Thanks in part to the spread of advanced analytics tools, CMOs increasingly face the same level of financial accountability as CFOs. Because of this shift, many marketers feel pressure to adopt data cultures like those already used by finance teams. Marketing departments are right to embrace data, but to truly lead, CMOs shouldn’t simply borrow from the CFO playbook. Rather, CMOs need new techniques that explain how marketing dollars turn into revenue.
This was the message Quantifind President and cofounder Ari Tuchman delivered during a recent webinar cohosted with the CMO Council. To illustrate, Tuchman asked attendees to consider Twitter’s unusual management structure.
As you may recall, last May, the social media company was months into a fruitless CMO search. Facing pressure from investors after a disappointing quarter, Twitter made a move few expected, naming CFO Anthony Noto as its CMO, as well.
Twitter’s decision deserves our curiosity and investigation, Tuchman said. From one angle, Noto’s new role is specifically about Twitter and its attempts to re-energize user growth. But from another angle, the move raises questions about the relationship between CMOs and CFOs in general.
Is Data Turning CMOs into CFOs?
CMOs and CFOs have historically approximated a sort of right brain-left brain divide within the C-Suite. But analytics have changed that. Increasingly, marketers face pressure to adopt data cultures and to use advanced metrics to tie together user data, ad spend strategies, and KPIs. The CMO’s toolbox, in other words, has never looked so much like the CFO’s.
Even so, CFOs and CMOs continue to have different mandates, Tuchman said. For CMOs, the priorities are revenue and brand growth. CFOs, on the other hand, generally emphasize the business’s financial health. These different viewpoints breed tension as often as not. The CFO might see cost reductions as a means of responsible risk optimization, for example, while the CMO sees those cuts as inadequate budgeting that shackles growth.
Tuchman isn’t the only commentator to focus on these distinctions. Back in May, when Twitter announced the change, most journalists and thought leaders reacted with something between puzzlement and disapproval. “It’s such an odd thing,” Dartmouth marketing professor Kevin Keller told Ad Age, summarizing the majority view. “Marketing is just not something a CFO is trained in.”
Keller might be right— but even so, many lines between CFOs’ and CMOs’ respective responsibilities are growing messy.
In a recent Ernst & Young survey, for example, over half of responding CMOs said they work more closely with CFOs today than they did three years ago. Nearly two-thirds of surveyed CFOs reported increased marketing participation. These findings compliment an IBM study that shows CMOs and CFOs have recently become CEOs’ two most important strategic allies.
The data revolution has played a significant role in these new dynamics. For the last several years, big data proponents have promised unprecedented insight into consumer behavior and unambiguous links between business decisions and financial results. These angles are of clear interest to both CFOs and CMOs. But as many early adopters of advanced marketing analytics have discovered, results are still catching up to hype.
One recent survey found only 12% of CFOs consider CMOs “excellent” at connecting marketing initiatives to ROI, for example. IBM research indicates that as of last year, 82% of CMOs felt unprepared for the data explosion, up from 71% in 2011. Indeed, according to IBM, CMOs feel no more prepared to wrangle social media than they did three years ago.
Marketers have struggled with data despite dramatic increases in analytics spending; IBM notes that 94% of CMOs have deployed or plan to deploy advanced or predictive analytics tools, an increase of over 40% since 2011. According to a recent Forrester report, marketing departments are implementing big data tools faster than any business unit except IT. Nevertheless, operational improvements — not marketing success — are driving most of the data benefits.
As marketers have struggled to capitalize on data, some experts have argued that data science is replacing traditional CMO skills. “Marketing today actually has a great deal of analytical capability and requirements it didn’t have five years ago,” Scott Broomfield, the CFO-turned-CMO of sales automation provider Xactly Corp, recently told The Wall Street Journal. “I look at marketing very much the way a CFO looks at a metrics dashboard because that’s my orientation.”
Along similar lines, a 2012 McKinsey report suggested CMOs should work more closely with CFOs and adopt MROI approaches driven by analytics. More recently, some experts argued that despite confusion over Twitter’s CFO-CMO merger, the company actually made a smart move that will bring accountability, discipline, and clear priorities to its marketing efforts.
Dueling Data Perspectives: Driving Growth or Reducing Risk?
What do we make of all this? On the one hand, critics scoff at Twitter’s move because CFOs and CMOs are different beasts. But on the other hand, the two roles have been pushed closer by technological progress, as well as growth mandates from the CEO and other business pressures.
Tuchman suggested that companies can negotiate the challenging new dynamics by treating data as a versatile resource that different jobs use in different ways. CMOs generally track external data related to growth and brand awareness. CFOs generally track internal data that measures revenue and other KPIs. Analytics can provide a link between these different data sets, but the CMO and CFO perspectives remain distinct and act as checks and balances in overall corporate strategy.
Tuchman explained that even though CMOs need to become more data-centric, it doesn’t necessarily follow that marketing chiefs have to operate like CFOs in all respects. After all, CMOs are hardly the only business leaders who face data disruption.
With analytics tools more accessible than ever, employees throughout the enterprise are using data to improve efficiency, from HR departments that use data to improve employee retention, to manufacturing teams that use statistics to optimize supply chain operations. As different departments embrace data, each has to maintain a sense of its own priorities. The fact that CFOs have a longer history with data doesn’t mean that other data-driven departments have to religiously assimilate CFO values.
Indeed, many CFOs view data from a quarterly, shareholder-driven perspective that doesn’t always jibe with the longer-term viewpoint that CMOs need for sustained brand growth. It’s undeniable that marketers need data to be more accountable for their efforts, more efficient, and more in tune with the online social forces influencing consumer purchase behavior. But marketers also need a sense of creative risk, rather than the CFO’s analytical avoidance of potential hazards.
The Right Approach for Marketers: Explanatory Analytics
Recounting conversations with CMOs, Tuchman said many marketing chiefs feel burned by their initial data efforts, which produced inconsistent results and often focused in the wrong places. These misfires have imparted important lessons— that more than half of tweets provide no information on consumer buying intent, for example.
But those lessons merely tell CMOs what to avoid; CMOs are still struggling to find the data points and tools they should embrace. When consumers talk online about beer and an associated summer concert series, Tuchman illustrated, it can be complicated to disentangle which conversations express a consumer’s intent to purchase beer, which express interest in the concerts, and which communicate something else.
Tuchman noted that predictive analytics has become popular but cautioned that this technique hedges too heavily toward the traditional CFO perspective. Predictive models extrapolate current trends in order to predict future outcomes. CFOs then use this information to protect the company against projected fiscal dangers. If a predictive model anticipates that a company’s sun dress sales will drop 4%, for example, the company might slash sun dress inventory and cut associated marketing budgets. It’s a technique designed to mitigate risk, not to shape growth.
For a CMO, the value isn’t in using his or her company’s current position to predict its future. The predictive model measures only where trends are headed. It assumes the future is locked. Instead, Tuchman said, CMOs need explanatory models that reveal why trends have developed and, just as importantly, how they can be changed.
In the sun dress scenario, for example, a CMO using an explanatory model can understand why sun dress sales are falling flat with certain consumers. Is it the marketing messaging or the product? If it’s the messaging, what tactics might better connect with target audiences? Is the current messaging resonating with some overlooked group of consumers? If so, how might this base be grown?
By correlating financial histories with unstructured consumer data such as social media posts, explanatory models distinguish the factors that matter from the ones that are just statistical noise. They offer the foresight of predictive models but also give CMOs in-depth understanding that lets them stay a step ahead of market forces. By using explanatory analytics, CMOs can shift from defense to offense— and shape market shifts, instead of merely reacting to them.