Rebirth of the CMO
Chris Davis, Peter Dahlstrom, Fabian Hieronimus and Marc Singer
The CMO role is undergoing a renaissance. Overly simplistic notions – “the people who do the advertising”– were based on stereotypes that never accurately reflected the range of responsibilities that many CMOs had. Those notions are even more outdated now.
Instead, the last few years have seen a proliferation of C-suite titles that include a component of marketing. Some are chief customer officers, chief experience officers, chief client officers, or chief digital officers. This diversity reflects not only a deepening understanding of the connection between growth and customer satisfaction, but a much greater awareness of what marketing can do to help forge that bond.
Digital disruption has driven much of this shift. Digitally enabled tools and processes have altered what and how a business sells, flipped the tables on the typical customer relationship, introduced a glut of new channels and competitors, and made it harder for organizations to break through the “noise.”
That shift has created an increasingly commoditized product and service environment. Digital has removed barriers across sectors, even in old-line businesses known for “sticky” products, such as telecom and insurance. And that same transparency has radically shortened the shelf life of any new competitive advantage. “We’ll spend a lot of time bringing product to market, but we need to plan for the fact that a launch gives us a six-month head start and no more,” says Gary Booker, CMO of Dixons Retail. “While our competitors catch up, we have to get into the mindset of already moving onto the next thing.
All that has elevated – and complicated – the role of CMO. Delivering above-market growth increasingly hinges on differentiating the customer experience and building tighter customer relationships . That in turn relies on not only having excellent marketing capabilities, but also connecting marketing with the entire organization. That isn’t easy, but the payoff is worth it: Our most recent research shows that companies with excellent marketing capabilities outperform the market with 2-3X greater revenue growth.
While the CMO role necessarily varies across sectors, we see three activities that are now required of all CMOs.
1. Discover data-driven insights that drive growth.
Clear, meaningful insight into the market and the consumer decision journey is job one for today’s CMO. “When it comes to who asks the provocative questions [and] who agitates for customer-led change,” says Tariq Shaukat, the CMO of Caesars Entertainment, “it is the group closest to the customer and the group with the data. And that really is on the backs of marketing.” McKinsey’s DataMatics 2013 survey shows that companies that use customer analytics extensively are more than twice as likely to generate above-average profits as those that don’t. They also outperform their peers across the entire customer lifecycle, are nine times more likely to enjoy superior customer loyalty, and a remarkable 23 times more likely to outperform less analytical peers on new-customer acquisition. That means churning through data to find insights that others haven’t seen and then developing the organizational capability to act on them faster and better to drive above-market growth.
At a large hospitality company, for instance, the CMO can use analytics to find out not only which property or category was up or down over the weekend, but how key customer segments moved as well. If data shows the lucrative “weekend tripster” segment cut back on the average length of their stays, marketers can respond with offers or other perks, such as late checkout or complimentary upgrades, to drive changes in behavior and protect revenue.
Better analysis of those insights can improve marketing return on investment (MROI) by 10-20 percent and drive average profit growth of 14 percent . Yet, only 30 percent of companies believe they understand their customers’ needs well enough to identify what initiatives will drive growth. That’s a major missed opportunity according to Ian Ewart, Head of Products, Services & Marketing at Coutts. “I see far too many data that don’t go anywhere and that’s just a cost.”
To have the influence to help set business strategy for the company, CMOs need to translate customer insights into terms meaningful to senior leadership. Deborah DiSanzo, the CEO of Philips Healthcare, was once a CMO. She knew that to have a role in steering strategy, she had to earn the trust of her CEO and board. “To get that trust,” she says, “you have to speak with authority, you have to speak with empowerment, and you have to speak with the facts—and your marketing plans had better have a return on investment.” Data-driven customer insights give the CMO the power to do all that.
2. Design the right strategies and processes to carry out the vision in a multichannel world.
Talk about how complex marketing has become is very much in vogue, but there’s much less discussion about the operational (and diplomatic) muscle CMOs need in order to get things done. Customer journeys are complex and crisscross the organization. Even simple-seeming tasks, such as browsing or buying, often involve several steps, each touching a different part of the business. A customer may go online, compare products, scan a bar code, search, and call an agent. Designing a consistently positive, rewarding experience across all those touchpoints takes system-wide thinking and an integrated service-delivery approach. Point solutions, such as focusing on the call center, the store, or the website, no longer cut it in a multichannel environment, not when delivering excellent customer journeys can increase revenues up to 15 percent and cut costs by up to 20 percent.
Any well-designed interaction starts with a clear understanding of customer needs and the capabilities of front-line employees. That means plotting and, in many cases, reformulating processes to create a smooth and satisfying customer experience. To stitch it all together meaningfully, CMOs are increasingly expected to act as general managers with P&L or shared/shadow P&L responsibility that drive revenue growth. That bottom line sensibility is crucial. Says Abi Comber, Head of Marketing for British Airways: “Having P&L responsibility is incredibly powerful. CMOs need to show the ROI of every pound spent on marketing and how it delivers against the bottom line.”
CMOs are also now often judged on how well they can design and run an organization that reaches across the entire business. We’re seeing marketers develop centers of excellence, particularly around digital, to advise and support business units and functions in serving the right information to the right person at the right place and time.
To hit P&L targets, for instance, the CMO at one technology company focused on shortening the sales cycle. Data revealed the initial sales meeting and RFP were especially influential in shaping buying outcomes. So marketers collaborated with IT to design an iPad application that allowed salespeople to enter their book of business and receive detailed customer profiles with background on important customer decision-makers and priorities, as well as status updates and other useful information. That helped account managers focus their pitch on the client’s business issues and build rapport. The CMO also worked with the finance office and product managers to link pricing and benchmark data into the RFP process, which improved quality and response times.
Similarly, when web analytics revealed a spike in the number of unique visitors at a student loan site, the CMO helped orchestrate the responses. To woo high-value, low risk customers, the CMO worked with the risk team to fast-track the credit approval process. They also worked with the call center and IT to create a “chat live” button to make it easier for customers to complete forms online before they drifted off to a competing site. And when customer data showed that first-time applicants were more likely to move forward when there was a human touch to the process, marketing helped assign a sales person to individual customers. Those steps helped the bank drive up loan volumes, a tangible bump the CMO could point to in discussions with other leaders.
3. Become the organizational “glue” to deliver change.
“If marketing is not driving the change agenda then either the agenda is wrong or marketing is not being effective,” says Ewart.
Companies across the spectrum are grappling with change as new technologies, innovations, and customer behaviors disrupt old business models. When it comes to transforming an organization, clearly leaders across the C-suite, starting with the CEO, have critical roles to play. But the CMO has a unique and critical role to play to deliver the change. Deep insights into customer behaviors and market trends mean that the CMO needs to identify what changes are necessary. More importantly, the CMO then needs to motivate and help drive the required changes through the organization.
“You have to be able to command the pace of change in your organization in order to keep up with what consumers are looking for and the ways in which they’re interacting with you,” says Comber.
The most obvious changes are often the ones affecting the customer experience. Providing a consistent customer journey across all the touchpoints of an organization is critical because customers today punish companies that don’t deliver a consistent experience. Banks, for example, have a very strong correlation between consistency on key customer journeys and overall performance in customer experience. When we sent an undercover-shopping team to visit 50 bank branches and contact 50 bank call centers, the analysis showed that for lower-performing banks, the variability in experience was much higher among a typical bank’s branches than it was among different banks themselves.
Improving a customer journey is not something, however, that CMOs can do on their own. It requires that the CMO work with other leaders in the company who have responsibility over various touchpoints along the journey. The CMO needs to sit down with the head of sales, the COO, the customer service center leader and others to map out what exactly customers do on a given journey, which function has responsibility for which interaction, and what each then needs to do to ensure a consistent and excellent customer experience. With so many parts of the organization needing to come together to deliver on a customer journey, the CMO has to operate as the “glue” across the organization.
That bonding role extends to other aspects of the business as well, such as delivering on products and services. “Marketing is the integrator in the end-to-end chain,” says DiSanzo. “If you don’t have a world-class marketing enterprise, your solutions won’t meet the market.”
At Philips Healthcare, that integration takes the form of a “Great Marketing Plan.” The core of that plan is a 15-page blueprint detailing what various parts of the organization need to do and how different functions need to work together in order to bring something to market. Marketing plays an oversight and coordinating role in this process.
Erwin van Laethem, CEO of the Dutch energy company, Essent, highlighted that connecting talent when describing what he was looking for in a CMO: “We were looking for somebody who had a track record in fact-based marketing and someone who was also very engaging for the whole organization – what we call an ‘attractor’ for other people who would then follow the vision and the aspiration that we set out.”
In delivering on change, the CMO is increasingly being asked to go beyond providing an orchestrating role across the organization to deliver products, services, and experiences. We see CMOs, with their strong communications and creative skills, increasingly move into a position to drive changes in the culture itself. At British Airways, for example, the CMO was a leading force in using social media to transform the organization into a much more transparent, customer-oriented business. Interactions with customers went from a “tell” to a “conversation.”
“This is a far more open version of British Airways than we may have had ten years ago,” says Comber.
To affect changes in culture, some CMOs are partnering more closely with human resources. Says Peter Markey, CMO of Post Office (and former CMO of the RSA Insurance Group), “The HR director is a vital relationship for me because a lot of what we’re trying to do through marketing and brand is drive culture change in an organization. So the HR director has to be my best friend.”
Such a partnership is also helpful in establishing the right performance incentives. For example, a large conglomerate needed to mobilize 500,000 employees around a new customer-focused initiative. To do so, it linked customer and operational performance metrics, and then prioritized them based on their ability to lift customer satisfaction and market performance. That approach to linked metrics served as the basis for developing employee incentives, such as bonuses.
The truth is that for all the hard skills needed to master the operations of marketing, CMOs really need to excel at the soft skills to succeed. Forging strong working relationships with leaders in the C-suite, building bridges across functions, being transparent, demonstrating the value of marketing, and helping other leaders succeed is becoming the core factor in a CMO’s ability to succeed.
The need to deliver on organization-wide imperatives creates lots of pressure for CMOs. But it’s also raising the CMO’s profile, a fact that explains in part why Fortune 100 CMO tenures are growing to an average of 45 months (Russell Reynolds data), nearly double the 23-month average formerly considered the norm. CMOs who bring data-driven insights to all decisions, build effective bridges across the organization and use their experience and acumen to drive above-market growth will see their profile and influence grow significantly.
CHRIS DAVIS: Chris Davis is a leader of Russell Reynolds Associates’ Consumer and Financial Services Practices. .
FABIAN HIERONIMUS: Fabian Hieronimus is a partner at McKinsey, where he helps clients find above-market growth, create customer excitement, and optimize Marketing ROI.
MARC SINGER: Marc Singer is a senior partner at McKinsey, and a leader of McKinsey Digital, where he helps clients accelerate digital growth.
PETER DAHLSTROM: Peter Dahlstrom is a senior partner at McKinsey and helps clients predominantly in telecommunications, high-tech, media, and fast-moving consumer goods.