Market fragmentation, growing popularity in zero-based budgeting, and political situation have all aided the creation of the environment in which companies need to concentrate on better processes, and asses and mitigate risk. This environment, more than ever, forces marketers to focus strongly on business outcomes, cash-flow, and revenue. However, they are well known to be the trigger of the finance department, as they are often the first ones to feel the burden of whatever is happening with the organisation.
And while marketing and finance have had somewhat an adversarial relationship, it is crucial to transform finance into an ally and become a performance-driven unit at the same time.
Collaboration amongst crucial business departments is key to success and we constantly advocate for cooperation in the business, especially when it comes to the budgets and forecasts. And as mentioned, the marketing department is unfortunately often the one that gets neglected in these discussions, however, it is both affected by and can strongly influence it.
Marketing as SBU
Marketing plays a crucial role that too often gets neglected in many forecasts. If you ever looked up how to improve your forecasts or what you should include, many ignore the marketing department and only talk about delivering budgets, overheads and other restrictions to them.
CMOs are fully capable to manage risk, improve efficiencies and be financially accountable and more often than not – they do. But this practise is repeatedly ignored by the financial department and is perceived as benefiting only their department.
And at this time, it is vital that the finance department accepts marketing team as strategic business unit or SBU. This way marketers are able to demonstrate their accountability by focusing on incremental sales and gross margin contribution are able to review their department’s KPIs and structure them accordingly to overall business strategy and appropriate corporate KPIs.
Marketing can play a crucial role in not only accurately determining, but help to build and improve many operational indicators, such as average purchase per customer, upsell conversion rate and/or ratio, average customer lifetime value, acquisition cost, retention rate and many more.
Another benefit of having a marketing team join your financial forecast development is their knowledge of seasonality. Not only that they are aware of your product seasonality, but they can also help influence it with certain campaigns and introduce new angles to campaign during those intervals. For example, recent upgrades in marketing automation have introduced weather based social and advertising management dashboards. So, if your business heavily relies on weather, the marketing team can help to capitalise on that seasonality, that your other operational executives couldn’t.
Additionally, marketing can predict, with significant accuracy, new product introduction cost and success. Marketers gather data for customer surveys, product test, focus groups, and market analysis. They know exactly what competitors are doing and thus, should be a vital part of creating market forecasts about the new product and help planning production or ordering, and you can time marketing efforts for the product launch in conjunction with those plans.
Accuracy in making forecasts provided by the marketing team can mean the difference between being ready and being left behind.
If you would like to run a forecast together with your marketing team, try ProForecast financial forecasting software. Unlike some other programmes, ProForecast creates a unified forecasting application that enables colleagues of all levels to work on forecasts safely, in a transparent and consistent format, enabling results to be tested and replicated. Additionally, you can export any part of your report and safely share it with anybody who wants to have a look.