When people think about Marketing, financial literacy as a key skill doesn’t always come to mind.
Creativity, innovation and communication skills are typically associated with Marketing to effectively promote products and services.
While those skills are essential for Marketers to perform in their roles, wider business skills such as financial literacy are key to learn for a successful career.
Marketing is essentially about adding value by meeting consumer needs and business needs.
This means Marketers need to understand and master the financial concepts and language spoken in their organisation, all the way to the boardroom. And the earlier in their career, the better!
So, let’s look at what financial literacy is about and why it is an important skill when working in Marketing.
What is financial literacy?
Financial literacy refers to the ability of individuals within an organisation to understand and effectively manage financial matters related to the operation and success of the business.
It encompasses a range of knowledge and competencies related to financial management, analysis, and decision-making within a business context.
For example:
• Understanding financial statements: The ability to interpret and analyse key financial documents such as P&L’s (Profit & Loss). This includes understanding key financial metrics and ratios to assess the financial health and performance of a business.
• Budgeting and forecasting: Being proficient in creating and managing budgets, as well as forecasting future financial performance based on historical data and market trends. Financially literate individuals can allocate financial resources effectively to support business objectives and ensure financial stability.
• Financial planning and analysis: The ability to develop strategic financial plans and conduct thorough analysis to support decision-making processes within the organisation. This may involve evaluating investment opportunities, assessing the financial impact of business initiatives, and developing financial projections.
• Risk management: Financially literate individuals understand the various financial risks that may impact the business and are adept at implementing strategies to mitigate these risks. This includes managing budgets, identifying potential financial threats, and implementing appropriate risk management measures.
• Financial communication and reporting: The ability to communicate financial information effectively to stakeholders within the organisation, such as senior management, board members, and investors. This may involve preparing financial reports, presenting financial data in a clear and understandable manner, and providing insights to support strategic decision-making.
• Understanding financial markets and economic trends: Staying informed about financial markets, economic trends, and industry developments that may impact businesses. Assessing the implications of external factors on the business’s financial performance and adapt growth strategies accordingly.
Why financial fluency matters when working in Marketing?
Financial literacy is an essential business skill for Marketers to make informed financial decisions, manage resources effectively, and drive the long-term success of their organisation.
It empowers individuals to understand the financial implications of Marketing strategies and contribute to achieving their organisation’s financial objectives.
Financial fluency in Marketing is a bigger skill than managing brand campaigns spending and ROI analysis.
It involves broader aspects of business and brand management that Marketers need to be confident with, especially as they move up the career ladder.
Broad brand management includes:
• Brand P&L management: Marketers are accountable for delivering annual financial targets for the brands they manage, such as year on year volume / value sales growth and improved brand profitability. This means Marketers need to fully understand their brand P&L components, regularly track brand performance versus targets, understand key growth drivers and course correct brand strategies, plans and investments where necessary, to deliver financial objectives.
• Budget management: Marketing teams need to work within allocated brand budgets, ensuring that the company financial resources are used efficiently to achieve Marketing objectives while maintaining the profitability of their brand.
• Return on Investment (ROI) analysis: Marketing campaigns require financial investment, and businesses need to measure the return on that investment to determine the success of Marketing initiatives. Understanding financial metrics such as Customer Acquisition Cost (CAC) and Lifetime Value (LTV) helps Marketers make informed decisions on how to allocate their brand budget for the best results.
• Forecasting: Businesses need to forecast future revenue and expenses, including projected sales from Marketing activities. Marketers need to work closely with their Finance and Commercial colleagues to understand how their brand P&L is built, how volume targets are phased across the year and how their annual brand plans and investments contribute to delivering financial goals.
• Risk management: Marketers need to assess and manage financial risks associated with brand activities. This includes understanding the risk of overspending without generating sufficient returns or the risk of investing in Marketing channels that may not deliver the desired results.
• Profitability analysis: Marketers are accountable for building and growing brands profitably for their organisation. They need to understand the profitability of the different products in their brand portfolio, targeted consumer segments, trade channels and customers. By understanding their brand financial mix and the business impact of Marketing and Commercial strategies, Marketers are more empowered to drive the profitable growth of their brands.
Conclusion
Financial literacy is an essential business skill for Marketers to build early and throughout their career, alongside technical and interpersonal skills.
By effectively managing company resources, evaluating the financial performance of Marketing strategies and making informed decisions that drive brand profitability, Marketers can credibly establish themselves as business leaders and progress to senior leadership roles in organisations.