The role of the CFO is changing
Once focused solely on costs and cashflow, the modern CFO is expected to add strategic value through supporting the long-term goals of a business, which Accenture describes as an evolution from “cost authority” to “business value architect.” The fact that almost three-quarters of finance leaders say they’ve been more engaged with strategy over the past two years is testament to the fact that financial management is no longer the CFO’s sole domain.
As more organizations embark upon digital transformation projects focused on getting closer to their customers, it is clear that value is grounded in customer analytics from which to make forward-looking decisions. As Accenture highlights in its Finance 2020 [î] report, the modern CFO must shift from reporting on the past to predicting the future.
However, traditionally, the relationship between finance and marketing has been a difficult one, with seemingly conflicting aims inhibiting the collaboration necessary to drive growth.
As Forrester observes: “Marketing and finance share the goal of increasing revenue but often have different perspectives and key performance indicators without a shared understanding of their relationship. In many cases, marketing struggles to demonstrate its value to the finance team, which results in underfunded marketing departments that can’t produce the business results finance leaders are most focused on.” [ii]
At the core of this disconnect is an inability to measure the impact of marketing. However, predictive analytics can provide a bridge between the departments, as insights fuel marketing strategies to generate new revenue and protect existing revenue streams.
Measuring Customer Lifetime Value
Using robust insights derived from customer analytics, finance and marketing professionals can converge to create a shared set of KPIs that are most relevant for the business, allowing them to jointly track and measure the impact of marketing initiatives on profitability.
This is particularly valuable when looking at an area such as customer lifetime value (CLV), a key measurement that allows marketing professionals to predict the financial opportunity represented by a particular customer over time. Armed with detailed analysis, marketeers can better focus efforts on the most profitable customers to drive revenue,while finance leaders have greater visibility into which customers are the most valuable.
Improving Customer Retention
With the cost of attracting new customers can be five times that of keeping an existing one, customer retention is crucial. Advanced sales and marketing analytics can identify those customers who are likely to leave or change their spending habits, providing an opportunity to intervene to protect revenue streams or upsell a new product. In turn, this allows marketing teams to enhance customer relationships and instill greater loyalty, while providing finance teams with insight into the relationship between churn and profitability to establish KPIs that monitor business performance.
Identifying New Sources of Revenue
Business growth requires models focused on finding new customer targets and/or additional sales opportunities with existing customers. However, measuring addressable market opportunities and understanding current market penetration are difficult to achieve with traditional approaches that are reliant on disconnected and perhaps conflicting data sources.
Advanced predictive sales and marketing analytics take the guesswork out of defining market strategies to generate revenue from new markets and existing customers. By predicting upsell and cross-sell opportunities, sales and marketing professionals can execute targeted campaigns to those customers likely to buy more. Additionally, such analytics can build a picture of the attributes of the best customers so that marketing teams can pursue campaigns targeted at prospects which fit the “best” customer profiles.
Marketing Analytics for the CFO
With predictive analytics, the marketing function is more measurable in terms of customer acquisition, growth, and retention. CFOs in turn have more visibility and understanding into the key metrics that until now, may have been difficult to explain or quantify. Fueled with predictions, marketing and financials teams can align on the right investments to protect and grow the business.