The Interdependency Of Marketing And Finance

It’s tempting to consider marketing and finance to be completely separate business disciplines. Marketing is about subjective, edgy, creative things like brands and television commercials. Finance focuses on hard, cold numbers. In reality, as most experienced business leaders know, the two disciplines are deeply entwined in the successful management of a venture. Though it’s not the only factor, marketing is one of the most essential drivers of business profitability and high valuations. Marketing is about revenue generation and growth, which is what drives the financial side of the business.

For this reason, marketing and finance are two sides of the same issue, both answering the same, fundamental questions that every business must answer: who will buy our product at the best price? How do we get as many profitable customers as possible? How do we keep customers loyal and returning to purchase again and again?

By developing an appreciation for the way marketing drives finance and vice versa.

Linking Marketing And Finance

There is a fallacy that marketing and finance are separate disciplines. In reality, they are closely linked. They often overlap, and they inform one another about the current and future health of the business. This is the case even when the people performing finance and marketing functions either don’t know or believe that they’re interdependent.

Every business leader should strive to see marketing from a financial perspective and finance from a marketing perspective. When a business leader can operate with this insight, good things tend to happen in a business and other types of organizations as well.

Looks can be deceiving. Finance appears to be a numbers game, a cold, fact-based area of the business world where money talks and everything else walks. Marketing, in contrast, is often viewed as subjective, an arena for creative, artsy types who love talking about soft-edged concepts like brand aura and emotional engagement with the customer. However, finance is not only about money and marketing is about a lot more than image. In truth, both disciplines are about the same thing: how a business sustainably earns, grows, and increases in value.

Marketing is one of the main drivers of earnings, growth, and valuation. Finance is about measuring the effects of marketing—from the decisions to operate in specific markets and serve specific customers to pricing, basic advertising and messaging, product design, and the scope of product lines.

Great Marketers Understand Finance

You will only be great at marketing if you understand finance and marketing’s effects on financial outcomes. Conversely, you will only be great at finance if you understand marketing and how it affects business financial performance and valuation.

These skills are essential to steering a business in the direction of strong growth and robust cash flow. Knowing how to work with marketing while applying financial discipline enables the firm to build value for shareholders and will likely make you more valuable as well.

Contributed to Branding Strategy Insider by: David Stewart, President’s Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.

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