The predictions for Marketing have been flowing in. Gartner’s study suggests budgets for this year are down and that the pressure to prove the value of the dollars continues to increase. Gartner claimed in their 2017-2018 CMO Spend Survey, “CMOs are either being too nearsighted to be strategic or too visionary to deliver against marketing’s objectives, which results in a lack of focus on the metrics that really matter to CMOs and the business.” Forrester, in their Predictions 2018, called for CMOs to “refocus energy on marketing’s role in driving top-line, innovative marketing effectiveness growth.”
Research by Kim Whitler revealed that 57 percent of CMOs have been in the role less than 3 years. It’s the lowest average tenure in the entire C-suite.
What are the implication to CMOs and Marketing leaders? Paraphrasing Caren Fleit, Managing Director, Korn Ferry, “marketers must transition from Marketing specialists to generalists who can lead.” That means marketers must think like business people. And that means being able to translate the work of Marketing into impactful metrics that resonate with the CEO or CFO. This is about more than ROI or MROI. In fact, the focus on ROI may just lead to your downfall. Marketing must be able to articulate how the strategies being deployed are impacting the business. This means moving the conversation to the topic of marketing effectiveness.
ROI and Marketing Effectiveness: Why do their Distinctions Matter?
Marketing effectiveness produces far more than ROI, a financial calculation used to determine whether an investment achieves a satisfactory return compared to other uses of cash. When Marketing is effective it drives growth, creates value, and improves Marketing, as well as business performance. ROI will not tell you how well Marketing is producing the intended results. When Marketing stays focused on business results it builds an organization that earns a place at the table. When Marketing operates primarily as a service station supporting sales, it risks abdicating its strategic position. A CMO who loses this focus creates the possibility for other roles to take the strategy seat, such as the emerging roles of Chief Experience Officer and the Chief Growth Officer.
Producing a good ROI for an activity that doesn’t directly affect a business outcome is a meaningless victory. Quantifying the return of your marketing activities is important but not sufficient if you want to keep your seat. On the other hand, delaying investments because the dollars in may not cover the dollars out could result in deciding to forgo key strategic investments for new products, new markets, or building brand preference as well as negatively affecting customer buying decisions and the ability to stave off competitive threats. ROI won’t help you understand how well Marketing is helping the organization achieve its objectives or how to improve the contribution. This is the domain of effectiveness.
Marketing is the only function within the organization that incorporates the word “market” in its name. It is the responsibility of Marketing to deeply understand the entire ecosystem of the market, which includes customers and competitors. It is this keen understanding that facilitates Marketing with a capital “M.” This is the starting point for achieving Marketing effectiveness.
Marketing effectiveness is Marketing’s best defense and offense. To be effective at producing the desired business results, there must be clear strategic intent associated with the work of Marketing. This work must be aligned to the organization’s outcomes and Marketing must be able to measure the degree to which it positively impacted and contributed to those outcomes.
Build Five Capabilities to be More Effective at Effectiveness
Effectiveness relies on executing your strategies, associated programs and tactics, and it implies quantifying impact on the result. Being able to execute and quantify successfully requires:
- Customer, market and competitive intelligence and insights derived from data to make actionable and sound strategic decisions, such as which markets and customers to pursue and what products to offer, when and how
- Defined, honed, and proven processes, such as planning, segmentation, product innovation and program execution and the associated systems and structures
- The right people with the right skills
- A culture focused on growth and value measurement framework and associated analytical tools and techniques
These five capabilities provide insight into your Marketing effectiveness. A comprehensive audit will help your organization identify strengths and reveal areas for improvement. In the meantime, we’ve created a short version of the most salient components within each area that you can use as a starting point.
If you haven’t conducted an audit to determine whether you have the capabilities to be effective, or it’s been awhile since your last audit, this is a natural next step. Remember that it’s hard to grade your own homework. Work by the Corporate Executive Board suggests that marketers assess their marketing effectiveness to be 25% higher than it actually is. A third-party assessment provides an independent evaluation of a business entity or professional practice. Using a third party can also help a forward-thinking company identify potential problem areas and provide insight into best practices.
This post originally published on LinkedIn.