"The purpose of the business is to create a customer" and "because the purpose of business is to create a customer, the business enterprise has two—and only two basic functions: marketing and innovation."
- Peter Drucker.
The core purpose of marketing is often misunderstood and overshadowed by a department called 'marketing'. However, at its most strategic level, marketing is about driving a business forward, generating sales and improving brand value.
How does marketing add to the bottom line?
For most CEOs, there are five key questions to consider when discussing 'marketing' issues:
- How is it going to help me grow revenue?
- What's the return on investment?
- How much does it cost to acquire a customer?
- What's the customer's lifetime value?
- What does marketing do to add brand value?
For today's CMOs, if they are not commercially driven, they are not doing the company any good because they're not adding to the bottom line. And as important, they are not doing themselves any good because their tenure in the role will be shorter than expected. Many enlightened CEOs know the importance of marketing and want a marketing leader at the top table. They want insight-driven leadership. If they don't get it, the marketing department will be left out of the picture and will be a service function. That will work for a while until some firm in the industry gets it. And then it won't.
This may account for the typically high turnover amongst CMOs - a misalignment of expectations. It is always surprising how many CMOs seem to think it was the CEO who didn't get 'it' when actually it was the CMO who didn't step up to the challenge.
The modern CMO is analytical and business-minded
"Half the money I spend on advertising is wasted; the trouble is I don't know which half."
- John Wanamaker
Marketing has a vital role to play in the success of the company. Gone are the Mad Men days of isolated teams of marketers and advertisers. Today's Chief Marketing Officer needs to run a team that is connected to all areas of the business. That means taking learnings from the sales team and the technology on hand, analysing the information and providing tangible solutions to increase the bottom line.
Many a business leader has wryly echoed 19th century United States merchant John Wanamaker's famous sentiment over the years. However, in today's world of data and technology, it's no longer relevant. Everything is measurable; it's merely a question of having the capacity to analyse the data effectively. As a result, the skill sets required of a Chief Marketing Officer are very different to those of days gone by.
With the tools - frequently referred to as marketing technology or MarTech - used for marketing changing so rapidly, sometimes an existing CMO won't have the right skills for all areas of consideration. In some cases, it may mean they are no longer right in their role. A CEO needs to consider the business challenges facing the company and then hire the optimal CMO profile.
Good marketers understand the customer
"People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page."
- Steve Jobs
Central to a business-minded approach to marketing is that old adage - put the customer first. What good marketers have always done well is to understand the customer. Now we have a myriad of tools to support us in that endeavour. Steve Jobs was a superb example of someone who had an intrinsic understanding of what people needed and wanted. No one was asking for an iPhone, but his insights are the reason he was able to pioneer such outstanding products.
In another sector, you might look at Airbnb. They had a great insight into what people wanted when they travel. It's a far cry from the 1960s Holiday Inn slogan: "the best surprise is no surprise" - promising a reliable replica, wherever you went in the world.
In 2020, Goldman Sachs showed that they still have their finger on the pulse, with the launch of Marcus - their high-yield online savings accounts. So successful was it, that by June it had to close to new business for a time because it had been deluged with deposits. Of course, it might be the case that they didn't spend enough time on the pricing strategy—a common mistake amongst businesses of all sizes.
Marketing can't sit in a bubble
"Marketing and data, in particular, are first-class citizens in a way they were not four to five years ago."
- Direct-to-consumer entertainment company CEO
Interdepartmental relationships are crucial to using marketing to its full potential, and it's these relationships that both a CEO and CMO should foster. For example, there are many instances where CEOs foster an abusive relationship between marketing and sales. This is self-defeating because it's the collaboration between both departments that are most likely to generate warm leads that matriculate into sales. If the marketing team has no sense that revenue is their responsibility, their actions will not be driven by the bottom line.
This is especially important for new businesses to remember as they move away from the stage where they are keeping their head above water to longer-term success and value. In a lot of startup companies, the marketing leader will be focused on the day-to-day tactical actions such as social media and Google spend. At some point, it will become clear that they need to look at the bigger picture and what the brand really means, and to do that requires strong relationships between teams and leaders. In the absence of the almost unicorn-like Chief Marketing Technology Officer - frequently mentioned yet rarely seen, the relationship between a CMO and CTO is invaluable.
In short, when a CEO is looking to both understand and maximise the potential of their marketing investment, it's essential to recognise just how much value a good Chief Marketing Officer and their team can bring in real terms. That means including them in the business development and business decision-making processes. It also means treating it as a department whose goal is fundamental to driving revenue and brand value. That may mean bringing in an experienced Fractional CMO to help raise the game.
Written by Mark Magnacca
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