CMOs drive business results, and so do CEOs who “get” marketing. The “CMO Impact Study,” now in its second year, shows a relationship between better business outcomes and companies with stable, marketing-focused leadership. It also challenges the conventional wisdom that data-driven marketing leaders reign.
Companies in which CMOs have longer tenures and access to their CEOs and C-suite tend to have higher market share, according to the new study (executive summary, PDF), authored by Kimberly A. Whitler, an assistant professor of marketing at the University of Virginia’s Darden School of Business, in conjunction with CMO.com. Longer tenures and C-level access are likely the markers of a firm that is committed to marketing, which, in turn, is a factor in its success, she said.
“The objective of this research was to understand how and when CMOs have an impact,” said Whitler, a former CMO who also writes CMO.com's monthly “CMO Matters” blog. “They don’t work in a vacuum. They are affected by the person who hires them, who reviews them, and who determines corporate strategy.”
The “2015 CMO Impact Study” is a follow-up to a report released early last year, which proved that CMOs drive business value. This year’s study compared the CMO functions in the companies with the best marketing capabilities (in the top third of all firms) versus the CMO roles among the companies in the bottom third to examine how the differences contributed to different marketing outcomes and business results.
The new report surveyed 564 business executives, including 223 chief marketing officers or the equivalent, and mostly from U.S.-based firms. It found a correlation between companies in which CMOs have a higher profile and are more involved in overall strategy and firm success. On average, the companies with better marketing showed a two-thirds higher market share. The relationship between the CMO’s status and market share relates to the value of prioritizing marketing, Whitler said.
“Those firms that are better at converting resources into marketing capabilities are better at growing market share,” Whitler said. “Last year’s study demonstrated that CMOs matter. This year’s study shows that in addition to CMOs mattering, firms that commit to marketing tend to be better at it, which is related to better business results.”
|Click to view or download the "2015 CMO Impact Study" infographic (designed by Uberflip). You can also scroll to the end of this article to view it in full.|
Marketing, A Core Competence
Among results of the study, Whitler said “one of the ahas” concerned marketers’ influence on company strategy. While it’s not surprising that CEOs who prioritize marketing show better business outcomes, those who invite CMOs to strategy meetings also showed better results, Whitler explained.
Being involved in senior management is very important for marketers, said Eric Eden, senior vice president of marketing at technology firm Cvent. Sales, technology, marketing, finance, and product teams all have different ways of looking issues, and “success comes at the intersection of a healthy debate across these perspectives,” he explained to CMO.com.
That involvement in strategic discussions and decision making is a signal of the company’s commitment to marketing, Whitler added.
“All of this falls under a basic question that scholars and firm leaders have been asking: How do firms develop a competitive advantage through stronger marketing capability?” she said. “When the CMO is included at the strategic level in the firm, what you’re saying is, ‘We value and prioritize marketing and believe that marketing can contribute to business results.’”
Barbara Goose, CMO of real-estate technology company Altisource, agreed. “Marketing is a core competence, not merely a support function,” she told CMO.com. “The CEO should need input from the CMO daily.”
The study also shows that companies where both CEOs and CMOs have longer tenures tended to have better business results. The firms with higher marketing capability (and better results) have CEOs with 35% longer tenures and CMOs with 15% longer tenure than at the laggards.
“There’s a story here about continuity,” Whitler said. She noted that “much research has been written about short CMO tenure. This research, however, also found a CEO’s tenure correlates to marketing capability and results. It’s difficult to develop an embedded marketing organization if the leadership keeps changing over time, so the longer the CEO’s tenure, the better the firm’s marketing capability tends to be.
“What that means is continuity matters. The cost of a revolving door in marketing is significant,” Whitler said.
Eden noted that after 10 years in senior management at Cvent, he knows a long tenure is an advantage. Marketers can get to know their industries, partners, vendors, and customers really well; initiatives can be tested and investments leveraged better over time, he said.
“My experience is that a lot of initiatives take years to put in place, so tenure is important. It can make a big economic difference in profit and growth. Over time you can learn what really works and optimize,” he said.
The background of both CEOs and CMOs before their current assignments also appeared to have an impact. The research found that CEOs who came up from the marketing side (a more frequent phenomenon in recent years) are more often found leading the better-performing companies. Conversely, the lower performers are more likely led by CEOs who moved up the manufacturing or operations ranks.
“CEOs who have a stronger marketing and/or sales experience are more likely to work in companies with better marketing capability,” Whitler said. That shouldn’t be surprising, she said, since those companies tend to prioritize marketing.
Peter McGuinness, chief marketing and brand officer of Chobani, noted he has the advantage of working for a CEO, Hamdi Ulukaya, who is also the company’s founder and has a passion for the brand. McGuinness often tells the story of how Ulukaya was willing to invest in a factory when others advised him against launching a Greek yogurt in the U.S. market. The gamble, of course, paid off.
“He’s very passionate about it, and he’s very participatory about that, as he should. He’s the founder,” McGuinness told CMO.com. “I know the brand really well. He knows it extremely well. We work in collaboration, and we’re pretty consistent in terms of how we see things.”
The study’s findings suggest a few questions a CMO should be asking in order to gauge marketing’s place in the firm, Whitler said.
|"2015 CMO Impact Study" author Kimberly Whitler.|
“How committed is the CEO to developing marketing in the firm? Are they going to invite you to key strategy meetings? How often do they meet with their CMO? Who do they include in weekly leadership meetings?” she asked.
“Chemistry matters. High-functioning relationships are built in time,” Goose added. “Trust drives growth. When a CEO knows their CMO will succeed, there is more freedom and stronger results.”
The CMO’s background also has an effect, according to the study’s findings. Whitler noted that more analytics-driven CMOs were more likely to work at firms with lower marketing capability. That actually runs counter to the current CEO focus on finding marketers with a strong analytics grounding: The study shows it takes both a data and creativity focus are required, she said.
“This result was frankly surprising. I expected that the more analytical marketers would be associated with the strongest marketing firms,” she said. “However, after considering the results, it actually makes sense. Balanced or hybrid CMOs–those with both analytical and creative skills–are more often found in firms with stronger marketing. Why? The analytical skills help CMOs understand what to do, but the creative skills help CMOs use that insight to change consumer beliefs and behaviors. Both are critical and, unfortunately, right now we tend to be overweighting the analytical side and devaluing the creative side.”
CMOs are transitioning from being creative brand gurus to more business-focused executives, said Lisa Arthur, CMO of Teradata. This is leading to the emergence of more marketing chiefs who are stronger in analytics but lack the brand experience to drive more effective marketing, she said.
“The key—and the study does a great job of highlighting this—is data alone is not enough,” Arthur told CMO.com. CMOs need to be more well-rounded, combining marketing and creative expertise along with an insightful, data-driven approach to engaging consumers, she explained.
“As the study cites, CMOs need to have balance and exhibit an appetite and skill in being data-driven, leveraging insights that are granular and trend-spotting, along with being creative and expressing the brand to drive growth,” Arthur said.
“That’s the ‘aha’ here. Most CEOs want somebody very quantitative,” Whitler said. But she warned against focusing on that aspect too much.
“In the case of marketing, you can’t be right- or left-brained. You have to have a blend of both creative and analytics skills,” she said.
Click to view or download the "2015 CMO Impact Study" infographic (designed by Uberflip).
The full report is available only to participants of the study.
See what the Twitterverse is saying about the CMO Impact Study: