Financial fluency means understanding two definitions of value

George Bernard Shaw is widely credited with observing that “England and America are two countries separated by a common language”. The same might be said of marketing and finance, because they use many of the same words – such as equity, security and leverage – but mean different things.

Nowhere is this difference in language meaning more salient than in the concept of value. For marketers, value is a customer concept. It represents the ratio between the perceived benefit that a product or service offers and the price being charged for it.  Value is defined by consumers.

For finance people, value is defined from the perspective of the producer. Value is created when the revenue received exceeds the total costs of making and selling the product or service. Value is a measure of internal efficiency.

Marketers may accuse those in finance of being like Oscar Wilde’s cynic, who knows the price of everything and the value of nothing. In return, finance people accuse marketing of understanding how to spend money, but not how to make it.

The danger is that many marketers appear to think financial fluency means adopting finance’s view of value at the expense of their own.

According to Marketing Week 2025 State of B2B Marketing survey, 90% of respondents claim financial fluency helps marketers make a stronger case for investment. The danger is many marketers appear to think financial fluency means adopting finance’s view of value at the expense of their own. In other words, they need to focus on internal costs, rather than customer benefits.

This cost focus was the mantra of performance marketing. Find the cheapest CPM to generate a dollar in revenue. But, as Nike, Starbucks and others have learned, not all dollars of revenue are created equal. The cheapest dollar of revenue often comes from the most opportunistic customer, rather than the one who has the potential to become a loyal customer.

The real magic happens, not when marketers parrot finance’s philosophy, but when marketers integrate finance’s view of value with their own. When they show that they know how to spend money in a way that makes money. Marketers must understand the concept of value from both the production and consumption sides.

Value as a production concept

This necessarily involves understanding how the business they’re in makes money. The good news is that most businesses fall into one of five types, based on the industry in which they compete:

• Businesses where the product costs (COGS – cost of goods sold) are a very high proportion of each dollar of revenue. This is true for industries such as automotive, construction or wholesaling
• Service businesses where staff costs (SG&A – selling, general and administrative) are a high proportion of the cost base. This describes industries such as hospitality, healthcare and transportation
• Businesses which require a large amount of physical infrastructure (PP&E – property, plant and equipment). This includes industries like utilities and telecoms – but also cinemas and cruise ships
• Businesses that compete on innovation (R&D – research and development). This includes semiconductors, software and pharmaceuticals
• Industries that have a balanced blend of product, staff and research costs, plus may have a large retail footprint. This describes many types of consumer goods companies and retailers

Once you have a basic understanding of the cost and margin structure of your business, you can identify the value of a 1% increase in growth, versus a 1% increase in margin.  This depends heavily on context. If you are in a low margin business with limited economies of scale, then the value of growth is close to zero. Growth will make you into a bigger business, but not a more valuable one. Your priority should be to find way to increase your profit margin before you try to grow.

Conversely, if you are in a high margin business with low marginal costs, then the value of growth is enormous – even if it comes at somewhat lower margins.

Value as a consumption concept

However, financial fluency is about more than being able to read an income statement and a balance sheet. These only give you the production side of the value picture. You need to understand the consumption side of value. There is no value created by producing something for which there is no demand.

How marketers can align their messy reality with finance’s demands for certainty

Once marketers have taken the time to do their homework on how the business makes money, they can gently remind their finance colleagues of Peter Drucker’s observation:

“Because the purpose [of a business] is to create a customer, the business enterprise has two – and only these two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”

For a customer to perceive value, they must be presented with something that is better – either because it offers more functionality for the price, or because it is better suited to their needs.

Bringing the two together

Although marketing may be more comfortable with the consumption view of value and finance with the production view, at this point the complementary nature of the two concepts of value will be apparent – as will the role of price. For customer value to be increased, you must either increase the level of perceived benefit being offered or lower the perceived price. If you do the latter, then you reduce the revenue received by the business and therefore destroy value from an internal perspective.

The consumption and production concepts of value are interdependent because the price paid by the customer is the revenue received by the business. The equation for a successful business, therefore, collapses down to optimising the ratio between the delivery of customer benefits and the costs of doing so.

Financial fluency is not about marketers becoming accountants.

If you focus too much on the benefits to the exclusion of costs (the typical error of marketers), then the business tends to fail quickly. But if you focus too much on costs to the exclusion of benefits (the typical error of finance), then the business does well for a short period of time before demand collapses.

Financial fluency is therefore about understanding the relationship between internal production costs and customer benefits. It means understanding that there is such a thing as “bad” revenue and that many costs are “good” because they support the delivery of a customer benefit for which the customer is prepared to pay a premium.

Financial fluency is not about marketers becoming accountants. It is about knowing enough about the production and consumption perspectives on value that you can advocate for the strategy that delivers the optimal ratio between internal production costs and external consumption benefits. Now that’s what I call value.