Why CFOs Love Data-Driven Marketing
CFOs and Marketers have not always seen eye-to-eye. Traditional marketing and advertising costs have always been viewed with suspicion. With no visible connection between financial investment and the return it creates ad spend can only be viewed as a cost.
All that has changed.
The explosive growth of digital and data-driven marketing has created the ability to show the relationship between the investment in advertising and the return in hard dollars. This connect-the-dots ability between ads and profits is new, and is evolving rapidly. It has never existed in this way before.
And CFOs love it.
The CFO’s role is to maintain the financial health of the company. CFOs are far from being the bean-counter many marketers envision. They are driven by the same financial results as good data-driven marketers. My favorite moment with a client CFO was seeing him exhort to us to “Spend more money! Spend more money!” He fully understood that optimizing to financial data had moved marketing from the “cost” column to the “revenue generation” column. When you prove the dollars in = more dollars out relationship, CFOs will be the first to push more budget to marketing
Here are three simple rules to help you get the financial backing of your CFO:
1. Speak Finance
Marketing metrics drive CFOs nuts because they rarely mean anything related to financial performance. Clicks, views, impressions, unique visits, cost-per-click, likes, and any of a thousand other marketing metrics don’t correlate well to profit. Our recommendation is to use profit as your marketing KPI. If you need to talk about another metric, put it in the context of financial results. Maybe (and yes, this might be marketing heresy) don’t use traditional marketing metrics as KPIs at all. Your CFO will love and reward your focus on meaningful financial outcomes.
2. Work Backwards From Revenue
Advertising is an investment that creates a financial outcome at some later time. Marketers often focus on “time” in the order of the user journey. However, the CFO is interested in the financial outcome, and interested in both its magnitude and the time it takes to get there. It is very different to the CFO if the same Cost-per-Customer-Acquisition (CAC) is recouped in one month versus twelve months; which is something a marketer may not differentiate. Showing both the investment-to-return in time and dollars by creating financial projections will align you with the CFO view of financial control. This makes clear the marketing program’s financial success.
3. Involve the CFO in the Conversation
Marketing is likely a significant chunk of your company’s expenses. CFOs need to know this is being spent wisely, but can’t be expected to know the details of the complex and technical field of digital marketing. What they do understand is the relative impact of investment, the balance of expense versus cash flow, and keeping the company financially healthy. Engaging your CFO in a discussion where the investment and return is clear in both magnitude and time frame will be eye-opening. They will likely look for opportunities to help you grow your company’s success through your marketing efforts. Most CFOs will be very willing to promote ad spend and growth if it is predictably profitable. Their insight on what affordability means or what constraints on investment exist will be extremely helpful in the marketing team’s prioritization of how to use limited dollars and resources.
We’ve talked to plenty of marketers over the years who disparage over getting the CFO involved, saying things like “they just don’t get it”. Our experience has been the opposite. Your CFO is your secret weapon if you can tell your story in financial terms and optimize to financial results. Try talking to your CFO. You might be surprised.