Chief marketing officers used to be seen as ideas people charged with creating imaginative marketing initiatives. But, as Christian Dörffer and Tim Munoz of Prophet explain, they are becoming increasingly accountable for business profitability.
The CEO depends on a star executive team of experienced leaders that helps set the strategic agenda, contributes to enhanced shareholder value, and leads a continual corporate transformation that keeps the business relevant to its customers’ needs.
Increasingly, that team includes a Chief Marketing Officer (CMO) – a job title now seen at more than 50% of Fortune 500 companies, although less common in Europe and Asia.
The CMO role reflects the elevation of marketing in business organisations and the expectation that the individual holding the CMO position should serve as the missing link in the executive team that turns marketing capability into corporate growth.
Meeting that expectation is a challenge, requiring a close alignment between the agendas of the CEO and the marketing department and improved collaboration across functions. A study by the Association of National Advertisers (ANA) found that the agenda pursued by corporate marketing is not usually aligned with that of the CEO. Marketing tends to focus on such tactical issues as maintaining branding guidelines and sharing best practices. Meanwhile, according to a 2004 report by the Conference Board, the CEO’s top priorities are achieving top-line growth, adapting with speed and flexibility to change, maintaining customer loyalty and retention, and stimulating innovation.
Given the differences in the agendas of CEOs and marketing departments, it’s no wonder that marketers are often considered to be creative dreamers who lack business acumen and that marketing budgets are often the first to be cut in the face of adverse market conditions.
This disconnect stems from the fact that the role of the CMO is often poorly defined or is filled by a marketer who is not up to the role. While it doesn’t help that, as the ANA study found, the marketing function in 70% of respondents’ organisations was being revamped or had been restructured during the last three years.
It shouldn’t be this way and doesn’t have to be. At firms in which marketing is a driving force for business growth, by following an agenda that aligns with and supports the CEO, the CMO can meet five critical CEO expectations: strategic guidance, marketing accountability, customer specialist, change leadership and executive collaboration.
To serve as a strategic CMO rather than a tactical marketing director, CMOs must effectively integrate brand and business results and be seen by others as both a driver and enabler of long-term business success.
Those who spend the lion’s share of their time and energy on driving out the latest television commercial or short-term communications programme are following a recipe for under-performance.
Instead, CMOs should proactively introduce the executive team to revenue growth opportunities that also strengthen the long-term health of a company’s brand portfolio assets – the lifeblood of the organisation.
A great example of such a strategically focused CMO is McDonald’s Larry Light. Light deserves credit for driving a broad marketing agenda that looks at the overall offering – from menu to price to geographical presence – to better support the efforts of McDonald’s to return the lustre to the golden arches.
Any CMO today should be able to demonstrate a return on marketing investments and show how brand and marketing activities and investments drive growth. The amount of data available on customers today coupled with advances in analytical systems has made what seemed impossible only few years ago an achievable task. The rapid adoption of data mining software, the output synergies derived from matrix collaboration between the CMO’s and the CFO’s teams, and the advanced skill sets available in marketing teams means that accountability is no longer the sole province of finance teams. CEOs should therefore expect answers from their CMOs on questions such as: How much would we have to spend to reach critical scale?
And what marketing initiatives will give us maximum uplift in a new market?
Most CMOs start with a deficit – they are perceived as cost centres and support functions, not as drivers of growth and profitability. As marketing evolves from an art to more of a science, it is becoming a force to be reckoned with. Some pioneering CMOs of marketing accountability have turned marketing into a profit centre, producing bottom-line results just like the business units do.
Take Raoul Pinnell, chairman of Shell Brands International. One of today’s brightest marketing stars, he is credited with not only creating a reputable brand in a category not historically associated with branding, but increasingly with turning Shell’s brands into a highly profitable licensing franchise.
Diageo’s Rob Malcolm similarly wins kudos on this front. Recently, he and Diageo CFO Nick Rose teamed up to conduct an Economic Profit (EP) valuation of all the brands in the company’s portfolio. This was designed to assess the drivers of shareholder value for each brand and, more importantly, inform portfolio resource allocation decisions. Today, each brand team is given specific EP accountability targets and is responsible for identifying innovative ways to grow both the size and the value of their businesses.
To support each brand team, Malcolm has established several teams that provide services such as customer data analysis, pricing and competitive simulation support, and decision support.
One of the CMO’s most valuable contributions to corporate strategy discussions is a deep understanding of customer needs, behaviour and profitability. CMOs should be obsessed with understanding the hearts and minds of customers and with building lasting and profitable relationships. At some of today’s fastest growing companies, emerging customer dynamics have not only driven corporate strategy, but also forced the transformation of the entire business model and, subsequently, operations.
Staples’ chief marketer, Shira Goodman, has helped the company reorient all facets of its business around customers’ needs, by researching customers – soliciting their feedback and opinions, observing their in-store behaviour, but also sometimes ignoring what the data said. This data/intuition balance led to Staples’ reorganisation of the store layout, moving ink and paper (its equivalent of eggs and milk) to the front of the store, from the back, to encourage impulse buying and make quick purchases easy. Since implementing this new strategy, Staples’ revenues have increased by an average of 10% each year, overtaking Office Depot without looking back.
CEOs need to rely on their CMOs to co-lead corporate transformations. Whether the business sector is utilities or fast moving consumer goods, remaining relevant to customers and staying competitive requires agility across the organisation. The CMO can play a vital role in two key areas. First, they can manage communications with external stakeholders and with employees.
Second, they can ensure that customers will experience the transformation across every key touch-point with the organisation. More specifically, the CMO can ensure that the brand strategy supports where the business aspires to go.
Peter Stringham, CMO at HSBC, has played an important role leading the change toward its transformation into ‘the world’s local bank’. In addition to radically improving marketing efficiency in the bank through vendor consolidation, Stringham has orchestrated the three-year transformation of the bank across the organisation.
He planned the global external communication strategy for both customers and the financial community, and carefully built the transformation into existing key processes to ensure impact. As a true leader, Stringham himself teaches the corporate seminar on HSBC’s brand strategy twice a year to all new management recruits across the bank.
One of the greatest challenges for today’s organisations is the ‘silo’ structure and mentality that erects a barrier to cross-organisation and cross-discipline collaboration. Industries, and sometimes economics, often dictate that organisations are divided geographically or along product or departmental lines. Furthermore, companies with large brand portfolios are often unable to fully leverage the power of their brands as a whole because of the myopia created by category and business unit silos. Only a few companies are able to successfully manage across silos.
The key to their success is executive collaboration. Yvonne La Penotiere, now president but formerly executive vice-president of brand and marketing at Carlson Hotels Worldwide, recently put in place a brand strategy for all of Carlson’s hotel properties that encompassed hotel operations as well as communications. Critical to the initiative’s success was her close collaboration with Carlson’s CFO and the head of hotel operations. Together, they were able to ensure that Carlson’s brand strategy was assimilated throughout the company, from corporate employees to owners and franchisees. As a result, the company achieved record results in 2004, along with a marked change in its culture. Employees are now more focused on guests, while also maintaining a strong focus on the brand’s promises to ensure they are consistently being met to create the desired guest experience.
At P&G Europe, CMO Jennifer Dauer and CFO Wade Miquelon work closely on a daily basis – they literally sit across from each other and often share some team resources, primarily to make smart business decisions. Dauer’s team aims to develop new and innovative products to meet latent customer needs, while Miquelon’s team ensures that customer segments can be served profitably. By sharing the ownership of brands, Dauer and Miquelon effectively overcome the silo mentality experienced in so many other major companies.