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CMO Study Not Fair To Pro Marketers

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.

Reader Comments

Josh Healan

July 10, 2007 8:56 PM

Although I don't entirely agree with the metrics used in the CMO Study, I don't entirely agree with David's commentary either. The facts used in the study to create the published conclusion are incomplete. A CMO's impact needs to be measured over the long-haul. It's typically the long-term sum of several short-term marketing tactics that determine the success of professional marketers.

A big part of that short-term and long-term measurement should be tied directly to the top and bottom-line growth of a company. We live in an integrated world where everyone is accountable to themselves and to each other. Marketing today effects everything. It's not just about the ad campaigns anymore. Yes a CMO's job is still about traditional branding, but today's successful branding includes image in-store, image on-line, call centers, customer service, product design, product quality, PR, social responsibility, investor relations, and so on.

Simply put, it used to be that the CMO's job was only about creating the big brand promise. Today, at least in large corporations, the CMO's job is also about fulfilling that promise.

Successful marketing executives, even the agencies they partner with, understand this.

Juan CIerva

July 11, 2007 6:17 AM

Most of the people I talk to consider that Marketing is little more than legalized swindling and scams from companies that are out to sell any way they can. Real life examples of marketing cons that are very noticeable include Jaguars that are really Ford Mondeos, weight loss products that are all fake, Credit Card offers that are actually rip-offs, Debt consolidation schemes that actually increase your total debt and, in general, the fine print and fast talk attached to the end of any commercial. If you consider such vivid examples, it's no wonder that people consider any advertisement as a threat that includes deceit somehwere in the offer.


July 11, 2007 7:45 AM

David, when you say that evaluating marketing solely based on sales figures is 1970s thinking, it should be noted that most of the execs today have been educated on how to lead companies in the 1970s, hence their mindsets are about 30 years behind on many important marketing issues.

That said, if the sales of Brand X are off for 18 months by more then about 10% to 15%, there's probably a problem with marketing and brand perception. If there's a few quarters in which the product stumbles or even looks bleak, but eventually evens out to an acceptable level, the issue might be the way the product is sold, produced or distributed.

Prolonged losses over more then a year are signs that the marketing startegy is probably not up to par.

Geo George

July 11, 2007 8:46 AM

Its nice when experienced people like Prof discuss the differentiators with actual cases or names morphed.The Artcle/ blog is nothing but an attempt to establish his authority on the topic.
The discussions are deabatable and a CEO, CMO or CFO not in sync with companies inter and intra departmental starategies is Obslate in a present scenario.Marketing and sales are closely interdependent and mutually related streams and vary from category to need cases to prove the point


July 11, 2007 9:04 AM

I would agree. The hot topic is the integration of marketing and sales. I think most people think they understand marketing when they really don't because they haven't really studied it. We live in a short-term world. Marketing is about longevity. I think of sales as a function of marketing. I don't know if that is correct. I may really mean to say that sales feeds off of marketing. Marketers are supposed to be in tune with the market, competitors, the customers, and integrate the information so that corporate objectives can be achieved. Marketing should work with finance, engineering, product development, the senior managers, sales, etc. It is about branding and there should be a whole strategy that takes time to develop. Procter & Gamble understand marketing. They sell commodity products but they have meaning to the consumers. That is brilliant marketing.

Jack McBride

July 11, 2007 1:41 PM

The title Cheif Marekting Officer is a bogus one in most companies. How can you call someone a CMO when that individual has no control over the product, the price, the distribution (or channel)or even the marcom budgets.

Even in true marketing driven companies such as P&G the product/marketing managers control those elements not Jim Stengel their nominal CMO.

The title should be cahnged to Chief Marekting Communications Officers, which all they really are, then hold tehm accountable for that narrow funtion.

Jack McBride
Managing Director
McBride & Associates

Mike Duke

July 12, 2007 3:46 PM

There is a great series of interviews with CMOs and other senior marketers I've been downloading over the last few weeks from which addresses some of these points. I'm left with the impression that the marketers are always going to be fighting their corners and justifying their existence because they are viewed as a cost center by the other C-levels. Few CEOs really understand marketing properly.

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News, opinions, inflammatory meanderings and occasional ravings about the world of advertising, marketing and media. By marketing editor Burt Helm, Innovation Editor Helen Walters, and senior correspondent Michael Arndt.

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