There is much greater alignment between chief financial officers (CFOs) and chief marketing officers (CMOS) than is assumed by the industry, a new study by Amárach on behalf of IAPI (Institute of Advertising Practitioners in Ireland) has revealed. The survey with 205 CMOs and 219 CFOs was undertaken to get an understanding on the critical aspects of the CMO-CFO relationship, their collaboration, challenges and future outlook.
The research provides insights into how these two key executive roles can work together more effectively to drive business success. Themes covered include alignment in terms of growth priorities, measurement (KPIs), investment in terms of marketing spend, value added by external partners and future investment priorities. The perception among marketing and agency practitioners that finance presents a barrier or could even be hostile to marketing practice is dispelled as a myth.
It shows that, in general, a cordial relationship exists between the two functional heads and they have a good working relationship with one another. It shows that CFOs are open to persuasion and marketers and their agency partners can be reassured that the practice of marketing is valued and respected by finance departments. The results reveal strong alignment between CMOs and CFOs regarding the importance of marketing strategy.
The study showed that 80 per cent of those interviewed say it as either “very” or “quite important” and about a third of both groups rate it as “very important”. In addition, about 80 per cent of both CMOs and CFOs believe they have a very good or good understanding of each other’s KPIs, suggesting a strong level of cross-functional knowledge. Two-thirds of respondents in roles possess a firm understanding of each other’s priorities and objectives.
The real misalignment is in relation to what CMOs and CFOs prioritise. Unsurprisingly, the latter focus exclusively on financial variables (turnover, profit, cashflow, investment); while the former has a mix of financial and non-financial KPIs (such as brand awareness and customer engagement. All of this is normal except that most CMOs and CFOs agree that differences in understanding KPIs impacts decision-making processes in business.
In addition, only 28 per cent of CFOs believe that their company’s marketing strategy is “completely aligned” with its financial goals, compared to 37 per cent of CMOs. A reality check for IAPI members is that on average only about one in five CMOs see external agencies (of any type including digital, advertising, creative, media, market research, PR etc) as essential for success, and this falls to 15 per cent on average for CFOs.
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Interestingly, consultancy firms are considered even less so with only nine per cent of CMOs rating them as essential and 14 per cent of CFOs. It presents an opening for agencies to close this gap and establish a stronger position for themselves with clients. Agencies that help CMOs show a clear connection between marketing spend and measurable outcomes that matter to CFO and the wider business, become more essential to the business.
“IAPI initiated this research to gauge how much the marketing and financial departments have aligned over the past few years,” Abi Moran (above), CEO of Folk VML and IAPI president, said. “It’s incredibly positive to see the level of understanding and respect for each other’s functions, a testament to the work the marketing and advertising industry has done to incorporate metrics and commercial accountability into everything we do.”
Focus
“That said,” Moran added, “we can do more to support our clients in building the commercial case for effective brand advertising. This will be a core focus for the IAPI board over the next couple of years, using the Effie Ireland awards programme to build a bank of effectiveness cases.” The report points to a gap in prioritising investment in brand advertising with 41 per cent of CMOs awarding it a high priority, and only 28 per cent of CFOs.
Again, it represents an opportunity to provide CMOs with a commercially robust case for brand advertising. When it comes to AI, one third of CMOs report that their company is leveraging AI (fully/some aspects) to promote marketing efforts. Nearly one in four are exploring its potential, while 18 per cent have investment plans. Surprisingly, given the current hype in adland, one in five CMOs have no plans to invest in AI for marketing purposes.
To read the full report, click on https://iapi.ie/files/documents/IAPI-Amarach-Research-CMO-CFO-Research-2024.pdf
