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The Rise of the New Power Partnership CFO CMO

The increasing importance of a CFO CMO partnership Today s Topics 1 Why the new importance of a CFO CMO Partnership 2 Issues facing today s CMO how the CFO can help 3 Understanding the most disruptive destabilizing painful change in modern marketing 4 The CFO s important role in agency relationships and new agency search 5 Wrapping it up two take aways 2

1 Why The CFO is becoming more important to the CMO as a partner 3

The CMO really needs your help Marketing is more complex Demands on the dollar are greater than what s in the wallet More often than not she is learning new landscapes on the fly There are too many experts and not enough generalists He lives in a world of possibilities and abstracts the CFO is an advocate who can help bridge the gap into a world that wants quantification 4

2 Issues 5

Issues Facing Today s CMO CEO pressure for short term results Difficulty in generating marketing metrics Greater difficulty in generating communications metrics Lack of real understanding of how agencies make money 6

Issues Facing Today s CMO Many CMOs not truly knowledgeable in understanding creative development over all platforms or all media All too many agencies just hang out a shingle digital for instance What you see is not what you get outsourced agency talent Big Data has moved from buzz word to most misunderstood or misused research 7

Issues Lead To Budget Pain While every department feels it only one isn t defined by weights and measures Unprecedented financial concern and even greater scrutiny ROI demands Search for measurement Short vs long term Confusion over what s real in advertising Confusion about what is advertising 8

3 The most disruptive change in modern marketing 9

Digital The major destabilizing culprit at both client and agency 10

What is Digital What Isn t Digital Does this define Digital Maybe Maybe not 11

50 wa ys to leave your stake holde rs co nfuse d 12

What is Digital Marketing The greatest sales tool the world has ever seen A technological scam perpetrated by propellerheads who have never seen a marketing plan A flash in the pan that will be the marketing world s next hula hoop 13

Actually none of them It is simply a new medium that is as weak or powerful as the idea contained within it and the way it is targeted to current or prospective consumers 14

But as CFO Digital has or will have a direct effect on your managing P L New disciplines for you to learn and keep relearning with few measurements or financial metrics The intersection of big data and new media technology has greatly expanded the role of marketing as a driver of enterprise value creation This new driver defines the critical importance of a closer peer relationship between CMO and CFO in order to drive strategy and improve the financial health of the enterprise Internal economics increased marketing Capex and Opex Changing economics at ad agencies their compensation requirements 15

The CFO s role in CMO CFO Relationships Marketing New Agency Searches 16

Significant change in the CFO s marketing playbook See yourself in a role of advisor not inquisitor when speaking to your CMO peer or his subordinates Financial Coach Make sure your CMO understands the changes and their impact on P L 17

Collaboration The Evolving Partnership Make sure the CMO knows and you reinforce that you and your team view marketing as an engine of growth as opposed to a cost center Lead discussions so they shift from where can we trim spending to how we can optimize spend and justify when and how to increase our investment 18

Strengthening the Partnership How to effectively bridge the gap with CMOs Actively develop cross functional teams with open communication objectives Understand the CMO perspective on drivers of customer value that are both tangible and intangible Develop a common set of metrics addressing performance of marketing investments that can be understood by all Establish accountability for marketing ROI with measurable performance objectives Recognize the need for and importance of unquanti able creativity and innovation to enhance brand and customer experience 19

Strengthening the Partnership How to effectively bridge the gap with CMOs Insure that your finance team s forecasting work operates at granular level based on strategic needs by region vertical or customer segment as you and CMO agree in advance to Work with the CMO to create a common lexicon for your teams so both speak the nuances and complexities of marketing objectives with the more objective and finite metrics of finance that perhaps have more elasticity than would be seen as the outcome of a production line 20

Strengthening the Partnership How to effectively bridge the gap with CMOs Make sure all marketing finance conversations address at the least these three topics Spend by target audience who are we trying to reach Marketing investment by objective when are we trying to reach them Marketing spend by vehicle how will we reach them Them the existing ex or potential customer client partner or in uencer Sometimes the shareholders stakeholders PE rms investment banks media retailers distributors but not your bragging rights to the wife 21

Your CMO and brand team are begging for understanding Follow These 3 Golden Rules 22

Golden Rule One Acknowledge that good marketing does create shareholder value Frame questions supportively Asking questions of discovery tend to work well such as What can we achieve with good marketing How well is our current marketing performing How can we improve the payback we re getting 23

Golden Rule Two Embrace Ambiguity and be willing to accept I don t know as an answer from marketing in the near term difficult as this might be for most CFOs provided it is followed in short order by but here is what we can do to find out You will be seen as the stable measured voice of management helping to embrace uncertainty especially in the early stages of marketing measurement when the unknowns will outnumber the knowns 24

Golden Rule Three Be patient Don t assume that applying time pressure will speed discovery More likely impatience will be met with passive aggressive resistance which will surface many more complex obstacles than you or the rest of the finance team have the time or ability to conquer Premature demands for precision will backfire in the form of higher weighting of the more measurable marketing elements such as web site traffic 25

The CFO CMO Bottom line If the spirit of your inquiry is interpreted as a quest for insight rather than an attack you ll get much closer to the answers you re seeking much faster with greater accuracy You ll have improved your company s and your marketing department s chance to achieve goals exponentially You ll have contributed immensely in creating a positive environment in your agency that will deliver exceptional results 26

CFO And The Agency 27

The Bermuda Triangle CMO CFO The Agency Natural allies not antagonists CFO defines reality for CMO CMO creates vision within defined parameters Agency is source of vision execution 28

For the CFO to help achieve an agency s success Temper procurement department As cheap widgets can cause a product to fail so can cheap creative and insight Agency must make a fair not usurious profit Help CMO learn how to challenge and and manage procurement while challenging managing on her own agency service costs CFO should work with marketing to insure that creative quality and business sense not price is the requisite for an agency 29

CFO And Agency Selection You should always have a role on the agency evaluation team Resist the conventional role of inquisitor Embrace the role of being cheerleader You should always play a major role in compensation terms and system Do not leave this to a procurement line employee Be supportive of the agency s need to make a reasonable profit 30

CFO And Agency Selection Try and understand your company s demands as a client lots of last minute work and changes multi department freebee requests shift in house routine brand work to agency staff ex dealer retailer promotions events Contribute to defined Scope Of Work SOW upon which the agency will be compensated Consider helping CMO craft invitation to compete which states what is involved for new agency so you both can evaluate agency s SOW that fee is based on 31

CFO And Agency Selection Resist the temptation to offer creative judgments or offer them privately over coffee Let marketing always do the feedback Reinforce to the CMO that you will always keep opinion private between each other Vet the agency s numbers on staffing and overhead Understand all the components of agency overhead Buffer the procurement group 32

5 Wrapping it up and the take aways 33

Wrapping it up Why the CFO is now a friend of Marketing The CMO and her agencies are under more pressure than ever The economic change wrought by the rise of digital marketing The dilution of effective channels to reach both b to b and b to c customers Creative confusion Marketing has become even more of a scapegoat The rise of immediate negative response in social media from blogs to twitter to Facebook to huffpost et al Ire of board and stakeholders to new visibility 34

Wrapping it up Why the CFO is now a friend of The Ad Agency Agencies are under more pressure than ever Staff based fee systems The problems with generating realistic incentive compensation The increasing velocity of account switching which can devastate them and cost you money Client approval processes have become increasingly difficult to manage Marketing direction has become ambiguous and more often than not marketing team members have not been trained in advertising media or even financial controls 35

Wrapping it up Why the CFO is now a friend of Marketing and its Agencies The fact is Support from the CFO is the ONE and ONLY concrete vote of confidence as it is defined by role consensus as financial acumen not just opinion 36

Wrapping it up Two Important Take Aways Trust and respect Two attributes that most agencies no longer expect from clients and marketing teams no longer expect from colleagues Take away One Both marketing and the agency will walk through walls for those that give them trust respect Take away Two And first in line to give them what they need to produce best in class marketing and advertising can be the CFO and her team The stabilizing voice of the client 37

About Trade Area Marketing Group We re a hands on advisory and consulting service working for private equity firms business to business and business to consumer corporations as well as advertising agencies We work in four primary service areas CEO CMO advisors for advertising media digital direct marketing direct response public relations licensing media sales promotion agency searches client agency compensation agreements on boarding relationship development Advisors to Private Equity investors with existing or new portfolios in advertising agencies looking for mergers or acquisitions Advisors to agency management for mergers acquisitions exit strategies CEO CMO consultants providing on site management for international or domestic corporate brand strategy and marketing plan execution in critical situations More detailed information can be found on our website www tradeareamarketing com 38

Joe Dell Aquila jfdellq tradeareamarketing com 203 322 3642 Harry Falber hfalber tradeareamarketing com 203 557 4150 39

If you have begun thinking about revisiting your agency line up, evaluating your marcomm expenditures, renegotiating your agency compensation agreements, or just talk about issus you seem to feel you are having, we would be happy to discuss our services with you.