It should come as no surprise, but here's one reason for the disconnect between top marketing and financial officers: They use different metrics to calculate return on investment.
A recent survey of 522 executives by Direct's sister publication Business Finance found that CMOs are concerned with sales volume, conversions and leads while CFOs focus on profitability, gross revenue and cash flow.
And the poll noted disparities in how both sides view their companies. Marketers tend to think they should have more influence on strategic direction.
They're right — up to a point. But they have to learn how to play the C-level game. In her new book “Marketing Metrics in Action,” Laura Patterson argues that “many marketing functions are not in sync with companies' overall strategy.” The result? “Companies are experiencing a gap between actual revenue growth and investors' expectations.”
The danger is that this gap can lead to “lower margins, loss of market share, slowing growth and defecting customers.” Ultimately this is the chief executive's problem, but CMOs are first to get the ax.
Patterson says CMOs will last longer on the job if they do things that move the business/sales needle. It's not clear from this study that they are.
Only 7.9% overall include share of wallet when computing ROI. But even larger firms ignore it to some extent, and they shouldn't because this number will be far more meaningful to a CFO than clickthrough rates or Web site traffic, according to Patterson.
By the way, size does make a difference when it comes to calculating ROI. Over three-quarters of all CFOs factor in profitability. But firms with 100 to 999 employees are more likely to use this metric than those with better than 1,000.
Hey, executives in the smaller outfits also are more inclined to think they understand marketing as well as finance. After all, they have to do both.
