Is Finance The New Marketing?

Google’s chief economist Hal Varian raised the question “Is Marketing the new Finance” and although referring to the finance industry not the finance function started a bit of a debate.

I’m raising the question “Is Finance the New Marketing?”, not because I’ve got nothing better to do than nose around in Marketing but because Hal was right. Marketing, especially for a pure etailer has changed.

Gone are the days of Marketing as Lord Leverhulme desribes:

“Half my advertising money is wasted, the problem is I don’t know which half”

Marketing has moved from an industry concerned with subjective and limited data to one with masses of objective data and great tools to analyse that data. The analogy I use is those TV beauty product commercials where they say 93% of women preferred their product only to have to read at the bottom of the screen the sample size was 50. The current analogy is of being able to multi-variant test a massive sample at low cost, completely objectively. Now that is a poll I would listen to.

So if  Marketing has changed, why is Finance stepping in?

Firstly – finance’s function has always been to review business performance, with the new marketing data this (and should be) real time for eCommerce companies. Retrospective reporting is necessary but isn’t as important as looking at the present and forecasting future business needs (i.e. cash.) The focus on cashflow in this recession has made this forward looking mentality even more necessary.

Secondly – revenue is (hopefully) your largest and most important figure in the P&L. An aggregated revenue figure just doesn’t cut it when reviewing business performance. Revenue = visits x conversions x basket size and this can vary hugely by channel when comparing YoY or MoM. Without understanding the channel performance and their interaction you can’t understand the business performance. So Finance is moving away from the P&L in it’s current format because it’s current format doesn’t meet the needs to understand the business.

Thirdly – Finance has always been involved in budgeting and allocating spend. ROI is now a lot clearer and more transparent. ROI calculations by marketing have traditionally been viewed with scepticism, dipstick polls 1 month post media spend are replaced with actual revenue (i.e. tie into finance figures) from online channels on a daily basis. This means rather than giving a whole pot of money to the marketing department it can be assigned in the most effective manner.  A finance director that understands why PPC and Affiliate spend should always be variable and treated as a cost of sale is going to be better for an organisation than one that assigns a fixed PPC budget.

Fourthly – There is a lot of data out there, only some of which can actually provide actionable insights. Where are you likely to find people good with spreadsheets and analysis – usually the finance team. We love spreadsheets, I almost wet myself when I realised I could emulate Hans Rosling and his motion graphs.

Finally – KPIs. KPIs are, as we know, great in management schools. In the real world they have tended to not be that key after all, usually because they were so abstract. Now, with this new data, it is easier to link directly to revenue or customers, and if they aren’t should they really be KPIs after all. At I Want One of Those we’ve come up with some interesting new KPIs across the departments.

So for those 5 reasons it does suggest that finance is indeed the new marketing however…it isn’t.

On channel management and business performance, unfortunately this isn’t as clear cut as it seems. The channels work together to create an ecosystem, or, (as stolen from Peter Bitzakis of ValueClick)

“Channel management is like running a bath with about 6 taps, if the temperature in the bath needs changing then you need to adjust one or more taps”

The number of touch points before a customer purchases is also increasing and attribution by last cookie wins can’t cope with this. A customer may see a TV ad, read a PR article, click on a PPC term, receive an email before finally coming through a voucher code site – attributing this sale to a voucher code site (and therefore possibly decreasing investment in other areas) clearly doesn’t work. I think this attribution of sale across channels is where the true value of data analysis lies. This could lead to true ROI management of channels.

Not only can no system I am aware of attribute revenue across user click-path as required above, no system can even handle all data at the moment. The biggest challenge we face is combing affiliate data, in-house ERP data, Google analytics data and PPC data – all the time wondering what the hell is going on in the (direct)/none channel in GA. As a LOTR fan I would say we need “One system to rule them all.”

For KPIs a challenge is what data actually provides insight into the performance of a department or employee. Are two variables actually related and who has the power to influence?

A key challenge is that although Marketing may be the new Finance, Finance is still the old Finance and the time taken to get deeper involved in channel management and data analysis doesn’t magically appear. I can’t imagine many finance professionals who would be too happy if you just chucked a significant addition of responsibilities on their lap.

Even if marketing isn’t the new finance and I’m just nosing around departments where I’m not wanted, at a minimum finance professionals in an eCommerce environment need to understand the context and power of this new data as it will impact on revenue.

I think of Colin Powell and his p=40 to 70 rule. If we can help marketing get the data to show a probability of success between 40 and 70% then the decisions still require a gut feeling call. Whose gut is up to each company.

K