance’, delivered at the cross-industry Eff Week conference today (9 October), which outlines key advice and recommendations to achieve this.
The project included group discussions, workshops and interviews with 26 organisations and 40 respondents (including Tesco, Pepsico, London Business School), and has been carried out in light of the change in the role of finance, away from just reporting performance and towards driving it and the increasing momentum towards a stronger marketing effectiveness culture.
Five steps are outlined – although the adoption of each will vary dependent on the status of the current relationship.
Marketers need better financial literacy to play a central role in the discussions on how their organisation creates value. The core contribution of marketing to cash flow, risk reduction, margin and long-term value needs to be understood across both marketing and financial functions. Focus is particularly recommended on a better understanding of the transformational effect of marketing on price.
CFOs and CEOs want to see the demonstration of marketing’s contribution to profit, organic growth or other success metric chosen by the organisation. Marketers need to set out the role and the KPIs for which they are responsible. Data is playing an increasing role in effectiveness measurement, but financial teams also need to understand that marketing is a creative process too and they are not an offshoot of the data-science function.
Marketing terminology should only be used when its value to the organisation is clearly understood. The combination of an agreed language and a sound knowledge of key financial principles means that marketers have more collaborative, confident and productive conversations, based on mutual respect, rather than ones based on conflict and suspicion..
As an industry, we need to understand how marketing metrics ladder up in value to the core financial metrics used in the C-Suite. In particular, greater emphasis is now needed on the understanding and wider promotion of how longer term, brand health metrics contribute to an organisation’s value and the levers that move them, to achieve a better balance in long and short term objectives.
Beyond the use of technology and databases, marketers can increase the level of trust their financial colleagues place in them by continually demonstrating rigorous thinking and a decision-making culture focussed upon evidence and learning.
Additional findings from the study:
A Capex attitude for effectiveness budgets emerged as a concept that sparked the imagination of some of the financial respondents. The increasing evidence of the long-term effect of marketing expenditure and systems has led some brands to try to move some of the budget associated with effectiveness to capex eg software and systems costs, on the basis that it creates future benefit and adds value over time. Financial regulations may hinder this at present, but the mindset associated with it could help to protect its budgets from short term raids.
Agencies can help drive this collaboration and the report lists 10 recommendations from greater promotion of the IPA database to a wider business base, to using their insight and behavioural skills to unlock the motivations of the internal stakeholders at the client as well as the external customer base. Another suggestion is the inclusion of marketing finance colleagues from client teams in agency planning processes;
Says Janet Hull OBE, Director of Marketing Strategy, IPA: “Financial colleagues have credibility, influence and expertise that can augment marketers’ skills, and so it makes infinite sense for better alignment between both parties to achieve better business outcomes. This research provides valuable clarity in the areas that both sides need to work on – from training to language to mind-set, as well as outlining how agencies can help them on this journey for an ultimate win:win,”
Says Fran Cassidy, Marketing and Research Consultant, who carried out the study: “The research shows clearly that a successful effectiveness culture needs involvement from the finance function as it moves into driving performance rather than just reporting it. With a strong balance between creativity and commercial discipline, the effect for marketers can be transformational and can help brands build their houses with bricks, rather than with sticks and straws. Agencies have a massive reservoir of skills that have been largely untapped in this area but I am optimistic that they can influence and inspire the process.”
A presentation of Fran’s key findings will be available to download from the Effworks website. You can also join the conversation on Twitter #EffWeek @EffWorks