Posted by: David Kiley on July 10, 2007
As reported in Advertising Age, a study to be published in the Journal of Marketing will report that over a five-year period chief marketing officers don’t have any effect on a company’s financial performance.
The authors— Pravin Nath, a professor of marketing at the LeBow College of Business, and Vijay Mahajan, a professor in the department of marketing at the University of Texas at Austin — admit the study is limited, reports AA, because it focuses on financial-performance metrics, such as sales growth and profitability, and not brand equity, and both were quick to offer caveats to the conclusion.
After writing on marketing for 20 years, one thing I have observed is that few companies even know what marketing is. Most companies view sales and marketing as the same thing. Sales and marketing are permanently linked for many executives as one entity, like Lewis and Clark.
Marketing is not the same as sales, and should not be treated as such. Sales can be impacted by so many things that have little do with marketing. The product is wrong. Your factories are set up to build or make twice as many products as the market demand. Your distribution is bad. Store design was botched. Bad publicity over poor quality has dented sales. All of those things feed into how a company and brand is performing. Little or none of it has to do with the chief of marketing’s performance. Yet, as head of the brand, who often gets scapegoated?
A chief marketing officer really can’t be judged on the same cycle as a CEO or CFO. A CFO should be judged on whether his or her financial strategies meant to support the company are working. Does the company have to keep restating earnings? Did an apparent profit get wiped out by accounting screw-ups a few times.? Did a bet on metal futures aimed at saving money backfire and cost the company big? The CEO needs to be judged on share price, earnings, market share momentum. He or she is responsible for the whole enchilada.
But the CMO is in charge of making sure the company’s brand(s) are being nurtured properly. Sales of Brand X off for 18 months? Don’t immediate blame the CMO and pressure thee executive to hold an ad agency review or concoct a new ad campaign. That’s not just 20th century thinking. It’s 1970s thinking.
A CEO and board of directors need to have a sense of the company’s brand assets and have a set of measures in place that indicated to them whether the brands equities are being managed properly.
The common financial metrics used to measure the performance of CFOs and CEOs don’t apply as well to the CMO position, Mr. Mahajan says. “Those are very short-term,” he said. “You cannot use short-term metrics to measure the performance of someone who is supposed to have a long-term impact,” he told Ad Age.
Among the companies studied, less than half, 40%, had CMOs in their top-management teams. Ninety-two-percent of the firms in the study had a CFO in that team. The actual use of the title CMO was not common, with only about 20% of companies using it; other titles, such as VP-marketing and senior VP-marketing, dominated.