Why is it important that marketing and finance work together?
With shrinking margins and complex consumer journeys, optimising paid media can be challenging. The relationship between marketing and finance teams is critical. When the two teams collaborate, brands can unlock new opportunities for growth.
A disconnect between these departments can limit the value of paid media and business performance.
Here are three key misconceptions driving this disconnect—with actionable steps on how to move past them. The goal: to find the alignment essential for unlocking additional profitable growth on paid media.
Misconception 1: Media Budgets Should Be Fixed
A fixed media budget can be a major constraint. With Google Search, where consumer demand can fluctuate rapidly, investment should be adaptable.
When finance teams set a predetermined search spend, they often lead to two pitfalls:
- Artificial Capping Of Growth: If the budget is exhausted prematurely, businesses can miss out on unexpected spikes in consumer demand.
- Suboptimal Optimisation: A “use it or lose it” mentality can incentivise marketing teams to go for unprofitable clicks to meet the allocated budget.
Paid media budgets should be treated as a variable cost, fluctuating based on actual consumer search behaviour.
Finance can join hands with marketing teams by allowing for quick adjustments to investment levels in response to market conditions. Businesses that adopt this demand-driven approach are better positioned to capitalise on rising consumer interest.
Recommended Action: Adjust Your Advertising Spend to Meet Shifting Consumer Demand
Don’t operate in the dark. Use tools like Google Trends and Keyword Planner to stay informed about evolving consumer behaviours. These tools can help you track search interest and estimate the necessary investment to achieve your desired ROI.
Instead of imposing artificial profit caps, align your paid media spending with real-time data on a continuous basis. Optimise your investment to capture the maximum value from changing market conditions.
Misconception 2: Bidding Strategy is Only A Marketing Mandate
A well-crafted bidding strategy helps maximise the return on paid media investment.
Bid too high, and you risk overpaying for clicks. Bid too low, and you might lose out on profitable purchases to competitors.
Optimising bidding to drive maximum profit is not just a marketing need. Suboptimal bidding often stems from marketing teams operating without the necessary financial data. Finance should play an active role in determining bidding strategy and set a tROAS based on profitability analysis to capture all conversions above that target.
Unfortunately, this collaborative approach is often overlooked.
To optimise bidding, consider the following factors:
- Product Profitability: Segment products by profit margin and bid more aggressively for higher-margin items.
- Customer Value: Prioritise customers with higher intent or lifetime value by bidding more for their searches.
- Omnichannel Impact: Account for the full value of paid media investment, including both online and offline conversions.
Setting granular target return levels is time-consuming. By working together, finance and marketing can drive substantial profit growth.
Recommended Action: Segment and Automate for Profitable Growth
Finance should conduct a thorough analysis to determine the optimal bid strategy. This analysis should incorporate the offline impact of paid media and segment customers based on profitability. While granular-level calculations might not be feasible, even a simple high-medium-low segmentation can be beneficial.
Once this analysis is complete, use automated Smart Bidding to optimise investment and ensure tROAS targets are met. Automation streamlines the process, freeing up marketing and finance teams to focus on refining tROAS calculations and customer lifetime value estimates.
By collaborating on these critical areas, businesses can drive significant growth.
Misconception 3: Perfection is the Only Goal
A common pitfall for businesses is the belief to have a flawless model before adjusting their paid media investment strategy.
This model provides marketing with absolute certainty about the return on every pound spent. However, the pursuit of perfection can be a never-ending journey.
Paid media offers a significant advantage: the ability to test changes on a small scale, such as in a specific region. This allows for immediate evaluation based on real-time business results.
Marketers can conduct low-cost experiments to achieve incremental improvement with minimal risk. By collaborating, finance and marketing can assess whether the changes are likely to add value and scale, rather than waiting for a hypothetical perfect model.
Unlike other initiatives that may require costly updates to legacy systems, improving paid media often necessitates a cultural and process shift. Embracing uncertainty and adopting a “test and learn” framework is crucial for success.
Recommended Action: Test, Learn, Scale, and Repeat
Finance should empower marketing teams with budgets for small-scale experiments within agreed parameters. This ensures that businesses can capitalise on evolving consumer behaviour and model advancements.
Implement a straightforward performance dashboard to track key metrics such as revenue, margin, return on investment, and click share. The data can be used to continuously refine strategies, scale successful initiatives, and iterate the process.
A checklist for finance and marketing alignment
- Be flexible, not fixed
- Capture every profitable click
- Test and learn to unlock growth
How Finance & Marketing Could Be More Effective: Here’s What Professionals Say
According to a YouGov report, 43% finance professionals say the relationship with marketing at their current workplace is positive, and just 7% say it is negative.
When asked how marketing can better prove its worth, finance professionals prioritised ROI at 46%. While ROI is crucial for any investment, it’s not the only metric finance teams care about. So, what else are they looking for?
- 46% prioritised ROI
- 35% valued new customer acquisition
- 31% valued retention
- 25% prioritised business outcomes
- 21% focused on conversion rates
Brand awareness and brand recall were lower down the list of priorities with only 16%, suggesting a disconnect between finance’s short-term focus and marketing’s long-term brand-building goals.
When asked how both the teams could improve collaboration, here’s what finance and accounting professionals said:
- 47% desired clearer alignment between marketing and overall business strategy
- 38% desired regular progress updates
- 35% wished for shared objectives
- 24% called for greater transparency into marketing activities
- 21% prioritised marketing’s focus on financial performance
- 19% focused on regular budget updates
- 14% called for direct communication with marketing teams
What Happens When Finance & Marketing Collaborate
Shifting the focus from mere measurement to active enhancement is crucial.
To achieve this, keep the following in mind:
- Flexibility Over Fixity: Monitor search trends to identify emerging categories and let consumer demand guide your search investment.
- Capture Every Profitable Click: Collaborate with finance to set appropriate target ROAS, utilise Smart Bidding, and measure success based on revenue generated at the target level, not budget adherence.
- Test, Learn, and Scale: Seize opportunities by conducting small-scale experiments, continuously refining, scaling, and repeating. Use a shared KPI dashboard to assess value.
Need a fresh perspective? Let’s talk.
At 360 OM, we specialise in helping businesses take their marketing efforts to the next level. Our team stays on top of industry trends, uses data-informed decisions to maximise your ROI, and provides full transparency through comprehensive reports.
