When directors at DHL Express say there’s a close working relationship between finance and marketing at the company, it’s not just a turn of phrase — CFO Oliver Gritz sits in an office right across the hall from George Kerschbaumer, the firm’s head of marketing. The physical proximity is symbolic of the connection between the two functions at the €14 billion express mail subsidiary of Germany’s Deutsche Post. In the past, Gritz says, marketing and brand awareness was such an area of focus for DHL Express that it led to “very peculiar organisational structures,” whereby business analytics and costing, for example, were looked after by the commercial department rather than finance. Although these areas are now the responsibility of his team, the CFO adds, “the close co-operation between the two [departments] has prevailed.”
Not all finance chiefs can say they share Gritz’s close ties with marketing, physically or philosophically. In many businesses, the departments may seem worlds apart, even if their bosses are separated only by a cubicle partition.
This matters now. While economies contract and consumers tighten their belts, it’s more important than ever for companies to get the right message to the right customers. But in a downturn, any business spending without a clear link to profit runs the risk of being scaled back. According to Sharan Jagpal, professor of marketing at Rutgers Business School in New Jersey and the author of Fusion for Profit: How Marketing and Finance Can Work Together to Create Value (Oxford University Press), this means that “marketing looks like the easiest and most logical [budget] to cut because [companies] don’t know how to measure its productivity.”
It doesn’t have to be like this. New metrics won’t appear overnight and companies cannot change the interplay between finance and marketing teams easily. But the finance chiefs of companies that have built closer ties between the two agree that there is still room for improvement. If CFOs want to understand the link between marketing and their financial performance better, they say, they’ll need to work more closely with their creative counterparts to agree which aspects of their marketing initiatives to measure and how to monitor them.
Where There’s a Will, There’s a Way
Measuring the effectiveness of marketing with mathematical precision has eluded even the most proactive CFOs and chief marketing officers (CMOs), but it’s still worth trying. Following a poll of more than 600 European CFOs and CMOs, a study by document-management group Xerox and consultancy Coleman Parkes found that nearly all the respondents on both sides of the fence believe marketing can have a positive impact on profitability. But they also agree that the effect is difficult to assess. Some 40% of the CFOs polled didn’t know whether their company even attempted to figure it out.
Yet for those companies that have made an attempt, the results are confusing. Not only did the CMOs who were polled say they report more marketing information to their CFOs than the CFOs say they receive, but CFOs believe more measuring is taking place than CMOs say is the case.