Marketing and financial literacy

In the world of marketing, creativity often takes centre stage. Brilliant marketers come up with innovative ideas, captivating campaigns and compelling content. Yet, despite their creativity, some find themselves struggling to gain the buy-in they crave from key internal senior stakeholders. What’s the missing link? In my experience, it often boils down to one fundamental issue: a lack of financial literacy.

Harsh as this may seem if the powers-that- be don’t feel you’re financially competent… you’re toast.

Whether you like it or not, finance (not marketing) is the language of the boardroom and refusing to learn the lingo just alienates the locals.

In fairness, if you don’t understand key financial concepts, how can you be trusted to accurately prepare a budget, allocate resources or participate in strategic planning discussions? How are the decisions you’re making balancing short-term marketing goals and long-term financial objectives?

Understanding the financial impact of marketing initiatives and being able to articulate the ROI is crucial. Without this ability, marketing strategies can end up feeling vague, fluffy and disconnected from the broader financial goals.

They don’t care how many clicks, likes or impressions the campaign got. You need to be able to articulate, in financial terms, how your marketing efforts are building brand awareness, enhancing client relationships or winning profitable new business.

Financially illiterate

In the realm of professional services marketing, financial literacy is crucial. Marketing decisions, whether related to budget allocation or campaign planning, should align with the firm’s long-term financial objectives.

If you’re not all over the numbers, you’ll be seen as an expensive administrator who’s not adding value. And, as those of us who cut our teeth via the comms side of marketing know all too well, reputation is everything and incredibly difficult to turn around.

If you’re viewed as financially incompetent, you can kiss goodbye to getting the support you need from the Board when you go cap-in-hand asking to increase your budget. In fact, it’s far more likely that your marketing budget becomes so pared back that it becomes increasingly difficult to demonstrate your creativity and effectiveness. Everyone loses.

To be clear though, this isn’t solely an internal problem. If you don’t understand what services and products are profitable, the impact of fee increases or what the ideal client looks like, then it’s going to be exceptionally difficult to attract and retain the right clients.

You also need to understand your clients’ financial needs and challenges to build strong relationships and provide tailored solutions. How is the current rate of inflation, interest rates or exchange rate impacting their business? What is causing issues in their supply chain or cash flow?

Setting marketing goals and objectives requires a firm grasp of financial projections and targets. Without this understanding, you risk setting goals that are either too ambitious or too conservative.

Demonstrating a clear understanding of financial concepts can help convince sceptics that marketing isn’t the ‘colouring in’ department but a strategic driver of growth.

Tips for building financial literacy 

Engage in regular conversations with colleagues in finance. Invite them out for coffee or set up meetings to discuss financial concepts, budgets and goals. You’ll both stand to gain a great deal and having a friend on the ‘inside’ should never be underestimated.

Seek out a mentor who possesses strong financial acumen. Learning from an experienced colleague can accelerate your understanding of financial concepts. You could also consider speaking to a peer outside of your firm. I’ve always found that people are flattered to be asked and happy to help.

Invest in courses or workshops that provide a solid foundation in financial concepts, and stay updated with financial news. Read the newspapers and listen to the business news on the radio in the morning.

If possible, take on projects that involve financial analysis or budget management. Practical experience is an excellent teacher.

Start asking questions!

Be curious and start asking questions. Here is where I would start:

  • How many clients does your firm have? Are they primarily near your offices or beyond obvious geographical boundaries? How much do they spend in total on professional services each year? What share do you get?
  • Where is the market opportunity? What service lines and sectors are going from strength to strength? Which appear to be stagnating? Where could new opportunities come from?
  • What’s the average fee and average lifespan of a current client relationship? Knowing these things will help you determine the lifetime value.
  • How many new clients would you need to win in the next financial year to help the business reach the board’s financial target? Or is some of this expected to come from the existing client base? If so, how much and are we confident those clients will purchase new services or react positively to fee increases?
  • Do you know who the key intermediaries are and monitor referral reciprocity?
  • How much does it cost to run a client file each year? Where is the breakpoint for profitability?
  • How do we manage the unprofitable tail to free up time to win more profitable work?

The ability to bridge the gap between creative brilliance and financial acumen is essential for your marketing career. If you can demonstrate both you’ll be in high demand and possess a skill set that few master.

As you continue to build your financial knowledge, you’ll find yourself making more informed decisions, contributing meaningfully to strategic discussions and demonstrating the true value of marketing in financial terms.

If you do one thing today… invite a colleague from finance out for coffee and start picking their brains.

Why the numbers matter

  • By understanding financial objectives, marketers can craft strategies that directly contribute to the firm’s growth and financial stability.
  • Financially literate marketers can showcase their efforts’ tangible impact on the firm’s bottom line, making it easier to secure budget approvals.
  • Proper allocation of resources is crucial for maximising ROI. Financial understanding allows marketers to allocate resources more efficiently, ensuring that investments generate the desired returns.

A version of this article was first published by PM (Professional Marketing) Magazine.

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