To Spur Change, CMOs Need More Managerial Discretion
A study conducted by V. Kumar of St. John’s University shows CMOs with more leeway in certain areas of the business can drive success when global companies enter foreign markets
When IBM said earlier this year that Carla Piñeyro Sublett was no longer CMO it was just the latest in a series of moves among major brands including Bank of America and General Mills to eliminate the CMO position altogether and disseminate the marketing responsibilities to other members of the C-suite. It's a bit of a conundrum: As strategic marketing inexorably moves to the core, the CMO title itself is disintegrating somewhat.
However, as the average CMO tenure continues to plummet, a new study argues that companies could generate much more value from their marketing efforts if CEOs were less inclined to get rid of CMOs so quickly.
But, at the same time, the onus is on CMOs to educate the C-suite about how marketing can add to the top and bottom lines by leveraging the abundance of consumer data marketers collect and translating that data into language the C-level executives can understand.
"With the advent of one-to-one marketing, it has become possible to assess the returns on marketing spend for each customer," says V. Kumar, a professor of marketing at the Peter J. Tobin College of Business at ANA member St. John's University, who conducted the study. "Marketing has elevated its role through the demonstration of accountability and responsibility. So, CMOs can confidently speak to their CEO or other C-suite members about how much the marketing spend should be, where it should be spent, and for how long."
Kumar, who was inducted into the inaugural Analytics Hall of Fame in 2019, wanted to gauge the level of influence CMOs have when companies seek growth in new markets. The study, released in 2021, queried 41 CMOs at multinational firms to understand the self-reported challenges they face, and one of the most common complaints was a lack of authority and managerial discretion.
Kumar's research team then compiled data on 297 multinational firms from 2007 to 2016, assessing the level of internationalization of each firm for each year by looking at the number of continents in which the firm operated, along with the ratio of foreign sales to total sales. (The study did not attempt to make any correlation between the CMOs who were initially queried and the 297 companies polled afterward.) The analysis showed that giving the CMO "leeway" in certain areas helped to determine the potential for success.
The ANA recently spoke with Kumar about the study — and the three forms of decision-making CMOs need to boost their odds for success. (This interview has been edited for length and clarity.)
Q. There's a growing trend among some major brands to scale back or even eliminate the CMO position altogether. But your study argues that CMOs have a crucial role to play for global brands and can help drive growth, under certain conditions. What are those conditions?
Our study shows that if CMOs are empowered with managerial discretion then the chances for internationalizing the firm increases. But the C-suite would naturally be worried about giving power to one person they might have thought as not producing value for the organization.
Our study reveals that if the C-suite can tie the CMO's compensation to performance, and if the C-suite also possess some international experience to ask relevant questions of the CMO, it becomes a win-win situation for all. Through our study, we are hoping for a collective mindset shift of the C-suite, from not wanting to give any responsibilities to the CMO to empowering the CMO.
Q. Many CMOs of global brands are facing growing challenges on several fronts, including demand from the C-suite for better accountability and ROI.
Some of the hurdles marketers are facing are a result of the global supply chain crisis, in which marketers can't get their product to their customers when they need it. When there is a supply chain crisis, products are not sold due to nonavailability and hence revenue is not flowing back to the firm. Under these circumstances, it is natural for the CEO and/or the CFO to question the timeliness of marketing spend. Here is where a CMO can step in and communicate about the process of how marketing works (i.e., creating top-of-mind awareness, getting into the products consideration set of the potential customers and then convincing them to make a purchase).
Q. The study found that giving the CMO "leeway" in certain areas helped determine the degree to which a company's global expansion plans were successful. Can you talk about the three forms of managerial discretion named in the report?
"Strategic discretion" focuses on incorporating marketing objectives with organizational goals. For example, should the firm [use] the same brand name when they enter foreign markets?
"Operational discretion" deals with the decision-making latitude in selecting activities and implementation methods to achieve specific marketing objectives. For example, how the products should be priced, distributed, and advertised.
"Financial discretion" refers to the latitude of the leader in allocating investments toward marketing. For example, deciding on the amount of digital advertising in each market so that customer acquisition is effective.
With this collective discretion, the entire market entry process is governed by the CMO, who helps to implement an integrated strategy for ultimate success. According to the study, a 1 percent increase in strategic discretion contributed to a 13 percent increase in the ratio of foreign sales to total sales, while a 25 percent increase in financial discretion contributed to a 77 percent increase. Similarly, a 43 percent increase in operational discretion contributed to an 8 percent increase in the number of markets entered.
Q. It seems counterintuitive, but for CEOs dissatisfied with their CMOs, is the solution to give them more power?
That comes back to the previous question and CMOs first being given the three forms of discretion by the C-suite. If the company wants to get into a foreign market, the CEO needs to have a conversation with the CMO because the CMO is the right person to know about whether the company should pursue that market.
It's a dialogue the C-suite should have with marketing on a continuous basis; the C-suite can't ignore the [CMO] because she has a wealth of knowledge about customers' ad market conditions to help brands become international.
For example, the CMO — based on customer analytics — can describe the profile of the high customer lifetime value segments to be targeted, suggest an appropriate referral strategy, and implement a gamification strategy in social media to create brand awareness and product sales.
The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.