Why CMOs are only lasting as long as Spinal Tap drummers
What has happened to the chief marketing officer role is the business equivalent of a person being drawn and quartered by four horses. But talking the right way to chief financial officers might keep you from that nasty fate.
Ancestry’s new chief growth officer will start next week. Coca-Cola got rid of the CMO job and also merged it into the same type of position. So did McDonalds in the US. Meanwhile, EasyJet combined marketing and sales together under a chief commercial officer role.
On Unilever’s website leadership team page, there is no chief marketing officer; the company had been expected to eliminate the position after Keith Weed retired, although it has recently claimed otherwise (although there is still no one in role many months after Weed stepped down.) I could go on.
Traditionally, marketing had covered everything that makes money – analysing the market, deciding the strategy, creating a product, determining the price, setting the distribution, communicating the value, building the brand and increasing the sales. Everything else was essentially finance or operations.
In that environment, the CMO was arguably the most important executive after the chief executive because he brought in all the money. The CFO just counted it.
How the CMO role changed
But over time, everything changed. Have you ever seen a colleague’s responsibilities taken away one by one until he had nothing left and became redundant? That is what is happening and its why CMOs today last as long as Spinal Tap drummers.
First, finance officers took away pricing. Then, strategy officers who took away market analysis and strategic planning. Product officers took away product. Operations and logistics officers took away distribution. Sales officers took away sales.
And what was left after those limbs were severed? The lonely trunk of communications. The horses galloped away a long time ago.
“Too many marketers have been focusing for too long on the tactical and executional aspects of performance marketing,” Ebiquity group chief executive Michael Karg wrote last week in a column in The Drum addressing the status of the CMO role.
“Many have become addicted to the quick fix and instant high of the here and now at the expense of long-term brand building. By sweating and optimizing the small stuff, the profession and its supportive industries have narrowed their focus too much and led many in marketing to work primarily on lower-funnel advertising.”
The ‘small stuff’ is increasingly how marketing is viewed, especially in the high-tech startup world. I have seen it myself countless times in various agency, consulting and in-house roles. The ‘smart people’ build products and create financial models. The ‘dumb people’ make ads.
At each of a company’s quarterly all-hands gatherings that I once attended, the CEO always thanked all the departments one by one. He started with R&D and sales. But every time, he almost forgot to mention marketing and tacked the team on at the end almost as an afterthought.
Everyone reading this column probably knows that marcom campaigns are investments. But everyone has also likely had CEOs and CFOs who view them as costs to minimise. And the best way to minimise marketing is to get rid of it. So, the CMO has been disappearing at the top management level – if not entirely.
Marketing is not taken seriously
Now, C-suite executives have every right not to take marketing seriously anymore. Why? Because our industry’s alleged ‘thought leaders’ and top agencies say moronic things. Here are just a few that I have seen.
“The future of marketing is love.” “We are where a more modern HOW happens.” “The future of marketing is community.” “It is about harnessing storyliving not storytelling.” “We are a brand intimacy agency." “The key to content marketing is love.” “The game in business is not how many customers you can get, it’s how many you can keep.” “Forget ‘money moves’ for a second. Have you worked on your ‘kindness moves’?”
If you believe those statements, you might as well walk into a boardroom wearing a hoodie, a backwards baseball hat and a pair of Gary Vaynerchuk’s branded sneakers. (Sadly, that’s a thing.) That might get you applause at marketing conferences, but it gets you laughed out of the C-suite. It is any wonder that the tech world hates marketing so much?
Andrew Chen, a general partner at Silicon Valley venture capital firm Andreessen Horowitz, seems to agree with Karg and also once noted that startups are addicted to short-term direct response.
“Scale effects mostly work against you in paid marketing,” Chen wrote. “The longer your campaigns run, the less effective they become – people start seeing your ads too often. The messaging becomes stale, and novelty effects are real. Market performance has a reversion to the mean.”
At one company where I once worked, the CFO asked me for the ROI of purchasing expensive PR software for the marketing team. I explained the benefits of building credibility and getting mass reach by appearing in major media outlets.
The CFO responded that he knew, on average, how many immediate customer leads we would get for every dollar that we spent on Google AdWords. The team did get the PR software, but I knew that my response was completely inadequate. I should have done better.
Why CFOs act they way they do
Part of the reason for that attitude is that CFOs must operate under strict reporting requirements. Marketers know that brand is an asset and that advertising spend – in part – increases its value. But finance cannot look at it that way.
Here is an excerpt from the UK’s Financial Reporting Standards (PDF): “An entity shall recognise an asset in the statement of financial position when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.”
“Marketing generally fails the ‘reliability’ test,” Alastair Thomson, a former finance director and CFO who is now with the FD Centre in the UK, said. “Whilst we might hope there are future benefits to it, at the time we press the button on the campaign nobody knows for sure what might happen. One the grounds of ‘prudence,’ one of our fundamental accounting principles, we therefore take any marketing costs in full in the year they’re incurred.”
So, how can marketers gain the respect of ‘prudent’ CFOs and justify spending money on marcom campaigns that are not short-term direct response? I put the question out on Twitter. Here were some responses.
Richard Kirk, partner at Zenith UK: “Basic: show the volume of incremental sales driven by marketing over time. Better: show how brand perception allows business to charge a premium price point. Best: show how investment in effective marketing can drive this brand premium up and [the] knock-on effects for revenue / profit.”
Chris McCash, founder of Breadwinner Agencies: “One of the better ones I saw was brand tracking (awareness and perception mainly) tracked directly to sales over two years of spend. They then worked out what a one-point increase (in either measure) delivered them in sales (and crucially what it cost).”
Nick Ellis, founder and creative partner of the Halo agency: “Start by changing the language we use. Never discuss cost. Only discuss investment.”
Helen Bailey, British marketing consultant: “Viewing it as an overhead opens the way for greater creativity and risk taking. The alternative is becoming enslaved with data driven measurement and metrics as seen in the digital and direct space.”
Tom Lewis, chief operating officer at LGSS Law, summarised the situation perfectly: “Accountants and accounting standards are not killing brands themselves, but they are part of a short-termist, rationalist, results-focused ecosphere that is hostile to brand-building.”
So, what would Thomson recommend?
“The safe solution for a CFO is to say no to everything. That’s our equivalent of nobody getting fired for choosing IBM,” he said. “Smarter CFOs are thinking primarily about the impacts on cash flow and profits, because those are what ultimately drives the value of the business.”
“When I’m looking at the cost of something, I’m always asking myself how likely the predicted cash flow return is and over what period of time. If I can get 10x return within the same financial year with a reasonably high degree of certainty, my instinct would be to support that project -- even if it meant a small risk of going over on the marketing budget.”
“In fact, if I could get 10x over a couple of years, that’s still a pretty attractive result. But I still couldn’t call [marketing] an asset – I’d need to take the hit to my costs and accept the risk of a hit to the bottom line if the plan didn’t deliver as hoped. However, I’d have the upside if it came in as expected to look forward to.”
Still, I do wish that CEOs and CFOs would remember the words of startup marketer Ranee Soundara: “Don’t complain about marketing being a soft skill when you deny us the time to properly conduct market/customer intelligence research, arguably the most quantitative process of our job. Before demanding results, learn to understand and respect the process.”
The Promotion Fix is an exclusive biweekly column for The Drum contributed by global keynote marketing speaker Samuel Scott, a former newspaper editor and director of marketing in the high-tech industry. Follow him on Twitter. Scott is based out of Tel Aviv, Israel.