Articles abound by academic scholars and managers questioning whether CMOs still matter. Some have even gone so far as to prognosticate the role's demise, suggesting that it is no longer a significant or relevant position.
To explore this supposition, I teamed with CMO.com to conduct the first-ever CMO Impact study. The analysis is based on results from a survey conducted this past summer/fall, with 71 percent of 814 respondents serving as the head of their firms’ marketing department (generically titled CMO for this study) and 29 percent holding other executive-level positions.
What follows is a sneak peak regarding the importance and value of marketing–a topic that many marketers have debated with other C-level executives.
Does Marketing Matter?
Prior to conducting the survey, I interviewed more than 150 CMOs about their roles and impact. I often asked whether they were grappling with any issue in particular.
The most common issue CMOs cited was how to convince other executives, usually their CFOs, that prudent investment in marketing would help improve overall firm performance. While the CMOs often had test results regarding specific programs they had run, they seemed to still struggle with convincing their CFOs that they should invest in marketing at all.
If you’ve grown up at Procter & Gamble, as I did, or another firm that believes that marketing is at the heart of creating competitive advantage, hearing CMOs struggle to educate other firm leaders on the inherent value of marketing is a bit shocking. However, what I noticed is that these CMOs were usually from industries where marketing wasn’t considered a central function. Rather than being considered pivotal to driving overall firm performance, these CMOs were viewed as a cost center that existed to support another important function (e.g., technology, R&D, sales, etc.). After completing dozens of interviews, I came to understand and appreciate the unique challenge these CMOs faced.
So this research was designed, in part, to address this question: How and in what way does the CMO impact firm performance (if at all)? While 2008 research by Pravin Nath and Vijay Mahajan indicated that a CMO’s presence on the firm’s top management team didn’t impact a firm’s performance, we approached this question differently. Going beyond one variable (presence on the top management team), we looked at a variety of factors related to the CMO role that might impact firm performance. I used the survey to understand how the CMO impacts the development of marketing capability within the firm.
Marketing capability is essentially the firm’s ability to convert marketing-related resources into positive firm outcomes. Academics have done a lot of research regarding marketing capability, with a meta-analysis–essentially a “study of the studies”–completed in 2008 by Satish Jayachandran and Alexander Krasnikov. They found that a firm’s marketing capability not only had a statistically significant positive impact on overall company performance, but it contributed more than either operations or R&D capability. In other words, a firm that has developed a stronger marketing capability (holding everything else constant) will significantly outperform lower marketing capability counterparts. And investing in marketing capability, dollar for dollar, should yield better results than investing in R&D or operations capability.
This meta-analysis demonstrates that a firm’s marketing capability matters, and that it matters more than other important capabilities. For the CFO, a choice to underinvest in developing marketing capability is a choice to fall behind competitors in this area.
To further investigate this question, we looked at results from the CMO Impact study regarding the effect that a firm’s marketing strategy and implementation capabilities had on firm performance. What’s interesting is that while both correlated with overall firm performance (e.g., market share, sales, profitability), marketing implementation capability was more positively correlated, indicating a stronger relationship.
The Relationship Between Firm Performance And Marketing Capability (Correlation)
|Market Share||Sales||Profit||Customer Sat|
|Marketing Strategy Capability||0.32||0.30||0.26||0.29|
|Marketing Implementation Capability||0.40||0.37||0.34||0.34|
This finding illuminates the importance of execution and implementation. Often, a disproportionate emphasis is placed on developing individual and firm-level strategic planning capability relative to implementation capability. Whether it is the curriculum at a top MBA program or a board-level conversation, the amount of attention placed on planning relative to implementation may need to be reconsidered.
Stay tuned for more results. A more in-depth article will be published by CMO.com in a few weeks.The final report will be distributed later this spring to only those individuals who take the survey. If you didn’t get a chance to participate, are the head of marketing for your firm, and would like to share your experience, please click here now.