72 65 64 50 21 49

25 75 76 67 32 55 98 71 95 16 96 11 1 82 87

23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91

52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20

62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1

82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34

54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9

8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39

42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2

20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63

6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49

25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33

29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19

44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52

36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18

28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73

15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62

14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46

45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13

38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48

68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70

53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87

23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37

47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38

2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25

75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46

45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8

34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20

62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25

75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46

45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8

34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38

2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21

49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 79 72 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52 36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34 54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27 70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28 51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73 15 80 35 91 52

36 60 61 78 40 26 59 33 29 100 43 92 22 5 9 8 34

54 58 99 84 81 63 6 37 47 86 85 93 97 83 7 27

70 53 56 77 30 13 38 2 20 62 14 3 90 88 18 28

51 57 89 31 19 44 94 39 42 7972 65 64 50 21 49 25 75 76 67 32 55 98 71 95 16 96 11 1 82 87 23 41 17 10 12 24 48 68 74 66 46 45 69 4 73

15 80 35 91 52 36 60 61 78 40 26

By Tim gacsaL ca, associaTe direcTor risk adVisory serVices Bdo nZ

Behind The figuresWhy the Sports Illustrated girls need to prove their ROI.

35APRIL 2014

BUSINESS

If you thought the Chief Marketing Officer (CMO) position was dead, read on for an alarming enlightenment.

In December 2013, I challenged CFOs to integrate more closely with CMOs or risk losing influence in the boardroom.

Why? Because digital marketing channels now allow CMOs to accurately measure the impact of their activities, maximise the value of their spend and link directly to increasing sales and shareholder value of the firm (a traditional finance objective). This puts the CMO in the front seat when communicating the value of their activities.

CFOs traditionally have held significant doubt towards the value-add from marketing, which largely stems from historical views that marketing isn’t scientific, hard to measure and more a cost than investment.

Speak to a CMO and you’ll find a strikingly correspondent sentiment, where one CMO from a large corporation told me that interactions with finance are akin to dealing with someone who barely understands marketing, but has management clout to beat us up because we traditionally could not promise the same degree of certainty and measurement pureness that the numbers people need.

The ongoing problem area between the two functions which hasn’t been resolved by digital, is in the area of long-term brand building.

financial kpis don’t always add-upWhy is this? Because in finance, value is measured in numeric terms, which gives their models credibility and allows them to defend their decisions and makes them easier to sell and justify. Also, finance and accounting activities often involve linear-type relationships where debits equal credits, balance sheets balance and the value of one dollar spent can be measured with relative precision.

Despite digital channels improving the CMO's ability to measure direct marketing effectiveness, it has not had the same impact on brand development marketing. An environment where CFOs mandate that all marketing investment decisions must have a spreadsheet with a number, such as an ROI, and expect outcomes to impact on each other proportionately, can lead to organisational behaviour that might not always result in the best decision making for the company and can potentially get the CFO in the “hot seat”.

The reason is because an ROI isn’t easy to calculate for brand building activities. But, as hard to justify and eclectic as brand building investments may first appear to a CFO, they are often very effective in driving the business forward.

For example, take Air New Zealand’s decision to invest in highly creative, entertaining and expensive in-flight safety briefing presentations, including the most recent and controversial use of the Sports Illustrated swimsuit girls. As well as conveying an important safety message, the aim of increasing brand awareness has been achieved.

Developing a highly accurate ROI for this type of brand investment is difficult and it is hard to justify the concept with numbers, however, it will be the one thing that customers will remember long after their flight with the airline.

The key takeaway for CFOs is not to fail to appreciate the importance of brand marketing outcomes and block these investments because the CMO failed to provide a comparison of ROIs across various options.

CFOs who do, may end up in front of the CEO explaining why the linear relationship between a drop in market share and brand spend resulted from their decisions.

Brand development marketing deals with human behaviour, and trying to predict or change behaviour en masse is not as simple as finance activities such as calculating the costs of manufacture or preparing financial statements.

Trying to use accounting or finance methods to measure and map how humans might behave is ludicrous and renders ROI-type calculations useless, and totally inadequate for the purpose. In fact, it is hard to conceive that we will ever get to a point where we will have the computational power to evaluate every single human behaviour, much less how we interact together.

Some day we may have access to that crystal ball with the foresight to determine whether creating an interesting in-flight safety briefing creates higher levels of customer satisfaction, brand awareness and brand resonance, all antecedents for increased sales.

The fact remains that these investments are important to building and maintaining a brand’s strength and can only be measured on a more multi-layered basis using financial and non-financial measures.

36 APRIL 2014

BUSINESS

a multi-layered dashboardThe need in organisations to justify decisions means people make decisions on what is measurable rather than what is most effective and important.

Small ideas or interventions can provide the best and most impactful solutions available, even though they may never be measured financially.

Staying with airlines, take other examples of marketing innovations such as apps that allow passengers to view wireless in-flight entertainment on their own devices, installing a seat-to-seat chat system or using big data techniques to push “best of” content to passengers such as most frequently watched movies or drinks ordered. All of these examples present challenges for the CFO when analysing the ROI, but each one will have a huge impact on customer experience, making the few hours in the air some of the least stressful moments of our lives and improving customer resonance with the brand.1

True, the cost of all in-flight services needs to be included in a consolidated financial metric such as total costs to serve, but the point is marketing innovations cannot always be measured with one simple metric and attempts to impose certainty on it and try to concentrate on the numerical value above everything else is highly misleading.

CMOs must not buy into, and CFOs must not pressure CMOs to be measured on, a single ROI or other financial metric basis, but they must both join together to develop a multi-layered dashboard of KPIs as they pursue together their common business goals such as growing the business (market share), customer maintenance and acquisition (loyalty and customer acquisition percentage), enhance the brand (brand awareness) and increasing segment profitability (segment ROI) as much as possible.

Getting this integration working well internally will transform the roles of both functions as core value drivers of the business.

five steps to better relations between cfos and cmos Management Consultancy McKinsey & Co recently released

their research findings around the five actions that create the strongest CMO–CFO partnerships.2 These included: • Creating an open-book mindset: CMOs must create

transparency by opening up about how much they actually

spend by product, market, on IT, digital and social media, sponsorships, promotions etc. This helps the CFO understand how value is being gained or lost.

• Focusing on the metrics that matter: CMO–CFO must be more of a partnership relationship where the two partiers explore together the performance that drives shareholder returns and align all metrics with corporate business goals. This can be done by creating a chart to illustrate how business goals cascade to marketing KPIs, tactics and strategies.

• Balance short- and long-term value creation: Calculate short-term marketing effects separately from longer-term benefits to isolate which activities truly build brand equity. This also assists the CMO to produce the right data to support their decisions about which spend boosts short term returns vs building brand equity.

• Look at savings as well as spending: Embrace lean concepts and benchmark marketing’s spend on key budget allocations, including spend on external agencies, research, advertising and other marketing tasks.

• Seek opportunities to collaborate: Recognise that both the CMO and CFO are on the same team. CMOs should invite finance to participate in marketing planning processes to build bridges and leverage finance expertise.

BDO has significant experience connecting marketing metrics with business goals in tangible and measurable ways. Working with the BDO Risk Advisory Services team, we aim to bring game-changing innovations to assist CFOs and CMOs find common ground and work better together to enhance business success. Tim Gacsal CA is Associate Director Risk Advisory Services at BDO NZ.

References

1. Keller K L. (2008). Strategic Brand Management: building,

measuring, and managing brand equity (3 ed) Saddle River,

New Jersey: Prentice Hall.

2. Gordon J, Monier J, Ogren P. (December 2013). Why can’t we

be friends? Five steps to better relations between CFOs and

CMOs.

The need in organisations to justify decisions means people make decisions on what is measurable rather than what is most effective and important