On the one hand, Marketing brings insights based on understanding what customers perceive as the value the business brings to them, and which they’re prepared to pay for. Finance, on the other hand, brings efficiency in the operations of the business with ways to deliver that customer value at the lowest possible cost.
The Problem: Contradictory Approaches To Business
This is where the methodology and processes of Finance and Marketing significantly diverge. Left to its own devices Marketing typically over-promises and under-delivers, pushing-up business costs against a return that doesn’t sufficiently justify its position. Taking to extremes the operational costs end up being too high, so the organization goes out of business.
Finance, in contrast, aims to engineer business cost structure from an assumption that “all costs are bad” and should be avoided, ultimately under-delivering on the customer value component. The result of reducing costs by too much is the value element is eroded. The customer no longer sees the product or service as being worth the purchase price, so the business no longer becomes sustainable.
A different approach, but the same end result.
The language of Finance is the language of the business in general. Based upon the underlying strategic goals and measurements set out by the CEO, part of the job of the CFO is to communicate information in strictly ‘business’ terms. It’s where you hear about things like Balance Sheets, ROI, cashflow, and EBITDA.
Clearly, Marketing’s message to the C-Suite/stakeholders should be seen as equally important. However since Marketing uses a different set of language terms unique to its own environment, much of what is said flies straight over the head of the average CFO. Even worse: CMOs sometimes use Finance-derived terminology in different ways to how CFOs would. The result is confusion, ambiguity, and even outright distrust.
Finance & Marketing: Why Can’t We Live Together?
So is the underlying issue primarily one of language? Partly, yes. The choice of language is certainly one part of the problem. But the bigger issue is for marketers to have a better understanding of the finance world. They need to recognize how Marketing’s thought processes and measurements are different to what Finance people understand. Moreover they need to be aware of the need to reframe information and reporting to be more attuned and receptive to a Finance-centric mindset.