Finances for Marketing

 


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Good communication between a marketing manager and the firm’s finance manager is critical. They must work together to ensure that marketing plans are realistic and that the firm can successfully implement them with money that is or will be able. Further, a successful strategy should ultimately generate profit. The financial manager needs to know how much money to expect – and when to expect it – to be able to plan for how it will be used.

Within an organization, different possible opportunities compete for capital. It’s often best for the marketing manager to use relevant financial measures as quantitative screening criteria when evaluating various alternatives in the first place. Marketing plans that are funded usually must work within a budget constraint. Ideally, the marketing manager should have some inputs on what that budget is – to get the marketing tasks done.

As a result, at least some important marketing strategy decisions may need to be adjusted- either in the short or long term – to work within the available budget. For example, the marketing manager might prefer to have control over the selling effort for a new product by hiring new people for a separate sales force. However, if there isn’t enough money available for salesperson salaries and benefits as well as for travel and other selling expenses, then the best alternative might be to start with manufacturers’ agents. They work for a commission and aren’t paid until after they generate a sale – and some sales revenue. Then, as the market develops and the plan becomes profitable there may be both the money and a good reason – perhaps lower cost or better control – to expand the firm’s own sales force.

There are a number of different possible sources of capital. However, it’s useful to boil them down to two categories: external sources, such as loans or sales of stocks or bonds, and internal sources, such as cash accumulated from the firm’s profits. A firm usually seeks outside funding in advance of when it is needed to invest in a new strategy. Internally generated profits may be accumulated and used in the same way, but often internal money is used as it becomes available. In other words, with internally generated funding a firm’s marketing program may be expected to “pay its own way".

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