A well-functioning relationship between the Chief Marketing Officer (CMO) and Chief Financial Officer (CFO) is crucial for driving growth. However, a recent study by the CMO Council and KPMG found that only 22% of these relationships are truly collaborative, as highlighted in a Marketing Week article. This statistic underscores a significant gap that many organizations need to address.

Further, economic challenges are becoming more prevalent, and many organizations are not adequately prepared. The same study reveals that only 10% of marketing leaders strongly believe their marketing investments—often controlled by finance—position them to outperform competitors during economic downturns. 

In challenging times, finance departments scrutinize budgets, including marketing spend. Despite this, marketing is expected to help the company navigate disruptions and connect with customers effectively. The pressure is on marketing to deliver results, even as budgets are tightened. To succeed, agility and innovation are essential. However, achieving this requires a strong alignment between marketing and finance. 

In this article, we will delve into the top 3 issues that plague the CFO-CMO relationship and provide strategies to overcome them, fostering a stronger CFO-CMO partnership. 

Bridging the CFO-CMO Language Barrier

Finance teams and marketing teams often speak different languages, using specialized terms unique to their fields. Finance focuses on metrics like EBITDA, ROI, and ARR, while marketing uses terms like engagement rates, clicks, traffic, and cost per action. This disparity creates a disconnect that often leads to the de-prioritization of marketing budgets and plans.

To overcome these language barriers, CMOs need to translate their metrics, such as clicks or web traffic, into actionable items for Finance. While Multi-Touch Attribution models can help bridge this gap by measuring bottom-funnel conversions, their accuracy is increasingly challenged by evolving privacy laws.

Recent advancements in machine learning offer CMOs new ways to quantify and measure their marketing efforts. Marketing Mix Models (MMM) and Geo Incrementality tests provide effective measurement for all types of marketing campaigns. These models rely on correlation and causation, fueled by internal data, allowing the target metrics to be easily adjusted to speak the language of Finance.

CFO-CMO: Transparent Results and Outcomes

In addition to bridging the disconnect between Finance and Marketing metrics, there is a significant challenge in quantifying and justifying the results of the marketing department. CFOs demand clear financial metrics, while CMOs often deal with less tangible outcomes such as brand awareness and sentiment. Current measurement tools are often inadequate for efficiently gauging the impact of awareness campaigns. CMOs need the right tools to understand, drive, control, and ultimately justify their budget and performance.

A potential solution lies in the shift towards machine learning models, particularly Marketing Mix Models (MMM) and incrementality tests. MMMs enable CMOs to provide a comprehensive view of all their marketing efforts, allowing businesses to optimize and understand which channels and campaigns are effective. By incorporating various data points, MMMs can forecast the potential ROI of marketing activities, helping align marketing strategies with financial expectations.

Incrementality tests help establish the causal impact of each channel, isolating the effect of specific marketing actions from other variables like macroeconomic changes. This is particularly useful for demonstrating the effectiveness of top-of-funnel campaigns that might not immediately translate into sales but build long-term brand value. Implementing these measurement tools can demystify marketing performance and provide Finance with clear, tangible insights into the effectiveness of the marketing department.

By leveraging these advanced models, CMOs can translate marketing metrics into financial terms, thereby gaining the support of CFOs. This not only justifies current marketing spend but also makes a strong case for potential budget increases, fostering a more collaborative and strategic partnership between Marketing and Finance.

CFO-CMO: Planning and Strategy   

Lastly, a significant disconnect arises from the differing focus of CFOs and CMOs. CFOs typically concentrate on short-term events, while CMOs are tasked with building a brand’s long-term vision and growth. This divergence can hinder a collaborative relationship and impact the overall strategic alignment of the company.

Marketing Mix Models (MMM) are well-suited to bridge this gap, as they provide CMOs with sophisticated statistical forecasting. This enables CMOs to present a clear vision of the business’s future in terms CFOs understand—revenues and ROI. Additionally, MMMs combined with incrementality tests capture the impact of top-of-funnel campaigns, clearly demonstrating their long-term effects and vision. This approach not only justifies current spending but also supports potential budget increases by aligning short-term financial goals with long-term marketing strategies.

By adopting these advanced measurement tools, organizations can ensure that both Finance and Marketing are working towards common objectives. This alignment fosters a more cohesive strategy, driving sustainable growth and reinforcing the value of a strong CFO-CMO partnership.