McKinsey: Can CMOs and CFOs be friends?

CMOs and CFOs always had a special relationship. Tough effectiveness debates dominated the agenda for decades, as some marketing activities were notoriously hard to measure. But marketing metrics and big data have now entered the marketing suite. Closer ties with finance seem logical. However ROI based decision-making is still yet to come for many marketers, as McKinsey’s Jonathan Gordon, Jean-Hugues Monier, and Phil Ogren have found out.

The authors believe five steps can improve relationships between CFOs and CMOs:

  1. Create an ‘open book’ mind-set
  2. Focus on the metrics that matter
  3. Balance short-term and long-term value creation
  4. Look at savings as well as spending
  5. Seek opportunities to collaborate

These five steps may not end the tension between CMOs and CFOs. But they may turn a heated debate into an informed argument among friends.

The 4Ps of marketing leadership

Millions of marketers master the famous 4Ps of marketing: product, price, place and promotion. But if you’re a marketing executive, you won’t get very far without also tackling the 4Ps of marketing leadership: productivity, purpose, pull and power (from my cmo.com column).

The 4Ps of marketing are a powerful toolkit that has given marketers a clear steer for generations. It’s actually pretty neat. The basic message? Marketers must create an attractive product, price it well, leverage the right distribution channels, and promote it effectively. Job done. But something isn’t working in today’s world of marketing. Recently, one of my CMO clients called to vent his frustration.

‘I need a new job,’ he said. ‘We’ve done a fantastic job researching this new product. We know consumers love it. Everything’s in place. But now they’re challenging my budget. And the CEO wants to make more changes to my campaign. This is crazy. I don’t have enough influence on decision-making.’ ‘But surely that’s just as true of customers?’ I asked. ‘You can’t force them to buy.’ ‘No, this is different,’ he said. ‘With customers, we can design products to suit their needs, ramp up distribution, build up campaign pressure. There’s a lot we can achieve with the 4Ps of marketing.’ My next question stopped him in his tracks: ‘If you can influence customer decision-making, why can’t you do the same internally?’

Think about it: marketers influence people’s behavior every day. We never complain about customers’ freedom to choose. We see it as our job to make them buy our offers. So we create a better product, a lower (or higher) price, better distribution, a better campaign. We’re the experts in influencing decisions. So why don’t we do the same internally? Why do so many marketers struggle to build influence in their companies?

We must accept that marketing is not the center of gravity in many organizations. Unless you work for one of the consumer goods giants, chances are that the marketing department has limited influence. Often, you can’t control short-term sales (that’s Head of Sales), you don’t generate confidential financial data (that’s the CFO), you may not control the product, and you don’t have a monopoly on creative ideas (everyone pitches in). The organizational reality often makes it hard for marketers to call the shots.

You can rage about the injustice of the system. Or you can accept it and start to build influence, just as you do in the market. The sooner you start, the better.

So how does a marketer gain influence?

The research I recently conducted with experts at INSEAD Business School shows a pretty clear pattern: outstanding marketing leaders are very productive in their field. They’re 4P experts. But they also have a strong purpose, create internal pull, and build power.

These 4Ps separate the best from the rest. So how about you? Can you demonstrate the 4Ps of Marketing Leadership?

Productivity – create visible marketing & business results.
This one is simple, but still tough. Senior managers give power to people who deliver, so being on their productivity radar really counts. Productive leaders are highly results-oriented. They talk about achievements, not process. They’re tenacious and hard-working. Most importantly, they’re strong team managers. Do you listen to your team? Do you know what team members need to perform at their best? Do you set clear targets? No matter how great you are, your team is the key to success. What’s more, when you do great work, make sure people see it. For introverts, this doesn’t come naturally. But visible results are your gateway to power.

Now, productivity is fairly obvious. The next 3Ps are less obvious, but even more crucial:

Purpose – know what you want to achieve in the market, for the company and for yourself. 
Great leaders know why they get up every morning. They have a vision, a dream. Ask yourself: If I left the company today, what would the press release say? Think big. An inspiring vision is the only way to inspire others. Get family, friends, and coaches to help you define and sharpen it.

Pull – inspire others based on your vision.
If you’re not in charge, your first priority must be to find followers. But people won’t follow for nothing. They need to see that following you leads them to a better future – either because they want to be like you, or because they’re inspired by your business vision. Once you have a vision, it’s vital to package it well. Think about it: the best stories are short and positive. Concentrate on your key message, and give others free rein to spread your story. The best marketers are great storytellers!

Power – get close to the decision-making process. Power grows when you have access to things that other people want. You can increase your power in three ways:

Have courage.
As a top automotive CMO recently put it: ‘If they don’t like my vision, let them fire me’. Many marketing leaders fail because of their desire for harmony – but you aren’t paid to keep everyone happy. When your convictions are at stake, lay your cards on the table. People follow leaders who stand firm.

Be relevant.
What’s your CEO’s agenda? What matters to the other stakeholders? And how does your role help them? Whatever your views, people will give you limited attention if you’re working on issues they see as secondary. Sometimes this means repackaging what you do, to make clear how it helps. So, for example, don’t talk about the ‘gross rating points’ of a campaign, but about ‘future sales’. At times, it may be better to force an alignment, even if it means adjusting your plans.

Work with the best people.
The best universities attract the best students. The best companies have the best leaders. There’s a reason for this: the best people will simply deliver more – even if they’re sometimes challenging or hard to manage. It’s worth it. Are you really surrounding yourself with the best team, the best agencies? If not, change course now. You’ll see your own power grow far more quickly.

Marketers are experts at creating market influence by applying the 4Ps. But this alone isn’t enough. It’s just as vital to gain influence internally. Successful marketing leaders therefore master the 4Ps of marketing leadership: purposepullpower and productivity.

Want to gain more influence? It’s your choice.

Digital marketing: No need to be a high flier

Harvard Business Review recently presented the top 10 medical innovations, including regenerative and genetic medicine, surgical robots and virtual visits. In the new millennium, doctors are faced with a flood of possible new treatments. A consultation room with no computer is now inconceivable. The situation in marketing is similar (from my cmo.com column).

Marketing leaders are feeling the fear: ‘Am I really in a position to use digital media effectively? Have I got the right team? Are my analytical skills good enough for me to keep up with digital high fliers?’ These are the same questions which doctors are asking themselves. Yet no decent doctor would just throw the latest genetic medicines at a simple influenza virus. Firstly, it would prove much too expensive, and secondly most flu viruses remain stubbornly resistant to many high-tech medicines. A bit like elusive customers, who seem resistant to using the ‘Like’ button on the Facebook pages of fridge manufacturers or following the Twitter account of health insurances. Leaders in marketing must above all retain an overview of the game as a whole. But this is easier said than done.

Analytical abilities have not always been as important. Once upon a time, many marketing managers hid behind their brand, proposition or product. Other departments handled the figures. For years, this division of labor worked well, but now those days are gone for good. The sheer volume of information from new media is simply too great to employ our existing strategies. This new reality is increasingly proving the downfall of marketing leaders.

Digitization: three steps to the top:

1. Find the biggest levers in marketing digitization

2. Set up one or two good projects (instead of many small ones)

3. Formulate a clear digital vision for the next three years

There were great expectations when Andi Meier (1) took over the marketing of a major cell phone provider. As an expert on consumer goods, he had seen international success as the leader of several brands. This was a new market; the challenge was to create a brand that attracted customers. It had to be cool and up-to-date. Initially, everything ran smoothly and growth skyrocketed. “It was such a buzz”, Andi recalls. But then the obstacles increased: campaigns attracted fewer and fewer new customers, despite high levels of outlay. Customers terminated contracts and nobody knew why. Andi was let go: it was the end of his dream career. His successors now know that the battle for cell phone customers is won on price and through customer loyalty. Andi and his team had shied away from these, while today’s best providers create prices with a precision that would impress many mathematicians. They can identify the exact customer behavior that precedes the cancellation of a contract, and act accordingly. Conjoint, regression and path analysis all used to be reserved for agencies. Now marketing departments deploy them too – this is often where the new core competencies of a marketing organization lie.

The three steps to the top of the digitization game

Marketing leaders do not need to be high fliers in digital media in order to have a successful game plan for the future. Indeed, people with a passion for specific media and methods can easily take their eyes off the ball. Top marketers now need to keep an overview of the game, and ask where the greatest potential for digitization lies, setting one or two key digital priorities and synthesizing from this a comprehensible vision of developments in their marketing.

1. Find the biggest levers in marketing digitization. Digital technologies are useful where they can help organizations increase sales and profitability, whether in the short or medium term. For example, if costs are the biggest lever then automated marketing can be key. If your focus is on customer loyalty, an analysis-based loyalty management program may be the way forward. Marketing leaders can make these matters a team task, as well as involving other departments such as controlling. Clarity about the major levers must form the basis for all subsequent steps.

Procter & Gamble is a leader in the digitization of marketing. In true Proctor and Gamble style, it began to digitize where concrete results would be quickest: in production and logistics. In the USA for example, logistics costs were reduced by approximately 15 %. New technologies are increasingly helping marketing departments with product development, market research and – most recently – everyday decisionmaking. Thus increasing amounts of customer data are entering our systems and allowing marketing managers to tailor activities with precision. P&G employees helped to develop these systems, with a single aim in mind: a measurable increase in productivity. Many marketing organizations lag far behind P&G in terms of digitization. This is not necessarily a problem; what matters is that managers and their teams clearly define where the major levers for growth and profitability truly lie and go on to tackle these issues.

2. Set up one or two good projects (instead of many small ones), combined with new abilities. Success also stems from the path not taken. There is a great temptation to launch several digital projects at once, to drive a transformation in marketing. Yet the success in such instances can be disappointing. How many customer loyalty systems have for years been stuck between IT roadmaps and test phases without having won a single customer? This must be avoided. Excellent managers plan visible, successful and sustainable projects. This in turn means one or two major projects which will see success within the first six months or so. For example, if managers set up a project to analyze customer data, concrete campaigns must also be set up in parallel to win or retain customers. This applies even where the technology is not quite mature. It is precisely these somewhat ‘homespun’ programs that provide teams with the most extensive learning experience. Such successes should be shared in order to sustain energy levels within the project. In all cases, projects must have strong links with the major levers for success. If a project does not fit this description, then it is simply not appropriate – however attractive it may seem.

The abilities of the marketing team must grow in parallel with the introduction of new technologies. Yet with many large IT projects, when the consultants leave there is nobody left who knows how to make the most of the systems. So marketing teams must never adopt a passive customer role when new technologies are introduced. Instead, the manager responsible must drive the project forward and follow it up from day one. Managers must therefore involve their teams in project planning from the very early stages. The opportunity to gain significant new skills is a particular plus with such projects.

Building analytical skills remains the greatest challenge in terms of future-proofing marketing teams. It is not a question of making all brand managers mathematicians. Tomorrow’s leaders must however be able to define analysis and derive clear instructions from data. This knowledge must be at the forefront of any choice of personnel.

Analytical skills in demand for marketing

Define your analysis: translate business issues into analytical questions and solve these with expert assistance. For example: ‘What theories do we have about our prices, and what type of analysis would confirm these? What sort of survey would we need to conduct in order to understand why we are losing existing customers?’

Translate analysis into a plan of action: the ability to pick out the key information from complex analysis data and translate it into the world of business. For example: ‘One percent of our customers leave us each year. We could invest EUR 1.2 million in retention, with no effect on EBIT, provided our success rate was 30 %’

The detailed technical skills, such as handling specific databases or software systems, can of course be covered by specialists. However this will only work where the marketing leader is in a position to provide the content of the analysis program and translate the output into a plan of action. In the transition to a digital era, the ideal marketing organization will have a good mixture of analytical generalists and analytical experts.

3. Formulate a clear digital vision for the next three years. Even where clear priorities are set from the start, new ideas will always emerge for upgrading or adding technologies: perhaps a new Facebook page, a digital channel to reach our suppliers, an online connection to our market research agency. These are all important issues, but it is difficult to decide which to pursue. That is why leaders in marketing need to develop their own vision for the digital development of their Marketing departments at a relatively early stage. Where do you see yourselves in three years’ time? What are the important levers in achieving this? What priorities will you pursue in support of these? It is important to agree this vision with colleagues at management level. A clear vision will make it much easier for managers to make decisions on new issues. Above all, this vision will channel new ideas before they disappear into obscurity. It is true that some effort will be involved in formulating this vision, but a clear vision provides leaders in marketing with significantly greater security on the road to digitization.

Excellent marketing leaders position themselves at the forefront of the digital movement. Yet you do not need to be a digital high flier to occupy this position. Instead, understanding the major levers, establishing one or two beacon projects and formulating a comprehensible vision for your future digital game plan are far more important. Developing internally rather than outsourcing, thinking holistically rather than learning just through trial and error. After all, it’s no less than you would expect from the best doctors of the future.

(1) Name changed

Egon Zehnder: The CMO, architect of consumer centricity

As the voice of the consumer in the executive suite, today’s CMO must drive customer orientation and innovation, build bridges and bring skills.

Few experts know CMOs and their companies better than executive search consultants specialized in marketing. These experts can align the expectations and skill sets of both sides during the search for customers. Dr. Michael Meier, consultant with Egon Zehnder, and his colleague Dick Patton take a look at the future role for CMOs. They identify three roles which tomorrow’s CMOs will have to adopt:

  • Driving force for more customer orientation. As a strategist liaising between the customer and the management or Board, a CMO supports and speeds up the alignment of what markets and consumers expect with corporate strategy.
  • Bridge-builder and innovation driver. As the link between the critical consumer and value creation within the company, Marketing is increasingly viewed as the driver of both profit and growth.
  • Skilled operator in the digital future. A study based on anonymized data from management appraisals conducted by Egon Zehnder International shows that the competencies in which top CMOs excel compared to their less successful colleagues are results orientation and change management.

Meier and Patton conclude: “In sum, the CMO of the future will be a media-wise change agent who blends a comprehensive range of competencies with personal authority. As a strategically minded mediator, he or she listens to and understands what markets and consumers expect and brings corporate strategy into line with these expectations.

CMO 2.0

A new study shows that the CMO role is now becoming an essential function in companies, but there is still a long way to go to achieve influence and control. Spurring CMOs on to take charge!

At senior executive level in many firms, CMOs still have to prove themselves. This is why “The evolved CMO” is also the apt title of a new study on CMOs. In Summer 2011, the executive search firm, Heidrick & Struggles, together with the market research firm, Forrester Research, surveyed decision-makers in 191 firms on the role of the CMO. The study published in 2012 shows a clear development in the role of CMOs today when compared with a similar study in 2008. CMOs now have greater management responsibility, play a stronger role as the voice of the customer within the organization and have generally moved away from the periphery into the centre of companies, and this has been a success, which bodes well for the future.

Nevertheless, CMOs are still rarely responsible for the main factors in the success of a business. When asked which central functions in the company fall within the scope of marketing’s responsibility, the focus is on areas such as brand strategy, advertising or market research. However, only a small number of marketing organizations are responsible for key success drivers, such as loyalty programs (55%), prices (31%) or product development (30%). Also responsibility for brand P&L (49%) or strategy development (40%) tends to be limited. Of the “4 Ps” (product, price, place, proposition), only one “P”, proposition, is in the hands of marketing. Collaboration between marketing and sales remains a constant issue. “Average” is the term, which best sums up the data gathered in the survey – there is plenty of room for improvement in this respect.

CMOs want their influence to grow in business strategy and digital marketing. 79% of CMOs surveyed state that their goal was to have more influence on the future development of the corporate strategy. This was by far the most important goal in the survey. 89% also consistently stated that their strategic thinking and visioning will play a major role in their personal success. This is, however, where the study also reveals the first inconsistencies. Only 22% said that their strategic thinking and visioning was in need of improvement and only 12% believe that they need more business acumen. This is where their own perception may differ from that of many CEOs. Nevertheless, 38% agree that they need to improve their relationship with the rest of the senior executive team.

There is also a slight difference in perception concerning digital marketing: 40% state that they want to improve their technological know-how. This is an understandable number in a world where marketing is changing. However, only 18% list technological know-how in their “Top 5 Factors” for personal success. In this respect, CMOs also have to ask themselves how much serious consideration they give to the digital revolution in marketing.

The consultants from Heidrick & Struggles and Forrester Research consequently make the following recommendations for action in their analysis:

  • Beef up your own technical understanding
  • Partner with lead peers on the senior executive team. If CMOs want to represent the voice of customers effectively they have to work closely with decision-makers. In a digital world, CMOs also have to develop much closer relationships with chief technology officers (CTOs).
  • Stronger focus on retaining instead of acquiring new customers. According to the study, the majority of CMOs focus on new customers. Based on other studies, Forrester recommends reconsidering this strategy to develop a customer-life cycle approach with a greater focus on existing customers.
  • Stronger relationship with sales to ensure the same brand experience is provided to customers. As the two growth-focused departments, sales and marketing must develop visions, targets and execution plans together to make the firm thrive.

In a nutshell: stronger leadership skills and greater technological know-how. CMOs must now get to grips with these two (no longer quite so) unfamiliar challenges!

Source: The Evolved CMO, 2012. A Joint Research Project by Forrester Research and Heidrick & Struggles.