More companies appoint Chief Marketing Officers, but role is poorly defined
A study by the Association of National Advertisers (ANA) and management consulting firm Booz Allen Hamilton found the corporate marketing function is not aligned with the CEO’s agenda, instead focusing on tactical issues such as maintaining branding guidelines, sharing best practices, and counseling divisions. Further, the joint study revealed that the role of the CMO is poorly defined at an alarming number of companies, and that companies expect marketing to provide measurable outcomes such as return on investment (ROI), but current metrics are not up to the task.
The study results were revealed at a roundtable on “Unraveling the Contradictions: Making Marketing Masterful in an Era of Change,” at the ANA Annual Conference on Saturday, October 9th in Naples, Florida.
Despite the challenges the study identified, it also revealed an emerging sequence of best practices for prospective CMOs. Key “success factors” include identifying whether a company’s CMO model is focused on providing service, advice, or driving growth. Other success factors include agreeing on an “expectations” contract with the CEO, establishing clear organizational structures and decision rights, renewing focus on capabilities such as ROI analytics and consumer insights and taking risks in pursuit of big ideas.
“This joint research effort demonstrates that the dynamic and rapidly evolving landscape demands that all marketers become more accountable. The CEOs have been living and breathing this for years. They are frustrated at the uncertainty of not knowing which half of their advertising dollar is ‘wasted’. The message here is clear – marketers need to measure and convey their value in the same language and metrics their CEOs use,” said Bob Liodice, ANA President and CEO.
The study of over 100 companies revealed the increasing importance of marketing – and the challenges it faces:
Marketing is increasingly important to corporate success, but CEO and marketing priorities are not aligned.
Across all industries, 75% of marketers and non-marketers agree that marketing is far more important to corporate success than it was five years ago.
Respondents in all nine industries studied cited competition and new products and ideas as the top two reasons for marketing’s ascendancy. The results vary by industry; for example, 79% of consumer packaged goods respondents felt that “marketing is best positioned to orchestrate across corporate functions to create and promote new products and ideas.” In the auto category, however, only 44% of respondents felt that way, while 81% cited “fierce competition” as the primary cause for marketing’s emergence.
In addition, marketing is becoming increasingly important in industries where it has traditionally taken a back seat. For example, banks are realizing that their options to grow through acquisitions are diminishing and they must become more successful at deepening relationships to drive organic growth. Reflecting this, 33% of financial services and 36% of Consumer Packaged Goods respondents – higher than in any of the other industries – cited the need for organic growth as a reason for marketing’s increased importance.
At the same time, marketing is disconnected from the CEO agenda.
According to the Conference Board’s CEO Challenge 2004 report, the top four priorities for CEOs are: top line growth (52%); speed, flexibility, adaptability to change (42%); customer loyalty and retention (41%); and stimulating innovation (31%). In contrast, marketing is focused more around tactical issues such as setting and maintaining branding guidelines (83%), counseling divisions (52%) and sharing best practices (52%) than it is with driving the CEO agenda (37%) and driving innovation (35%). In fact, less than half of respondents indicated that the issues that keep CEOs awake at night are at the top of marketing’s agenda. “Marketing organizations need to do a better job of identifying and supporting the CEO’s priorities,” said Paul Hyde, Vice President of Booz Allen, who noted that the average CMO tenure is only half as long as that for CEOs.
Measurable outcomes are expected of marketing, but current marketing metrics are poor.
Over half the respondents (51%) said that the difficulty in measuring performance is a key reason for pressure on the marketing department. “There is no consistent definition of ROI,” noted one respondent. Marketing organizations are instead using “surrogate” metrics, ranging from input-related metrics such as awareness and brand image in financial services to market share and growth in consumer packaged goods companies.
Higher expectations from marketing are driving reorganization, but the key emerging role of “CMO” is still ill defined.
Nearly 70% of respondents to our survey indicate that the marketing function in their organization is currently being revamped or already has been restructured during the last three years. Organizational restructuring was most likely at telecom and technology companies (nearly 85%), and least likely in the consumer packaged goods and health industries (nearly 60%).
The Chief Marketing Officer position is gaining traction.
The addition of the CMO position is becoming an increasingly important element of reorganizations. In fact, 47% of Fortune 1000 companies now have a CMO position, although the role lags such titles as Chief Executive Officer (98%), Chief Financial Officer (91%), Chief Human Resources Officer (83%), and Chief Information Officer (80%). However, the position is defined in radically different ways – used for corporate and business unit positions in some companies, and for staff and line positions in others.
Five keys to success
In-depth interviews with marketers revealed five keys to success for successful CMOs and senior marketers:
- Know which of three potential CMO roles you will be expected to fulfill — Marketing Service Provider, Marketing Advisor, or Driver of Growth.
- Agree on the contract with the CEO from the beginning, and continually check your progress against it.
- Develop organizational linkages, at both the corporate and business unit levels.
- Drive the marketing capability agenda. Quickly making progress on areas such as innovation and ROI marketing that are key to the CEO agenda will be critical to the ultimate success of the CMO.
- Take some risks – come up with the big ideas. “Sometimes you have to be courageous,” noted Ed Landry, Vice President at Booz Allen. “You can’t have a fundamental impact on a company’s direction without taking a risk.”
Over 370 marketing and non-marketing managers of mostly publicly traded companies completed an online study of marketing organizations conducted jointly by the Association of National Advertisers and Booz Allen Hamilton. About 80% of the respondents were senior or middle managers representing 14 industries, with over 90% of the respondents distributed evenly between Consumer Packaged Goods, Financial Services, Retail, Technology, Telecommunications, Manufacturing, Health, Auto and Professional Services industries. In addition, in-depth interviews were conducted with 23 marketers from 12 companies.