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The movie classic Casablanca ends with Humphrey Bogart (as Rick) telling Claude Rains (as Louie), “I think this is the beginning of a beautiful friendship.”

If Marketing is to become the engine of the business, we must build a “beautiful friendship” with the Chief Financial Officer to get the fuel we need. In this article, I suggest five keys to beginning a beautiful friendship with your CFO and five management processes to make the relationship last.

The Chief Financial Officer of a large and successful global consumer products organization—let's call him Bill—recently shared why he believes it's so important for Finance to build a productive relationship with Marketing. His perspective and management practice give us insight for making the CFO a fan of Marketing.

True, a company in the consumer products industry is more likely to be marketing driven than a company in any other industry. Still, all CFOs know that their primary responsibility is to help the organization grow. Therefore, with an extraordinarily successful record of double-digit annual growth—without an acquisition—for each of the past eight years, Bill has credibility when he says that a strong relationship between Marketing and Finance is critical.

Building a Beautiful Friendship

From our discussion and from conversations with senior marketers, I deduced five keys to beginning a “beautiful friendship.”

Key #1: Focus on helping Finance meet its three primary needs:

  • Healthy and predictable cash flow
  • Steady growth
  • Shareholder (or financial) value

This is the bedrock of the friendship. All the other work contributes to demonstrating how Marketing meets the needs of Finance for healthy cash flow, steady growth and shareholder or financial value.

Key #2: Educate the CFO that understanding and tracking how marketing generates inward cash flow is in his best interest

Bill understands this very well. That's why he has organized his department into three groups: Financial Accounting, Cost Accounting and Revenue Accounting. Of the three, only those in Revenue Accounting understand how the organization generates profitability and growth. In Bill's view, of the three functions Revenue Accounting is the most critical if the business is to achieve its financial objectives.

As Bill explains it, all finance professionals are experts in cost accounting and financial accounting (cash flow management). They are even masters at evaluating such investments as acquisitions and capital expenditures. But far less common are professionals who have a broad business strategy perspective, including an understanding of why and how the organization makes money.

Knowing that the typical finance professional is focused on costs, he asks all candidates for open positions in revenue accounting two questions:

  1. What would you suggest we do to help the business to grow?

  2. If the company were facing bankruptcy, how would you diagnose the problem?

For the first question, Bill hears many answers. He accepts any answer that demonstrates the candidate's ability to think about the business with a view to internally generated sources of money.

For the second question, Bill hears the same answer: “We're facing a cash flow problem.” This answer is wrong. The typical finance professional, Bill reports, is unable to think of a cash flow problem as symptomatic of a marketing problem, the root of all inward cash flow, profit and growth.

What distinguishes successful finance candidates and what they learn continually from Bill is an understanding of the marketing tasks the organization must accomplish for healthy growth—such as new customer acquisition, new segment penetration, customer retention and loyalty, and new category and product introductions.

Key #3: Foster regular personal contact between Marketing and finance staff

Once on board, the finance professionals in Marketing Accounting are not doing their job, Bill says, if they are working inside their offices. They must work face-to-face with marketers and with others in cross-functional teams. That way it's clear that they are not corporate police officers working with an “us versus them” attitude, but rather members of business or project teams that require financial management to help them achieve the organization's goals.

Similarly, all Marketing staff must take the initiative to meet frequently with Finance staff: not just in formal meetings, but at the local Starbucks as well.

Key #4: Strengthen the technical expertise and analytical thinking of professional staff

Bill does not let marketers go about their work unchallenged. He refuses to give the green light to creative ideas without analytical thinking that supports the recommendations.

For example, recently he refused to fund a new category launch until he saw an analysis explaining why the strategy would work now, when it had produced disappointing results two other times in the past. He faulted marketers for not learning from experience and for limited analysis of consumer markets. Bill wants to see analytical rigor from Marketing to support strategic recommendations, especially large ones.

The explosion of information and data mining tools makes analytical rigor not only possible but also expected. Therefore, at least one marketer must have the quantitative ability to generate reliable research and turn company information into knowledge—knowledge that encourages action.

Key #5: Develop and implement a marketing measurement system with ongoing dialog and oversight by Finance staff

Bill makes it clear that Finance and Marketing together have created a marketing measurement system to guide future investment decisions. As the CFO at the top of the organization, he states that his primary criterion for selecting appropriate metrics is that they help him balance the short- and long-term performance.

The measures are largely behavioral rather than attitudinal, such as spikes in sales of an established product due to a new promotional strategy (“we know a new advertising approach is a winner or loser almost immediately” he says); share of market for new and established products; sales from products that did not exist last year and the last three years; and sales of new products targeting new customer segments.

Knowing that consumer brand preferences are important indicators of future performance, he also tracks the marketplace with a few attitudinal metrics related to brand health. All measures used, Bill says, must be understood by everyone and interpreted with an eye toward future performance, not to defend past mistakes. It's also important that individual job performance not be tied to the measurements, as employees may become defensive and territorial.

Bill is an example of a CFO who knows that Marketing is at the center of helping the Finance function meet its three fundamental needs: predictable cash flow, steady growth, and financial value.

Strengthening the Friendship

Often we are not so lucky to work with such an enlightened financial executive. Nevertheless, whether our CFO understands the true value of Marketing or not, to strengthen our relationship with Finance we marketers must work to improve the following five processes.

1. Forecasting revenue

Many finance professionals do not understand the science of managing investment opportunities that involve revenue forecasting for such Marketing efforts as new product launches and promotional campaigns. Many marketers do not know what it takes to produce accurate and reliable forecasts.

Together, Marketing and Finance can use…

  • Experience and intuition

  • Sound and understandable scientific methodology

  • Knowledge and perspective gathered from internal and external partners

Finance insists upon an assessment of risk in the forecast, not only in terms of the likelihood of revenues falling short of budget but also the probability of complete failure.

Marketers know how to evaluate risk due to the presence of new competitors and the evolution of customer needs.

To compete effectively within the organization for scarce resources and to build a credible reputation worthy of ongoing financial support, Marketing must know that Finance will require quantitative forecasts, each with an assessment of the risk involved.

2. Pricing

Prices should be set from an outside-in (customer and competition) perspective, not an inside-out (cost-plus) perspective. The critical determinants of consumer behavior in the marketplace are perceptions of relative value for prices charged and assumptions about the reactions of competitors.1 That's why marketers provide the critical input for pricing decisions.

Cost-plus pricing may be widely used, but it makes no sense for two reasons:

  • Customers (those who pay the price) do not care about your costs

  • Costs are a function of how much you sell (because fixed costs are spread over more or less volume).

3. Setting budgets

Budgeting is not merely a financial process. Rather, budgets are prepared from a series of strategic decisions about the allocation of fixed resources to meet the organization's objectives. The portfolio of annual investments consists of many decisions, each with its own objective.

Most companies conduct a thorough budget process once a year and then make adjustments as needed. When belt tightening is necessary due to revenue shortfalls, often Finance will apply an across-the-board cut. But with insights about the importance of each initiative provided by Marketing, the organization can more effectively allocate resources to weather the storm and plan for the future.

Perhaps more than any other process, winning budget battles requires effective communications skills in presentations, negotiations, reports and meetings.2

4. Measuring performance

The buzzword in marketing today is “metrics,” referring to quantitative performance measures used by organizations to assess the outcomes of marketing decisions. More so than ever, the heat is on Marketing to establish accountability for its use of funds for communications, and measures have become widely adopted.3

These expectations come in part from the increased use of electronic and direct response media that are perfectly measurable, unlike communications through traditional mass media, such as television and newspapers. Also, the pressure on companies to show increasing earnings after the Internet bubble and during a soft economy has also increased the need for marketers to document the effectiveness of their investments. (See the endnotes for the leading resources4 on the subject.)

In addition, each year more professional marketing conferences and executive education programs have been offered on the subject of metrics.5

While the drive to select and implement measures of performance is clear, some caution is needed for the following reasons:

  • First, most marketing metrics have not been shown to be reliably associated with a firm's performance and value.6 For example, while market share is the most widely used measure, there is ongoing debate about its usefulness as an indicator of effectiveness.

  • Second, the data needed for accurate measures may not be available, either from internal or external sources.

  • Third, the organization needs different measures for different elements in the strategic portfolio. For example, return on marketing investment may be an appropriate metric for an existing product with a strong customer base, but not appropriate for a new product with little or no existing customer base.

  • Fourth, the measures may lack credibility or usefulness, because they are produced either by Marketing alone or by another function without input from Marketing.7

When Marketing and Finance work together in the interest of both functions and the organization overall, they can identify and implement the most effective measures of performance.

5. Documenting financial value added

While marketers are obsessed with customers, Finance may often be obsessed with capital, whether the source is company stock traded in the equity markets, banks, venture capitalists or donors. With the growth of the service economy, based on knowledge as capital, marketers in many companies have learned how to translate Marketing's effectiveness in financial terms that CFOs value.

Marketing can strengthen its relationship with Finance by developing an understanding of how an outside and future orientation brings financial value to the organization. Investing staff time to understand the impact of Marketing on these measures will produce a significant return:

  • Customer Equity8
  • Brand Equity9
  • Price/Earnings Ratio
  • Future Earnings10

Regardless of industry, history and culture, all successful organizations are built upon a strong alliance between Marketing and Finance. By meeting the needs of this internal “customer,” we can build a “beautiful friendship” that supplies the necessary fuel to make the engine go.


1 Total Integrated Marketing, James Hulbert, Noel Capon and Nigel Piercy, Free Press, 2003.

Communications, covered in Practice Four as a set of skills that are critical for influence and impact in any organization, is at no time more valuable than when submitting and defending budgets.

3 “Which Marketing Metrics Are Used and Where,” Patrick Barwise and John Farley, Marketing Science Institute, 2003

The following are some of the best resources on the subject:

  • Marketing ROI: The Path to Campaign, Customer and Corporate Profitability, James Lenskold, McGraw-Hill, 2003; also see for articles and papers.

  • Return on Marketing Investment, Demand More From Your Marketing and Sales Investments, Guy Powell, RPI Press, 2002.

  • Marketing and the Bottom Line: The Marketing Metrics to Pump Up Cash Flow, Tim Ambler, FT Prentice Hall, 2nd Edition, 2003.

  • Measuring Brand Communication ROI, Don Schultz and Jeffrey Walters, Association of National Advertisers, 1997.

  • MarketingNPV ( is a consulting firm with valuable resources and links available for free on its Web site.

  • “Measuring Marketing Productivity: Linking Marketing to Financial Returns,” Suleyman Cem Bahadir and Kapil R. Tuli; MSI conference summary on “Measuring Marketing Productivity: Linking Marketing to Financial Returns” held October 3-4, 2002, in Dallas, Texas, available at

  • Precision Marketing: The New Rules for Attracting, Retaining and Leveraging Profitable Customers, by Jeff Zabin and Gresh Brebach, John Wiley & Sons, 2004.

5 For example, Wharton is conducting two four-day executive education programs on the subject in 2004 -- “Marketing Metrics: Linking Marketing to Financial Consequences”—for an executive level price of $6,000 (for information, see

“Linking Marketing Decisions to Financial Performance and Firm Value,” Donald Lehmann, Marketing Science Institute, Executive Overview, March 2002.

7 “ROI: Friend or Foe,” Christopher Kenton,, 2003.

8 Angel Customers and Demon Customers: Discover Which is Which and Turbo-Charge Your Stock, Larry Selden and Geoffrey Colvin, Portfolio, 2003; Driving Customer Equity: How Customer Lifetime Value is Reshaping Corporate Strategy, Roland Rust, Valarie Zeithaml, Katherine Lemon, Free Press, 2000; and “What are Your Customers Really Worth?” Allen Weiss,, 2000.

9 “How to Measure Brand Equity,” Debbie MacInnis and C.W. Park,, 2004.

10 “Understanding Financial Value Creation,” Michael Perla,, 2003.

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image of Roy Young
Roy Young is coauthor of Marketing Champions: Practical Strategies for Improving Marketing's Power, Influence and Business Impact.