The Changing Influence of the CMO by Chris Trayhorn, Publisher of mThink Blue Book, March 30, 2009 The marketing function has evolved in recent years, becoming more important to the success of the business and becoming higher profile. To test our hypothesis about the ways the chief marketing officer has changed and the new requirements for the role, we embarked on a study that involved interviewing more than 30 CMOs from major U.K. businesses, most of them FTSE 50 companies. We asked this group of accomplished and high-profile marketers how the rule book has changed and how the CMO can build credibility and exert influence in the business. So, as well as exploring the nature of the role, we talked to CMOs about impact, accountability, tenure, compensation, team-building, succession planning and career development. To respect confidentiality and encourage frankness, we agreed to preserve anonymity in this report. From these discussions and our observations from our work, we produced “The Changing Influence of the Chief Marketing Officer.” This paper is an excerpt from that study. PERCEPTIONS OF MARKETING The perceptions of the marketing function differ, depending on the organization and the sector. Fast-moving consumer goods (FMCG) companies, dependent on building relationships with consumers and securing their loyalty, tend to place great value and expectation on the marketing team; brand-building and innovation are high on the CEO’s agenda. In financial services and business-to-business sectors, the correlation between marketing and growth is often less clear; here, marketing makes a significant contribution, but is less likely to be perceived as a driver of the business. One financial services CMO described brand as “the DNA that holds the business together,” but went on to say that it was difficult to convince people that brand is “more than logo and colors.” Although marketing in his company is responsible for product design and execution, the biggest challenge has been to create “an FMCG-style insight-driven proposition development model.” If marketing is to be an engine of growth, it must prioritize innovation. “Innovation is necessary to create organic growth. The capability for innovation needs to be one of the basic armaments in the marketing toolkit,” the innovation leader at one company said. “Innovation is an extension of marketing, and innovation strategies must be inextricably linked to brand strategies. This requires a hard-nosed, venture-capitalist perspective, where you pay as much attention to the economics of the business you are creating as you do to the consumer insight.” “You cannot risk being perceived as a fluffy creative marketer,” said one CMO. “To be truly respected at executive-committee level, you have to be a highly commercial individual with a track record of delivering significant profit growth.” Another CMO, who resented the perception that the CFO is more critical to the health of a business, emphasized that a CMO’s grasp of financial issues must be first-class if that perception is to be reversed. The alternative scenario, in which the CMO is seen as lacking “commercial nous,” is a sure sign that marketing has failed to bridge the credibility gap. Some companies have overcome the negative perceptions of marketing by merging marketing and commercial departments, thereby bringing more financial gravitas to the function. In one such company, the perception of marketing has shifted from being a cost center to a driver of business change, and the CMO has gradually been seen as responsible for generating revenue and creating demand. THE DEATH OF THE CHIEF ADVERTISING OFFICER: HOW THE CMO’S ROLE IS CHANGING Although the CMOs we spoke with represent businesses with vastly differing profiles, they share a great deal when it comes to background, attitude and skill sets. They all are doing different jobs than their predecessors were doing a decade ago. The most conspicuous shift in the CMO’s role is the growing emphasis on financial and commercial skills, closely followed by leadership ability. What was once primarily a marketing services role (creating the ads, protecting the brand, etc.) has evolved into that of chief commercial officer. One CMO estimated that the traditional marketing skill set, while still important, now only accounts for approximately 25 percent of the role; in his company, marketing sets the strategy, and sales executes it. One CMO revealed that top-line growth accounts for 50 percent of his potential bonus. Never before has the CMO been so accountable, not just for creativity, innovation and commercial execution, but also for revenue growth. Indeed, some CMOs now go by the title of chief growth officer. Media convergence and the emergence of new sophisticated interactive technologies create countless new opportunities for connecting with consumers, but they also have the potential to cause major problems for those not equipped to take advantage of these evolving channels. CMOs cannot afford to ignore these opportunities but must create new structures and hire people who can innovate in a technology-driven environment. The CMO of a global industrial business insisted that marketing – just like the rest of the business – must be more data-driven and fact-based when making the case for investing in, implementing and tracking new initiatives. “The CMO and team must have marketing nous – the instinct or intuition to know when to go with something and when not to because you know it is or is not going to work,” he said. Experience in international markets was also considered to be an important element of the ideal modern CMO profile. Indeed, people who have rarely strayed far from head office are at a distinct disadvantage, since it is unlikely that they have been tested by local market conditions or that they have learned how these can affect product development and brand management issues. NO HIDING FROM THE NUMBERS If marketing is to raise its profile and increase its influence, it must be able to demonstrate its contribution in tangible ways. As CMOs assume more responsibility for financial performance, their level of accountability increases; they must take the initiative and continually seek out ways to measure the success of marketing activities. The resulting evidence will determine whether the work of the marketing group is being optimized and helping to earn the support and credibility of the rest of the organization. A wide range of measures is used to determine marketing success. These measures tend to differ according to industry sector. In FMCG, the market response is usually very fast, and CMOs increasingly feel it is important to be able to set targets for and measure the effectiveness of every piece of promotional activity. It could be argued that measuring ROI is more important (and easier) for FMCG businesses than others, such as retail, where so many factors affect the customer experience. For FMCG companies, though, loyalty schemes can be an important business driver and are easily tracked. Most CMOs also track brand health indicators using both qualitative and quantitative methods – some as often as every six months. In financial services, a variety of measures are used, from brand awareness, consideration and conversion to customer acquisition and retention and transaction value. One CMO in our study told us his bonus is directly linked to these measures. Rigorous customer service metrics and visibility of data, for example in consumer banking transactions, are considered essential. On the evidence of data in hand, another CMO decided to adopt a new call center model, where priority was given to satisfying needs properly, rather than concentrating purely on speed of service. Of the many CMOs who put top-line growth as their greatest priority, one reports that 40 percent of his company’s global revenue comes from products launched in the past three years, suggesting a major emphasis on innovation. For this CMO, the key indicators of success are margin expansion and incremental return on incremental spend. Another CMO, who believes that the marketing mind-set should be suffused throughout the organization, maintains that earnings-per-share is the best measurement of a good marketing director. The general consensus is that all measures of success should ultimately be linked to revenue and profitability. BUILDING INFLUENCE CMOs and their marketing teams are living with a greater level of scrutiny and accountability than ever before. This is good news for results-oriented CMOs looking to increase their influence within the organization and win a seat at the top table. With CMOs on the boards of just seven FTSE 100 companies, board membership is not a realistic goal, since the trend in the U.K. is toward fewer executive directors sitting on public limited company boards. Rather, the executive committee is where they need to establish their presence, exert their influence and promote the marketing agenda. Three-quarters of those interviewed sit on the executive committee or equivalent, and an additional 15 percent are members of other influential committees or sit on subsidiary boards. Many of the CMOs we spoke with emphasized the connection between the ability to communicate effectively and the ability to build influence. Jargon alienates nonmarketers and reinforces the idea that marketing is a black art – mystifying, arcane and separate. If one of the aims of a marketing function is to educate nonmarketers, then being able to communicate in clear terms is vital. When it comes to brand-building, every CMO must not only learn what the brand is about, but also articulate its values clearly, making it relevant to other functions. Another factor that increases a CMO’s influence is the ability to build relationships and collaborate. This means taking a consultancy approach, understanding marketing needs and “finding out what keeps managing directors awake at night,” as one survey participant put it. Another advised fellow CMOs to “assert your value and that of your department, then create a structure of committees/forums that involve cross-functional teams.” Building influence may also involve taking a lead in activities that are not necessarily linked to operational, market or financial measures, such as corporate training. Being physically present at local business reviews can also have a surprisingly positive effect. One CMO said, “There are four ways to drive change: tell, sell, consult and co-create. My preference is to combine the last two.” WHAT’S NEXT? About half the people interviewed have ambitions to move into general management, with the rest content to continue their careers as marketers. Of those wishing to continue their marketing careers, the majority work in FMCG businesses, where the real power now lies in global category roles. One CMO described herself as the “most driven and least ambitious person,” quite content to stay in a marketing role. One of the biggest obstacles in the way of CMOs who want to move into general management is the “silo effect.” To overcome this tendency, it is important for the CMO to be able to influence and communicate the marketing message throughout an organization – an essential skill for a potential CEO to master. Many CMOs consider taking on a nonexecutive directorship, although, in reality, fewer than 20 percent of them sit on other boards. A surprising number are prohibited contractually from taking on outside directorship; by contrast, one CMO in the study made it a condition of her employment that she be allowed to do so (but with a noncompeting business). Well-chosen, nonexecutive directorships are a wise move for CMOs looking to move into general management, as the boardroom experience will introduce them to a range of debates and decisions they might not otherwise be exposed to. One CMO related how he has directly benefited from acting as a nonexecutive director of a small public limited company that has had to manage its costs closely. He has been able to apply what he has learned about this organization’s cost-control measures to his own department’s fiscal planning and control, albeit in the context of a larger corporate environment. CMOs comfortable with today’s focus on commercial accountability, business acumen and financial literacy will be in a good position when it comes to making an upward move. But, as one highly experienced CMO warned, “The biggest mistake moving from marketing into general management is the temptation to see the job as different, or somehow beyond marketing. You should never, ever shed the marketing mind-set – that should be present in every senior role in every organization.” Filed under: White Papers Tagged under: Edward Speed, Jonathan Harper, Jonathan Smith, Perform, White Papers About the Author Chris Trayhorn, Publisher of mThink Blue Book Chris Trayhorn is the Chairman of the Performance Marketing Industry Blue Ribbon Panel and the CEO of mThink.com, a leading online and content marketing agency. He has founded four successful marketing companies in London and San Francisco in the last 15 years, and is currently the founder and publisher of Revenue+Performance magazine, the magazine of the performance marketing industry since 2002.