The Chief Marketing Officer – A New Boardroom Role

The Chief Marketing Officer (CMO) has become one of the more commonly talked about corporate designations in recent years. Given the tremendous marketing potential offered by the new media and proliferation of distribution channels, companies have begun to realize the huge potential of marketing in guiding corporate level strategies and substantially contributing to the financial bottom line. In spite of such an understanding, it is startling to note that the average tenure of a CMO is merely 23 months compared to a CFO that typical lasts 4-5 years on average.

Further, not many companies have a senior marketing representative in their C-suite. This begs the question – do companies need a CMO or is the role of a CMO a mere hype? This article probes this question and offers companies some guide posts for better strategic directions. 

Why do companies need a Chief Marketing Officer? 

As the business landscape evolves, marketing also evolves into an organization wide strategic discipline. Given marketer’s knowledge of the customers, it is imperative that the CEO and the corporate board have a representative of the customer to continually educate them. Additionally, companies need a strategic CMO to benefit from:

Align marketing with the corporate business strategy: Newer technology, powerful channel partners, and empowered customers have made the competition highly intense and marketing a very involved and strategic discipline. Marketing can no longer be confined to the 4P framework. Marketers, with their in-depth knowledge about markets and customers, should act as a major resource for strategy formulation. In all issues of corporate strategy – what markets to compete in, what segments to target, what entry mode and strategy to adopt, which partners to strategically ally with – marketing offers substantial information. In order to convey these holistic perspectives, it is imperative the marketing is represented by the CMO in the corporate boardroom who can speak to the directors and the CEO in their language.

A classic example is of the iPhone from Apple. Given the tremendously successful iPod and iMac, Apple could have become complacent. But the marketing acumen of the executives recognized the need to constantly excite the customers. Further, they built their growth strategies on satisfying the unmet needs of the customers. Marketing played a crucial role in guiding Apple’s corporate strategy.

Connect the corporate boardroom with the customer: As Peter Drucker said, the only two functions of any organization are innovation and marketing. Irrespective how innovative a company is, how committed the employees are, and competent the top management is, unless the company connects with the customer, success will be elusive. The top management should constantly evaluate their strategic decision in the context of customer feedback - what do the customers’ value and how can the customers help the company in co-creating value.

CMO plays a crucial role in constantly updating the boardroom and the CEO about latest customer preference, how well the corporate resources are aligned to meet hose evolving customer needs. Companies such as Levis Strauss, Sony, Toyota, Nike and Singapore Airlines are some of the pioneering companies that manage to constantly feel the pulse of their customers. As such, the marketing takes a central role in guiding the corporate strategy by having the top management team and the CEO regularly updated about customers and markets.

Create a customer centric organization: Given the innumerable choices that customers have, ensuring long term customer loyalty and sustainable competitive advantage becomes highly challenging. The difference between the successful companies that achieve those objectives and those who fail is the corporate orientation. Customer oriented companies design and operate every aspect of the company with the customer in mind. To build a customer centric organization requires a highly concerted effort of all functions within a company along with every employee becoming a customer champion.

These issues deal with organizational culture, organizational structure and corporate policies. The CMO can influence the boardroom and the CEO to implement measures that would allow to build a customer centric organization. Banyan Tree Hotels and Resorts is a classic example that showcases such a customer centric philosophy. The founder has managed to instill a culture that allows constant interaction between marketing and other functions with the company. Such an emphasis has resulted in world class resorts that always manage to delight the customers.

From this discussion, it is evident that CMOs are strategic requirements of any corporate boardroom. But in spite of such a significant role played by the CMO, companies have not completely embraced the concept of a CMO. The next section discusses some of the main challenged faced by CMOs which make them vulnerable to boardroom dislike.

Challenges faced by the CMO

The challenges faced by the CMO are the problems increasingly faced by marketing as a discipline off late. It has been long argued that one of the fundamental challenges of marketing that has undermined the credibility of marketing, threatened the standing of marketing within a company, and even threatened the existence of the very discipline as a distinct entity is marketing’s failure to quantify its outcomes and justify investments into marketing activities.

The three main impediments in this regard are: (1) Relating marketing activities to long-term effects; (2) Separation of individual marketing activities from other actions and (3) Use of purely financial methods for justifying and benchmarking marketing investments. As such, CMOs are not given the opportunity to participate in the strategic decision making of the company. Two such daunting challenges are:

Measuring marketing outcomes: Marketing fundamentally differs from other functions with a company like finance or operations in a couple of aspects. As marketing deals with people, their attitudes and eventual behaviors, they are not as predictable as a machine process. As such, there can be considerable time lag between marketing actions and the intended outcomes. Further, measuring these outcomes will have to involve both financial and non-financial metrics. Given these underlying challenges, it is often challenging for the CMO to convince the top management of marketing’s ability to competently allocate resources and significantly contribute to the company’s growth.

Explaining marketing’s centrality in a company: Many companies continue to equate marketing with advertising and sales. But marketing has long evolved from being a tactical departmental function to an organization wide strategic discipline. Given marketers’ knowledge about customers and other stakeholders, marketing plays a central role in leveraging the internal capabilities. But to assert such a central role within any company, marketers should be able to understand the different aspects of the company, its strategies, its resources and its limitations. Marketers usually are involved in their own jobs and fail to leverage their centrality in a company. CMOs face immense uphill task in educating and convincing the C-suite of their capabilities and their rightful status.

The CMO and the corporate boardroom

Given the rather strong antipathy towards marketing within any company and especially within the top management team, CMOs should keep up with time and optimally utilize every resource at their disposal to address some of the fundamental complaints against marketing.

Leveraging the new media: Even as the Internet and other new media channels continue to challenge many of the fundamental ways of doing business, it also offers some tremendous advantages hitherto not within the reach of companies. As a majority of the companies compete to create a presence online, they also should establish structures in their websites that would help measure many a marketing variable. Softwares allow companies to track their customers’ footprints, the stickiness – the amount of time a customer stays on a site, the click through rate of online advertisements, effective optimization of layout design and feel to measure changes in attitudes and behaviors and so on.

These tools can be effectively leveraged by the CMOs to begin the process of quantifying marketing outcomes. These early experiments also allow companies to gradually design their own set of useful metrics. Such an essential first step not only brings credibility to marketing, but also allows marketers to make a strong impression with the top management teams and the CEO.

Internal training: In order for marketing to rise up to the boardroom level, marketers should be thoroughly able to understand the strategic imperatives of the company across functions and be able to speak the boardroom language. Such a state can be attained through formalized internal cross disciplinary training. Such a training system would allow marketers to understand the dynamics of corporate strategy and also enable marketers to effectively leverage the collective internal resources towards ensuring profitability and optimal results.

On the horizon

This blog post has raised some very fundamental questions about the way the companies should be run in the future. The role of marketing within a company is only going to become even more central as managing customer interactions and co-creating value become the building blocks of any corporate strategy.

In the future, the CMO will emerge as the strategic connection between the corporate boardroom, the top management team, the CEO and the customer. Companies should offer the CMO the requisite status and power within the company. Furthermore, companies must create an organizational structure where CMOs can guide the company’s vision and mission by integrating the myriad functions within the company. The time is not too far when the success of the company depends on the strength of its marketing and the CMO.

Sponsored By: Brand Aid & The Blake Project 

Comments

[J.D. Meier]

I think it's part of a powerful trilogy ... business, tech, and marketing (CEO, CTO, and CMO)

At the end of the day though, it's about showing results, and a CMO should be able to show impact on the bottom line.

[John Riley]

I concur with your comments on the CMO. My take on the title and its importance is that marketing has been interpreted by many as another word for advertising. While advertising is one dimension of marketing, that is not the complete definition. Management, particularly in B2B companies, historically has given PR greater stature than advertising.That memory has contributed to the hesitation to elevate marketing to a higher level. In other cases, advertising and PR came together at the VP level, but while that function was at the executive level, it did not rate Board status. The advertising/marketing function in consumer product companies has been recognized for its contribution over the years and it has not been uncommon to have the CMO become the company's CEO and a member of the Board.

I do not think the CMO title is hype. While the title might be misapplied on occasion, I think it may be a way to recognize someone who has made major contributions to the Company and his new responsibilites involve in part, the marketing responsibility.

[Warren Katz]

Great post, Martin. We agree that the CMO/Marketing function can and must have a more dramatic impact on the business… and deliver real business value (e.g. growth, focus, or effectiveness). Marketing is more than a communication function, it’s a BUSINESS function. And, in order to be seen as a strategic function that contributes materially to the business, marketing needs to act as a function that has an impact on the bottom line.

[Hans van den Berg]

Great article! regarding: "Align marketing with the corporate business strategy" I would think the CMO should get even more responsibilities. This would mean align or unify marketing & sales. This role then becomes a CCO: Chief Commercial Officer.

[CMOJournal]

Martin:

This is a nice piece, but you are missing two key concepts to the future survival of the CMO.

1). Accountability: We can "measure marketing outcomes" to our hearts content, but until we willingly take accountability for results (good or bad), it doesn't matter. And to that end, there are no "non-financial metrics" that matter at the end of the day. Let's be clear - awareness, consideration, brand equity, and all of the others are worthless unless you eventually sell something to someone and make a profit doing so. Yes, there is a lag time, but at the end of the day that's what it's all about. I don't care what the "likability score of your latest 60-second spot is... we need to stop resting on the laurels of our right brain and translate "non-financial metrics" into shareholder return. Anything else is a distraction.

2). Innovation: Your only references to innovation were through an indirect reference to the iPod... and by insinuating (via Drucker) that it is somehow distinct from marketing. Are you kidding me? Innovation is integral to the 4P's, and central to product. It's one of the ways Marketing drives revenue growth (and should be held accountable for such). Yes, customer orientation is key, but all of the traditional market research in the world would have never developed the Post-It Note, the mini-van, or Twitter. Innovation is the ultimate manifestation of customer orientation and a key role of marketing within the firm - not a antecedent to great marketing.

Please, don't get me wrong. You make some really great points, but CMOs must take more direct accountability and drive top-line revenue growth through innovation, or Marketing - as a profession - will become a novel art once practiced, but long forgotten. For it will have been absorbed into finance, operations, strategy, and other functional areas within the firm.

Respectfully,
Elizabeth Smith
Associate Editor, The CMO Journal
www.ChiefMarketingOfficer.com