Marketers and finance professionals have a “famously fractious relationship” that sometimes resembles a sibling rivalry, Thunderbird Professor Richard Ettenson, Ph.D., told representatives of both sides April 21 at the Advertising Financial Management Conference hosted by the Association of National Advertisers in Phoenix.
The tension that results may seem irreconcilable, but Ettenson said marketers can get the chief financial officer on their side when they learn to articulate a business case for their activities.
“If you look at who has the power in the relationship, it’s the finance side right now,” said Ettenson, who has collaborated in his research with Jonathan Knowles of Type 2 Consulting. “The onus is on the marketing side to speak the language of finance.”
Ettenson said marketers and finance professionals use similar terms, such as “value” and “equity,” but they often apply their own definitions. He said marketers tend to view things from the customers’ perspective, while finance professionals view things from the shareholders’ perspective.
The goal for marketers is to generate customer preference, while the goal for finance professionals is to generate profits.
“Who’s right? They both are, of course,” Ettenson said. “The goal is neither to maximize customer benefit — which would entail giving away the product — nor to minimize costs in isolation, but rather to optimize the relationship between the two. Marketing and Finance both have important insights to offer, so the goal is to manage the tension between them, not to eliminate it.”
In the end both sides seek business impact, which Ettenson called the promised land. “These two functions really are rowing in the same direction,” he said. “But they don’t seem to get to the same place.”
He said the key for marketers is to show a causal model using terms relevant to finance professionals. They need to show that marketing activity influences brand image, which creates brand equity, which shapes customer behavior, which results in business impact.
In the following podcast, Ettenson uses marketing data from Lipton Tea and Toyota to show that the payoffs are real. Audio: Tea and Toyotas (8:31).
“The folks in Finance are on your side,” Ettenson said. “But what they need is something that is broken up into manageable pieces that has a bit of rigor, that allows them to justify putting company resources toward marketing efforts.”
For more information on this topic, see Reconcilable Differences by Richard Ettenson and Jonathan Knowles in the June 2007 issue of Harvard Business Review. Richard Ettenson, Ph.D., is an associate professor and Thelma H. Kieckhefer fellow in global marketing and brand strategy at Thunderbird School of Global Management.