Does A CMO Add Any Value To A Company?

Well there’s a loaded question. This question has been posed for many years (at least 12) and the answer depends on who you ask. In 2003 a paper was written showing that CMOs increase revenue. (Though given the small percentage of companies with CMOs then, I have some reservations about the validity of the study.) Another study done in 2008 found opposite results, and in 2012 Forbes wrote an article suggesting “The CMO is dead.” A study published in the December 2013 issue of The Journal of Business and Economic Research purported to show that companies with CMOs generated 3% greater shareholder wealth.

In the October 2015 issue of The Harvard Business Review, they discuss a new study from the Journal of the American Marketing Association, which demonstrates another positive correlation between companies who outperform on revenue and those having a CMO. Thus, we now have lots of contradictions. Why is that?

The HBR article reminds us that correlation is not causality. The newest study clearly states that just bringing on a CMO will not necessarily result in more revenue. So, what conclusions can one draw from these studies?

The authors themselves suggest a few things, but I have a different issue to consider. In these studies they assume that the CMO in company “x” has a job description/responsibility similar to that in company “y.” This is a false assumption. The responsibilities of CMOs vary greatly among companies. Studies have found that CMOs self-describe their responsibilities as ranging from simply “director of advertising” to full-on strategic partner for all things “marketing” with the CEO. (I have railed about this disparity and the resulting title issues on this blog for years.)

How can one purport to know if CMOs add value when the term has no consistent meaning? What variables can you consistently hold constant to try to understand any such thing?

It seems obvious to me (and I would think any rational person) that a CMO adds value if they are needed. All companies have a CMO from day one; the CEO is the acting CMO. However, as the company grows, the CEO may become too busy elsewhere to be a useful CMO. Somewhere around $100MM in revenue that may happen in my experience. At that point all Marketing (Product Management, Product Marketing, Marketing Communications and Marketing Strategy) are probably still centralized, so you need a true CMO.

At the other end of the spectrum, $1B and up in revenue (and possibly well before then), it is likely the company has organized into Strategic Business Units (SBU) or Product Lines or another diversified structure. This then usually results in much of Marketing being placed within the hands of each SBU and the “centralized” part is really Marketing Communications. Thus a CMO in this company has very different responsibilities from that of the CMO in the $100MM company, unless they are also “dotted line” responsible for all of Marketing, including that done in the SBUs.

So, does a CMO add value to the company? It depends what you mean by CMO, but somebody better be the Chief Marketing Officer, either within the business units or for the company as a whole. As we note in our book, Value Acceleration, Marketing (creating alignment between the capabilities of your company and the current and future needs of your customers) is the only real source of sustainable competitive advantage.


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When All Else Fails, This Can Increase Your Company’s Perceived Value

David Aaker found a positive correlation between advertising and stock price over 20 years ago. In 1997 Corebrand also released a report positively correlating advertising and stock price. Increased awareness appears to increase perceived value of a company, which is then reflected in its stock price, if the company is publicly traded. Corebrand has recently released an updated report, “The Strong Link Between Advertising and Stock Value,” confirming this relationship is still true.

It does not take a rocket scientist to realize that stock price is usually a reflection of the future perceived value of a company. How else can one explain the sky-high stock prices of relatively new companies with little in the way of revenue? However, what these reports gloss over is the “drugs” involved.

The two Corebrand studies are published by the 4As, which is the American Association of Advertising Agencies. Think they might be biased? The studies are valid as far as I can see, and simply reiterate what Aaker, an academic, noted earlier. What the studies forget to note is that if you stop or cut your advertising, the inflated stock price is likely to drop unless there is real future value in the company.

Several years ago BASF ran a persistent campaign noting they did not make the products you use, they made the products you use better. Clearly a company-focused ad. Stock price increased. They stopped the ads eventually, stock price declined. They have started, albeit on a smaller scale, a new campaign, focused on BASF. Wonder why?

Intel Inside, while ostensibly an ingredient brand ad campaign, really had little effect on consumer preference when it came to actual computer purchase, but did boost their stock. Dramatically scaling back that program in recent years has correlated to a significant drop in their stock price.

Drugs you see. Once you start you can’t stop. But then maybe if a CEO can’t develop an effective strategy to grow the company, he/she can always fall back on advertising to make up for it. At least for a while. And then again, maybe it’s just a temporary campaign in advance of a sale. Situational strategy?


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How Do You Decide What To Do?

lovinitMuch has changed since 2005 in terms of how marketers are expected to make decisions. We’ve gone from a gut feel and intuition driven process (mostly) to what is supposed to be a data-driven, fact-based decision process today. Marketers are expected to justify spending (almost like it might be considered an investment?). Terms like Marketing ROI and Marketing Accountability, almost unheard 10 years ago, are now regular parts of a marketing team’s lexicon.

In the last 10 years have we gone too far the other way? Are we too data-driven? Or are we just making sure we can justify the decision being made even if it turns out to be wrong?

As most people know, McDonald’s is not doing particularly well. (Ok, their last quarter’s sales were up year over year, so the death knell has subsided, but still nobody is jumping up and down about their success.) Apparently at the recent ANA Masters of Marketing Conference, Deborah Wahl, the current CMO at McDonald’s, told a group that McDonald’s recent decision to go 24 hours per day with breakfast was driven by social media data.

Really, is she suggesting that without that input they really had no idea that so many of their customers wanted breakfast available all day?

Or did she need the social media data to back up her recommendation because talking to customers otherwise is just passé; too hard; too unreliable; too much work, or…?

Data is a wonderful thing … if used to create actionable insights. If used to protect one’s backside; well that’s another story. Agile is not just a method, it’s a competitive advantage. If you can’t afford to be wrong, you’ve got bigger problems.

Act on your insights. Be nimble, be agile, and do new things. If they work do more. If they don’t kill them and move on. Do or do not; there is not try.


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Differentiation Or Same As Everyone Else

crowehorwathI snapped this ad in the San Jose Airport. My thoughts were what tax advisory firm is going to lead with “you don’t matter to us”? How does this ad differentiate this firm in any possible way? What is its purpose?

One might think that it’s targeted at people who are fed up with their current firm and being treated indifferently. Ok, but if they’re open to change, how is this ad going to attract them? Aren’t they likely to have been made the same promise by their current firm? Doesn’t every single firm in the category make this promise? How is this ad compelling in any possible way?

mossadamsCompare that to this ad, which is placed about 25 feet away in the same airport on the same wall. Moss Adams suggests that the best companies pick them for a reason. Perhaps you might want to find out if you are good enough to be their client. Not sure if they can follow the ad with an effective conversation, but it sure seems MUCH more compelling to me than the first ad.

What do you think?


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Clever Re-purposing

telephonespacerepurposedIn the “olden days” (maybe 20 years ago) public telephones were ubiquitous in airports. The space was profitable to the airport as the provider paid for the privilege of offering the phone service and collecting the revenue from those phone calls. Cell phones put an end to that business; and while there are still a few “public” telephones in airports, they are few and far between.

So what to do with that formerly valuable real estate? How about sponsored work/charging stations. The space is perfect for short-term usage of a laptop/tablet and with power available, one can also get a charge for their mobile devices. And this smart airport turned it into advertising space as well.

Win/win/win. Great re-purposing.


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Do You Need A CMO … Part 2

Almost two years ago I asked the question for the first time as to whether a company needed a CMO. I noted in that post that all companies have CMOs whether it’s full-time or part-time. As I said then, and believe now, the CEO is the defacto CMO unless and until he/she hires a full-time CMO, with real Marketing (as opposed to just Marketing Communications) responsibility.

A recent article looks at the problem backwards (from my perspective) by considering what CMOs are responsible for today and concluding: “Taking stock, the CMO’s agenda now looks more and more like the CEO’s or COO’s agenda.”

As we note in our book, Value Acceleration, the only remaining source of competitive advantage is from Marketing (and no we don’t mean Marketing Communications.)


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Brick And Mortar Innovation

OSHI’ve written several posts on brick and mortar suicide (just do a search of the site to find them using that term), and to be fair, when I see something one of them is doing well I like to also note it.

The picture was captured at Orchard Supply Hardware. This innovative retailer, recently purchased by Lowes, is fighting back against online retailers in some clever ways, if you check out the sign.

They will set it up for you if you like. Don’t require you to come to the store and get it if you don’t want to (a slap at Note inside not curbside delivery (a slap at many e-tailers who use 3rd party delivery services); and of course the great headline Hassle Free.

Good for you OSH.


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