Home Marketing Best Practices Managing Conflicts Between Marketing and Finance Department: Is There Any Way for Alignment?

Managing Conflicts Between Marketing and Finance Department: Is There Any Way for Alignment?

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WHAT IF INTEGRATE?

Richie Norton once said: “Mission matching: an ask that creates synergistic congruence (aka win-win) between missions”.

Integration of marketing and finance departments means “moving from cost to contribution.” This will make the remedy against the conflicts that arise between departments as the objectives of the two become similar. Finance department’s input in the marketing department can be productive and can help in boosting overall business value. Through integration of finance and marketing department, the personnel of both departments become knowledgeable about the functional areas other than their own. Every one tries to utilize their skills in understanding the strategies and mould those strategies into financial performance.

In the result of that, finance department, who thinks marketing cost as a burden on the operational budgets, when integrate with the marketing department, considered it at as investment.

IS THERE ANY WAY OUT TO INTEGRATE?

Yes! Off course! There are some ways to integrate these two departments.

1. Consider marketing cost as investment:

Finance personnel in the organization should consider the marketing cost as investment rather than a burden on the overall operational budget. Practically, it is possible by using analytical approach to the marketing department’s cost. What need to be done is that the ratios applicable to the overall businesses should be implemented to the marketing department. Return on investment (ROI) should be transformed in to (MROI) marketing return on investment. Instead of cutting of marketing budget, finance personnel needs to use the incremental profitability approach first, to analyze real profitability from additional investment putting in marketing department. MROI can be calculated as:

MROI = ___Inc. Profitability from Mkt. Inv.___ /Inc. Investment in Marketing Depart.

Incremental profitability from marketing investment means that Incremental revenue attributable to marketing multiply by contribution margin percentage minus incremental investment in marketing.

Marketing ROI is not exactly similar to the  “ROI” because the cash invested in marketing is not similar to the cash invested in inventories, receivables, and non-current assets (CAPEX).   In accounting point of view, it is operational expenditure and should be expensed out during the period. The main purpose behind the calculation is to ascertain the contribution from marketing investment in the overall profitability.

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