I asked top marketers to report what percentage of their marketing budgets they spend on marketing analytics. I think this is a reasonable request given that 70% of all top marketers state that the marketing analytics group reports to them. Results indicate that companies currently spend an average of 5.7% of their marketing budgets on marketing analytics and that this number is expected to grow to 9.1% in the next three years. This 60% increase represents a sizable shift. To put it in perspective, marketing budgets overall have grown 8.3% over the last two years. This growth varies by company size and industry sector. Looking at Table 1, we can see that, in general, current marketing analytic spending levels and expected growth levels correlate with company size (measured as revenues). There is a trough near the middle for companies between $500M-$999M, but otherwise the relationship is positive and significant. Examining sector differences in Table 2, we see that services companies, overall, spend more on marketing analytics now and will remain ahead of product companies in the next three years. From these figures, service companies appear to understand the “big data” opportunity and believe they can leverage it to create more value for their customers.

Table 1. Spending on Marketing Analytics by Company Size (in sales revenues)

Table 2. Spending on Marketing Analytics by Sector

I also asked top marketers to report on the number of company employees dedicated to marketing analytics currently and what they expect in three years. Results indicate that companies currently employ, on average, 5.8 people and expect this number to increase to 6.9 people. This increase reflects a 19% increase. Compared to the 60% increase we observe in spending on marketing analytics, these results tell us that firms will spend more on systems than on people during this big data boom. Human capital will grow, but it will grow less than the capital investments companies are going to make in marketing analytic systems. I predict that if I continue to ask these questions over time, this emphasis will shift. That is, once companies have systems in place, the key element will be people who can manage and leverage these systems in strategy decisions.

It’s also interesting how company size (in terms of revenues) is related to these hiring levels. Looking again at Table 1 but especially at the last two columns, we see very little difference in company expenditures until we hit the $1B mark at which point the average jumps from ~1.3 people up to 9.1 people for companies with $1B-9B in sales and then to an astonishingly high level of 26.4 people! Examining sectors, we see that product companies, overall, have dedicated more human capital to marketing analytics than service companies! This difference dissipates some in the next three years. Let me therefore revise my hypotheses about service companies appearing to understand the “big data” opportunity and believe they can leverage it to create more value for their customers. Instead, it appears that service companies might be playing catch up on systems whereas product companies are fine –tuning the human element of the marketing analytics equation. This later theory appears more valid given that product companies also appear to use marketing analytics in a greater percentage of their projects. Look at Table 3. There we see that B2C product companies in particular beat the rest of the sectors in the use of marketing analytics to drive decisions. I’ll return to this topic in my next blog—stay tuned.
 
Table 3. Use of Marketing Analytics by Sector

All this talk of climbing made me think it would be interesting to plot the economic recovery using data from The CMO Survey. I plotted several key financial metrics as reported by The CMO Survey between August 2009 and February 2012 in Figure 1. What a beautiful sight! Steady and significant improvement over the course of 2.5 years to where we are today. These numbers are in response to the question, “Rate your firm’s performance during the last 12 months.”

These trends mirror the general trajectory of stock market performance over this time period. There was more volatility but the climb was positive over time. Looking at the Dow Jones Industrial Average, we see it climb from 7496 (August 2009), 10,335 (February 2010), 10,015 (August 2010), 12,226 (February 2011), 11,613 (August 2011), to 12952 (February 2012).

Figure 1. Firm Performance in Prior 12 Months (August 2009-February 2012)

Looking at performance in February 2012, it is interesting to see that the four sectors I follow varied considerably. Table 1 indicates that the highest performing sector on all three indicators is B2B-Services, followed by B2B-Products. This is also an encouraging sign given the importance of B2B markets to the overall state of the economy.

Table 1. Sector Performance Metrics for Prior 12 Months (February 2012)

Finally, it is important to consider firms’ goals about future performance on each of these indicators. As shown in Table 2, goals are even higher than this already rosy picture. The goal of increasing profits from 3.9% to 6.2% over the next 12 months is about the best news we can expect.

Table 2. Company Performance and Goals (February 2012)

As these figures show, the average integration score is just above the mid-point on the 7-point scale, which is disturbing given the increasing amount of money that companies are spending on social media. Furthermore and perhaps more disappointing is that the score has not changed in the last year. I asked this same question in February 2011 and the result was identical (3.8 out of 7). This means that spending has gone up but the integration gap has not been closed.

Looking more deeply at the numbers, we see differences across sectors, company size (in terms of sales), and the percentage of a company’s sales that come from the internet. Considering sector differences, B2C companies lead B2B companies on closing this gap (see Table 1). On the one hand this is not surprising because B2C companies tend to have stronger and more well-developed marketing groups. However, given that B2B companies are likely to know who their current and prospective customers are, I find the low B2B score a little disheartening. I think the challenge with B2B companies is that the sales divisions also need to be woven into the social media strategy. So perhaps we are seeing old marketing vs. sales difficulties that routinely appear in B2B companies.

Table 1. Sector Differences and the Integration Gap

There is also an interesting finding regarding how the integration gap varies by company size (as measured by sales revenue). Figure 2 shows a classic curvilinear relationship between integration score and firm size. In this case, that curve is a U-shaped curve with integration scores highest for the smallest and biggest companies. This is likely due the fact that smallest companies are achieving integration because everyone can still talk to each other (and may be working side by side). Meanwhile he biggest companies achieve integration by having enough people and throwing enough resources against the problem that some degree (still not much) is happening. In the middle, firms are spending, but don’t have the human interaction, time, or money to make it work well.

Figure 2. Company Size Differences and the Integration Gap
Finally, we see companies that receive a greater share of their revenues from the internet score higher on the integration metric. Specifically, companies with 0% of their sales from the internet have an average integration score of 3.3. This climbs to 4.0 for companies with between 1-10% of their sales from the internet. Companies with more than 10% of their sales from the internet produce the most respectable score in this entire analysis: 4.9. The results suggest that when the company depends on sales from the internet, managers realize the need to close the integration gap.

Figure 3. Company Revenues from the Internet and the Integration Gap
Closing this integration gap is a huge challenge facing companies today. If the gap is closed, social media will take its place in the pantheon of effective marketing strategies. If not, I predict that social media will not generate a respectable return on investment. Given the importance of this topic to the future of social media, I’m going repeat some of the strategies I have proposed in prior work for closing the gap:Gain top management support. Get the biggest gun from management who supports social media. You need a champion to get people from across the organization to pay attention and act.

1. Do not confine social media to its own separate department. I would put it in marketing or another key customer-facing group. Social media is a dynamic marketing function and not an IT function.
2. Offer social media training to all employees so they can begin to “see” linkages.
3. Assign social media personnel to key strategic teams doing cross-functional work, such as new product or new service development, new market development, and customer acquisition.
4. Do not outsource social media completely to a strategic partner. Outside agencies may have expertise, but you also need a dedicated social media liaison inside. This will enable relevant information to flow both in and out of the organization through your own social media personnel and ensure you’re your own managers are always weighing in on social media activities.
5. Put in place a system of accountability that demonstrates the effect of social media on valued intermediate outcomes (e.g., buzz) and financial performance outcomes (e.g., revenues). The choice of metrics should be influenced by whether social media is doing a push or pull job for your company.
6. Use social media tools to collect customer information that is important to different areas of the firm, such as innovation, customer service, etc.
7. Utilize social media metaphors to challenge the thinking of the company. At GE, CMO Beth Comstock asked the company “What if my aircraft engine had a Facebook page?” to kickstart a new business.
8. Develop formal (strategy steps) and informal (e.g., eat lunch together) routines that ensure social media personnel talk to and listen to the rest of the company.
9. Have social media and marketing personnel report to the same person.

Third, not all industries are growing their social media budgets at the same rate. Table 1 shows current, 1 year, and 5 year projections from the last two surveys for four key sectors. We can see that it is B2B-Product companies that have grown the most in the current period (47%) and expect to grow social media spend after one year (34%) and five years (38%) more than other sectors. B2C-Product companies continue to spend the highest levels, but B2B-Product companies have the steepest growth curve. I preface the social media questions with the following definition, noting that “Social media is online content created by companies, customers, and others on the web. It can take a variety of forms, such as blogging, product reviews, product design, social networking, forums, and video/photo sharing.” Given the role that social media can play in acquiring and retaining customers, I think it is perfectly logical that B2B-Product companies are amping up their investments in this area. The advantage B2B companies have is that they often know who all their potential customers are. This means engaging with them using social media tools is easy and content can be customized. I would guess that B2B-Service companies have the same opportunities. Why aren’t these companies increasing their spending at the same rate? In fact, this sector shows consistent decreases in the current year and one year out. Perhaps it is because B2B-Service companies are already spending 100% more than B2B-Products (8.6% vs. 4.2%)? I would love to have a few companies weigh in on this point.

Table 1. Social Media Spending Across Sectors

Human resources dedicated to social media also have increased dramatically in the past year. Results from The CMO Survey indicate that the number of people employed in-house to work on social media has increased 70% from an average of 5.3 employees to 9 employees (see Figure 2). Likewise, the number of employees working for outside vendors involved in the company’s social media activities increase from an average of 1.8 people to 4 people, reflecting a 122% increase. So firms are hiring or training people to do social media inside as well as hiring agencies to do some of this work for them. No doubt we will have increased pressure to deliver these skills in universities and community colleges. We are not there yet but hope that we can help marry the technical skills with the strategic and marketing skills essential to making social media spending pay off. Also we need people that can manage social media groups and build the operating procedures that move this human capital in effective directions. I think we will see more programs that offer this cross-cutting skill set.

Figure 2. Number of Employees In-House and Outsourced Engaged in Social Media for Companies

Figure 1. Optimists Outweigh Pessimists 8 to 1

The U.S. CMOs who took part in the survey were also asked to indicate their optimism for the overall U.S. economy on a scale of 0-100, with 0 being the least optimistic. Their overall optimism level came in at 63.4, an 11-point increase from when the survey was last conducted in August 2011 at the height of the national debt crisis. This also represents a 16-point increase from the survey’s low of 47.7 in February 2009 (see Figure 2).

Figure 2. Marketer Optimism for Overall U.S. economyThis bullish sentiment is strongest among the sector many experts consider critical to the sustainability of the recovery—B2B product companies.  These are the manufacturing companies that make many of the components that end up in consumer products.  Top marketers in this sector showed the biggest optimism gains, moving from a low score of 48 in August 2011 to a high 62 in February 2011—a 29.4% increase. Other sectors showed the following optimism increases:  B2B-Product (+19.5%), B2B-Service (+17.6%), and B2C-Service (+9.3%)

Looking further at the data, results indicate that CMOs have strong confidence in the underlying customer dynamics central to any economic recovery.  This is an excellent foundation for sustained growth.  When we move beyond the realm of debt-to-equity ratios and return on investment to the realm of real customer behavior, we are on firm footing.  Looking at Figure 3, we see that top marketers predict an increase in the number of customers entering markets, purchase volume, and likelihood of buying a range of related offerings from their companies. These figures paint a very positive view of the economic landscape. I’m very hopeful that these are the true signs of sustainable economic growth.

Figure 3. Customer Metrics: Forecasted Customer Outcomes in Next Year

One of the great things about modern day marketing in most companies is that many non-marketers are engaged in marketing tasks.  Whether it is information systems, operations, manufacturing, or human resources, many different groups take actions that have a direct impact on customers.  The challenge therefore is getting a singular view of the customer from all of these interactions.  Compound this with multiple communication and purchase channels as well as strong divisions between marketing and sales and you have the classic case of fragmented marketing knowledge.  Everybody knows a little, but the most profound insights that come from integrating knowledge across all of the company’s touch points with the customer are lost.  This can become especially hazardous when brands or divisions “own” customers in companies because opportunities for extending the customer relationship are lost.  This is one reason to advocate for an organizational structure based on customers, not brands.  Another opportunity for integrating knowledge about marketing occurs within large multinational companies.  There are many local success stories that could provide lessons for the broader organization but are never re-integrated.  Why not?  Most often it is because information processes have not encouraged that flow back into company headquarters.  This happens because there is a belief that HQ knows best or because local managers are not encouraged to share the reasons for their success with other units.

When I say “developing knowledge about how to do marketing” I mean the active codification of effective marketing practice.  This is important because the firm can benefit immensely by capturing and transferring marketing success.  To make this work, it is essential that companies uncover what successful marketers are doing.  This points to one of the reasons many companies don’t do this, which is that many marketers may not be aware of what they know or the process they use to engage in important marketing activities, such as setting price, positioning a new offering, or responding to a competitive threat.  Steps become tacit and must be “externalized” (to use a Nonaka term) before they can be codified.  This may be even more likely when the knowledge marketers have acquired is about marketing processes.  Because marketing strategy processes such as market selection, entry, and positioning are intangible activities, marketers may be less aware of what they have learned when engaging with these processes. As a result, this knowledge is not documented or shared and it is often lost.  Companies also may not store what has been learned because they do not think has immediate value.  This may occur for many reasons, including a short-term focus that makes learning seem like a luxury. Company quarterly performance pressures make learning seem like a luxury resulting in tension between learning and performing.

Looking at these two types of marketing knowledge, Table 1 shows that B2C companies make, on average, the biggest investments.  This contrasts with more traditional knowledge investments, for example marketing training, which is dominated by B2B-product companies and marketing consulting, which is dominated by B2B-services.

Table 1.  Sector Differences in Marketing Knowledge Investments

Here is a list of some of the strategies that seem to be paying off.

• Localize products (somewhat). KFC, which gains almost a third of its revenues from China through its 2000 outlets across the country, is an excellent example of this strategy. In addition to its core recipes, KFC continuously innovates by introducing dishes that match the Chinese customer’s tastes. Two examples are the Beijing Chicken roll with sea food sauce (similar to the Beijing duck, a traditional Chinese dish) and Spicy Diced Chicken (resembling a popular Sichuan-style dish). As another example, Pizza Hut, also a division of Yum! Brands, positions itself as an upscale restaurant in China by offering an expansive salad bar and even serving snail in red wine sauce. On the other hand, too much localization can harm marketing strategies in China. Global brands bring status, quality, and exclusivity. When deciding whether and how much to localize, global brands should weigh the costs and benefits of this decision. For example, Coke introduced a type of tea to the Chinese market under the Sprite name. However, customers associate Sprite with fun and refreshing drinks and did not intend to buy a traditional drink from Coke.
• Translate with care. Brand name choices in China can be a little tricky for foreign firms, as they need to choose a word that delivers the core message, sounds phonetically similar to the original name, and builds an image the company wants to deliver. Microsoft had to rebrand their Bing search engine in China since the definition of the mandarin characters pronounced Bing implied “diseases”—probably not the best meaning for a computer product. The name was then revised to Bi ying, which means “response without failure.” Similarly, Carrefour chose the name Jia-le-fu, which means “happy and prosperous families” because the sound “fu” has an auspicious meaning in Chinese.
• Collaborate with established vendors. A partnership with an established vendor can also lead to marketing success in China. To capture the attention of consumers in Shanghai and Beijing metro stations, DuPont partnered with several brands in China to promote its Teflon fabric protector. For the promotional program, DuPont chose domestic active-outdoor brands Anta, Semiar, and Qiaodan, which already had a strong retail presence. This DuPont partnership created customer interest in DuPont, increased store traffic for the partners, and led to more purchases of apparel with Teflon brand hangtags.
• Jump in early when demand is new. McKinsey’s report “The Products Chinese Customers Want” argues that many companies can make substantial early gains by offering products that are novel or unfamiliar to Chinese customers. As they note, “Fabric conditioners and pure fruit juices were rare in China a few years ago, but about half of all urban households regularly buy both now. Similarly, vitamins and mineral supplements, almost non-existent before America’s Amway launched Nutrilite in the late 1990s, has grown into a $6.5-billion business.”
• Get close and stand out. Chinese customers today have many choices when it comes to product selection. Therefore, to stand out, it is important to begin with the customer need and to offer products that follow closely. Through its market research, Johnson & Johnson identified leakage protection as the top priority of female sanitary protection products, which customers rated over comfort and superior absorption. This enabled the company to launch a product with a set of features that are distinctive from its competition.
• Luxury sells. The growing Chinese economy and urban expansion have produced a class of wealthy consumers who have purchasing power and a desire for conspicuous consumption as expressed in Deng Xiaoping’s famous phrase, “To get rich is glorious.” As a result, we find many luxury companies turning to China for growth opportunities. For example, Burberry’s opened up a flagship store in Beijing and launched the opening with a runway show that was turned into a social media event. Picking up on the theme of product localization, other companies are not only importing Western luxuries, they are creating their own unique brands associated with “Chinese luxury.” The best example of this strategy is Shang Xia, a line developed by Hermès. The press accounts note that Hermès’ new “created in China” luxury brand Shang Xia, is the first-ever Chinese high-end lifestyle brand built from the ground by a major European luxury house.” Shang Xia products will not be sold in Hermès stores and vice versa. Instead, they will be sold in Shang Xia boutiques, the first of which was opened in Shanghai. This strategy builds on the growing national pride of Chinese consumers while offering the sophistication of well-known luxury brands.
• Trust USA. Some other U.S. retailers have found it effective to introduce private label brands into their stores. For example, Walmart’s private labels “Great Value” and “Mainstays” were brought to China with the names “Hui Yi,” which means both “good price” and “quality” and “Ming Ting,” which means “bright hallway/yard.” These brands also appeal to Chinese customers because they come from a U.S. company. With health scares and worries about the safety of local Chinese products, many Chinese customers will spend a little more on Walmart’s private label.
• Target non-urban centers. In addition to its three major cities, Bejing, Shanghai, and Hong Kong, China also has many tier-two cities that are less wealthy. To tap this potential market and develop products that match their price points, many firms look to develop and manufacture products locally. Honeywell opened a global engineering center in the western municipality of Chongqing to develop instrumentation products for mid- and low-tier markets in China. Because of their low price, these products are often exported to other emerging markets. In the case of Honeywell, this includes Taiwan, Thailand, and Indonesia.
• Make history matter. Other brands that have a history in China have found it helpful to play up that connection. The history of Buick is an excellent case in point. As one study observed, “…the most influential Buick customer of all time—even if he didn’t recognize it—was the last emperor of China. Emperor P’u-i bought two of the cars in 1924. They were, in fact, the first motor vehicles ever allowed to pass through the gates of the Forbidden City. His endorsement was so critical that by 1930 one in every six cars in China was a Buick, the company boasted in an advertisement from that era. ‘Buick owners are mostly the leading men in China,’ it declared.” GM has stayed true to this heritage. This brand positioning helped GM sell 3 million Buicks in just 12 years. In fact, General Motors became the country’s first passenger carmaker to sell more than a million vehicles in a single year (2010).
• Respect culture. China is a country deeply rooted in culture and values with strong respect to their cultural symbols. Nippon, the Japanese paint manufacturer, once developed an advertisement that depicted a dragon slipping from one of the pillars in a monastery due to the smooth finish of the paint. Customers reacted negatively because they viewed it as a sign of China slipping against another country.
• Use local talent to learn. It is no surprise that utilizing local talent in market research and product development improves insights about the local customer. International Flavors and Fragrances Inc. hire Chinese product managers more than expats for heading their operations in China. This improves the company’s ability to navigate regional differences, to analyze market demand better, and to be more responsive to customer needs. Likewise, cosmetic companies Clinique and Estee Lauder use Chinese R&D teams to tailor their products to Chinese skin types.
• Get the business model right. Companies may need to rethink their business models when operating in China. Amway uses a direct-selling approach in USA and Europe. However, in China, direct-selling operations function as a base for criminal activity. Also, the Chinese market is riddled with unscrupulous operators selling substandard goods with poor services, claiming to be legitimate direct marketers. As a result, Amway’s direct-selling techniques raised concerns in the Chinese government. Amway thus had to revise its business plans to sell its products only through its own retail outlets.

Best of luck marketing in China! 祝您在中国营销成功

In response to the question, “Do you outsource any of your marketing activities?” I find that the B2C-Service industry has the greatest percentage of firms that outsource (88%), followed by B2C-Product (80%), B2B-Product (75%), and B2B-Service (66%) sectors. When asked, “By what percentage will your firm’s outsourcing of marketing activities change in the next year?” I see a different pattern as shown in Figure 1. B2B companies plan to increase outsourcing significantly more than B2C companies. Perhaps it makes sense that those firms that outsource now will need to increase outsourcing less in the future.

Figure 1. Percentage Increase in Marketing Outsourcing in Next 12 Months by Sector

Expected change in marketing outsourcing is also higher among firms that have 0% of sales through the internet (14%), lower for firms with 1%-10% of sales through the internet (8%), and lowest for firms with >10% of sales through the internet (2.8%). Here is my story about this result—firms that are already culling greater than 10% of their sales from the internet have built internal groups to do this work. Firms that are not yet deriving sales from the internet need help to get there.

Figure 2. Percentage Increase in Marketing Outsourcing in Next 12 Months by Company Internet Sales

How does the company’s growth strategy influence its marketing outsourcing level? Logically, when the growth strategy relies on existing knowledge and skills, such as in market penetration strategies, there is probably less need for outsourcing. The firm presumably can do this work based on its experience. However, as the company expands into new markets with existing products (Market Development), new products for existing markets (Product Development), or new products and new markets (Diversification), we should see the level of outsourcing increase. Correlation results offer some support for this view. If I correlate the level of investment in each of these four growth strategies with the level of marketing sourcing, I find the relationship is negative and significant for Market Penetration. This means as the level of investment in Market Penetration strategies increase, market outsourcing decreases. I find the opposite for Product Development, which is positive and significant. This means as the level of investment in Product Development increases, so does the level of marketing outsourcing. There is no relationship with the other two growth strategies.

One view of outsourcing is that firms do it when they cannot afford to build their own activities. If so, I should find that recent financial success is negatively related to marketing outsourcing. I do not observe that relationship in The CMO Survey data.  I find no relationship between current financial performance in terms of sales revenue or profits and expected change in marketing outsourcing over the next 12 months. Another view of marketing outsourcing is that it reflects strategic direction—firms that are increasing spending will tend to outsource more, on average. Results indicate support for this view: Companies that reported increases in sales revenue, profit, and customer acquisition goals also report the largest increases in marketing outsourcing. Together, these results indicate that it is not about where you have been but where you are going that determines your marketing outsourcing level.

A last factor that might influence outsourcing levels is the respect, longevity, and value of marketing within the company. If marketing is not valued, firms may not want to build internal groups of any scale. I examined the relationship between the tenure level of the CMO, the CMO’s number of direct reports, and the number of strategic responsibilities marketing controls in the company and the firm marketing outsourcing level. I see no relationship between any of the three predictors and outsourcing level.

Together these results indicate that marketing outsourcing is more about a company’s strategic direction and spending and not its wealth or the power and stature of marketing within the company. Why does your company outsource marketing?

Figure 1: Percentage of Company Outsourcing of Marketing Expected in Next 12 Months

Why do companies outsource marketing?

1. Companies don’t have the expertise to perform key marketing tasks.
2. Companies don’t think the benefit of building knowledge and skills is better than the value they get from an expert partner performing that same task.
3. Companies can’t produce the same function at the same low price as they can buy it in the open market because the provider has scale, scope, and experience (and perhaps cheap labor?).
4. Companies prioritize other strategic areas more highly than doing marketing internally.
5. Companies want a new point of view. It is easy to stop learning when you are stuck listening to the same colleagues every day. An external partner can offer important insights.
6. Companies don’t understand the value of marketing.

What are the costs of outsourcing marketing?

1. Integration costs: Outsourced marketing doesn’t fit well with marketing the company produces or with other strategies it is pursuing
2. Customer costs: Managers lose sight of customers and what the firm is doing in the marketplace. They spend a lot of time on inventory, balance sheets, analyst conference calls, or building plants. This turning inward can be tragic in some cases.
3. Control costs: Coase and Williamson both won Nobel prizes in Economics for their study of transaction costs, which are those costs the firm must control, contract, and incentivize away to ensure partners act as its agent. When a company chooses to “buy” its marketing services and not “make” them itself, the challenge is to ensure the relationship produces value.
4. Objectivity costs: No marketer wants to be fired for sharing bad news about the value of a strategic decision or initiative. This can make it tougher to be a truth teller if you are providing marketing from outside the boundary of the firm.
5. Risk costs: Partners may take more or less risk than a firm would take given they are not responsible to shareholders, employees, and customers in the same way managers are.
6. Path dependence losses: A path dependence means that experience matters. The down side to path dependencies from marketing experience is that firms get locked into their own habits and routines. However, the upside of path dependency—grinding out the knowledge and efficiencies that come from learning by doing over and over and over again—is not realized either. These positive path dependencies can make it difficult for competitors to jump in because the firm is so good at what it does.

Is your firm outsourcing marketing? How is the calculus of these costs and benefits working out? Any suggestions on how to tip the scales in the favor of benefits? I’ll share more next week on who is outsourcing. In the mean time, jump in and share your view.

Figure 1. Marketing Leader Retention Over Time

It appears that CMOs, on average, earn their keep; or at a minimum, companies realize that only so much good can come from stirring the pot. When CMOs leave, strategy is disrupted and valuable information is potentially lost. Furthermore, new CMOs need time to learn about the company and to gear up to lead the marketing organization. This means a loss of productivity and perhaps an opening for competitors to pounce.

The CMO Survey also finds that marketers tend to have experience in the companies in which they serve as CMO. Looking at the right-hand side Figure 1, we see that marketers have approximately 8.6 years of total experience in these firms, which when differenced from time as CMO, leaves marketers with approximately 4.2 years of other experience in these firms. No study has yet confirmed the wisdom of hiring from within or from the outside. However, one benefit of time in the company is the ability to really understand the company’s business, its customers, and its business model. Another benefit is the ability to build a network to get decisions implemented. These are two reasons many CMOs fail so I see these fruits of experience as a plus.

The CMO Survey also asked top marketers to report the number of direct reports they have. This is one view of marketing leader power. This figure is interesting because it is has increased from 4.6 in August 2009 to 7.2 in August 2010 and stayed level at 7.3 in August 2011. Together with tenure levels, this is another piece of convergent evidence that CMOs are offering value to companies during tough times.

Figure 2. Number of Direct Reports to Top Marketer

I see successful CMOs doing a number of key things for their companies.

1. They view themselves as a contributor to the firm’s bottom line.
2. They lead the company’s efforts to create customer value in both the firm’s offerings and in its business model
3. They use customer-based metrics that show the impact of their decisions to all members of the C-suite.
4. They lead their companies’ efforts grow and innovate.
5. They build marketing capabilities (not just one-off marketing strategies) based on organized, motivated, and knowledgeable human capital.
6. They develop trust as a truth teller of the present and as a forward-looking planner.
7. They execute strategies well. In fact, they put as much time and effort into implementing as designing the strategy.