The Hard Truth About a Soft Misconception
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1 THE GLOBAL CEO ADVISORY FIRM MARKETS The Hard Truth About a Soft Misconception Marketing: Redefining its Position in Your Company s Value Chain GILLIAN GORMAN ROUND Managing Director, Teneo Holdings mar ket ing, a noun, is the action or business of promoting and selling products or services, including market research and advertising. Starting an article with a dictionary definition is an unusual way of making a point. In this case, the point is that marketing has never been more important to building profitable, well run, customer-focused businesses. It is timely to restate the definition because marketing as a discipline has become significantly devalued. In many businesses, it has lost the importance and status that it should have for the key people who should be relying on it: CEOs, leadership teams and boards. Marketing is often regarded as a soft part of the business value chain, less important than other functions and without a seat at the grown up table. The understanding and appreciation of the importance of excellent, well purposed, financially responsible and creative marketing has been lost, ignored or simply not understood. Often marketing is thought of as only advertising and brand promotion. Under-appreciated is the value of integrating the marketing function and discipline in all stages of a business. The first known use of the term marketing was in the late fifteen hundreds and at that time the definition, was quite literal. It encompassed the taking of animals and produce to market, the persuasion of potential customers and the selling to them with the goal of making a profit. Thus from early times of commerce, marketing has been responsible for identifying products that potential customers need, sourcing those products, merchandising them, persuading consumers to buy them, and pricing those products at a financially viable level for both vendor and consumer. 66
2 VISION 2017 Returning to the original definition helps us understand the core responsibilities, and should also persuade us that the role of marketing is not as a moment-intime within the company s value chain, but rather underpins, drives and complements the entire process. In fact, one could argue that Michael Porter s Value Chain, which has been widely adopted and taught in every MBA course to future CEOs, has done marketing a radical disservice. The purpose of the Value Chain was to help explain how value is created within organizations by different disciplines, as demonstrated in this diagram: SUPPORT ACTIVITIES Firm Infrastructure Human Resource Management Technology Development Procurement MARGIN Inbound Logistics Operations Outbound Logistics Marketing & Sales Service PRIMARY ACTIVITIES Do you see where marketing is placed? Tucked right between outbound logistics and service.certainly one of the primary activities, but one that is relegated to a moment in time. I would argue that the responsibilities of marketing are more than just a moment in time, but rather - when strategically executed run the full breadth and depth of the value chain. Perhaps if the value chain was presented as below, marketing would be taken a little more seriously at the outset: SUPPORT ACTIVITIES Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Sales Service MARGIN MARKETING 67
3 THE GLOBAL CEO ADVISORY FIRM Not So Soft While the world has changed immeasurably in the 450 plus years since the original definition was coined, the marketing practitioners, and those that manage them, would be well served in recognizing the genesis of the art of marketing and the simplicity of the definition to optimize the current approach. Thus, what is the simple explanation of what a marketing function should deliver to a company within the contemporary landscape? In common parlance, can marketing deliver an ROI that has both a meaningful and positive impact on the business? So instead of relying upon the much lauded Value Chain, perhaps it s best to return to something that easily helps define the importance of marketing. The 4 P s is a core marketing concept, taught in every basic marketing course, that helps us understand the scope of marketing and define the parameters. The responsibilities of marketing are more than just a moment in time, but rather - when strategically executed run the full breadth and depth of the value chain. The 4P s correspond to Product, Place, Price & Promotion (think back to that market stall and what the earliest marketers were doing). Marketing should control each action and initiative within the 4 P s. Each one of these areas, each one of these actions, is related to a very simple goal: Sell more product. Identify the why, how and who of selling more product tomorrow than you sold today. Target new customers; turn them from passive to active. Ensure that at each step of the customer journey you are converting to financially responsible sales. Some of the key actions and initiatives within each of the 4 P s include: Product: Definition, Development, Assortment, Quality, Design, Features, Name, Packaging, Services, Legal & Regulatory Obligations. 68
4 VISION 2017 Price: List Price, Margin Analysis, Promotional Pricing, Discounts, Allowances, Payment Periods, Terms. Place: Distribution Channel/s, Coverage, Assortments, Locations, Inventory, Forecasting, Merchandising. Promotion: Sales Promotion, Advertising, Sales Force, Training, Public Relations, Direct Marketing. This list is not exhaustive and will expand and contract dependent on the business, product, promotional cycles and, of course, the competitive landscape. The best marketers and marketing departments are not only completely fluent in all of these aspects for their own business, but are cognizant of their competition and their consumer thinking. The discipline of marketing should never be limited to this moment in time, but rather focused on today, tomorrow, next year, and well beyond, trying to predict and see around corners as regards to product development, consumer needs, trends, and behavior from both qualitative and quantitative perspectives. Correcting Misperceptions If marketing is so important within the company value chain, why isn t it taken more seriously? Why is it seen as soft? According to a study by The Fournaise Marketing Group, entitled the Global Marketing Effectiveness Program, 80% of CEOs admit that they do not trust, and are not very impressed by the work done by marketers while in comparison, 90% of the same CEOs do trust and value the opinion of CFOs and CIOs. * First, a large number of CEOs who didn t rise in their careers via the marketing function may be unsure as to what to expect from their marketing teams and how to judge their efficiency. Even the 20 percent of CEOs that Fournaise identified as valuing marketing might benefit from a re-education of how they and their marketing departments can positively impact their organizations. And CMOs might have more productive relationships with their 69
5 THE GLOBAL CEO ADVISORY FIRM CEOs if those CEOs had a better understanding of the marketing space and the complexities therein.* CFOs often have a built-in advantage in that it is from their ranks that many CEOs emerge. Thus, one can conclude that CEOs speak the language of CFOs better than the language of the CMO. According to a Heidrick & Struggles research piece, in December 2015, around the path to becoming a Fortune 500 CEO, at least 30 percent of CEOs had spent the early, formative, years of their careers in the finance function. This is by far the most common, early career, experience of all Fortune 500 CEOs. In contrast, only 20 percent of current Fortune 500 CEOs started their careers in the sales and marketing functions. Let s de-couple sales and marketing, and arbitrarily allocate a 50:50 split between these functions. Thus, we can assume that approximately 10 percent of current Fortune 500 CEOs commenced their careers in marketing. And while only 5 percent of current CEOs were promoted directly from the CFO role, more than half were appointed from the role of COO or President, closely tied functions to the financial one. What this tells us is that the majority of CEOs are likely to be more comfortable with the financial discipline of their companies. It stands to reason that the 10 percent of CEOs who started their careers in marketing will have a more intimate knowledge of the function. The remaining 90 percent, having come from non-marketing roles, likely are less comfortable within the marketing rubric. However, this doesn t prevent CEOs having strong opinions around the marketing function. In addition to the 80 percent that don t trust and aren t impressed by their marketing functions, the same study found that 78 percent of these CEOs think Marketers too often lose sight of what their real job is: to generate more customer demand for their products/services in a business-quantifiable and business-measurable way. Exactly, that s the job. Which returns us to the original hypothesis; that for marketers, and those that manage them, a re-grouping around the core responsibilities of marketing 70
6 VISION 2017 would be beneficial across the organization and would result in significant upside in the credibility of their function, and their ability to influence the strategic direction of their company. What Does this Mean for CMOs? The negative opinion of their leadership colleagues is a bitter pill to swallow for marketers and CMOs, who naturally believe that they have to do more with less each year, in a more complicated environment. Proving out to these same colleagues that they not only understand, but can support, the macro company strategy and, in fact, lead it, will pay dividends. Going back to basics and ensuring that the marketing strategy all the way through to the individual marketing tactics and actions ladders up to supporting the company strategy is not just a worthwhile, but critical exercise, to be undertaken. The first step is always the core of the company positioning: it s Mission, Vision and Position. It s raison d etre: why it exists, how does it execute its mission and what is the brand promise. Do the Mission, Vision and Positioning statements of the company still stand true? Have they been revisited and revalidated to be appropriate for the current strategic vision of the company, the competitive landscape and the customer dynamic? When was the last time that the other members of the leadership team reviewed these and bought into them? By reviewing, renewing, and, if necessary, republishing the Mission, Vision and Position of the company, the CMO demonstrates ownership of this critical platform, and also has a base to judge all activity against. If a marketing strategy, or indeed tactic, does not serve the positioning statement then it simply must be discounted. That is not to say that experimenting with new ideas and tactics isn t valuable, but those ideas and tactics must be judged to be additive to the positioning platform. The next stage should be to re-connect, if necessary, the consumer to the CEO and the rest of the leadership team. It is imperative that the CMO, with the marketing function, has a deep and intimate knowledge of existing, target 71
7 THE GLOBAL CEO ADVISORY FIRM and lapsed consumers and can connect this knowledge to the rest of the organization via rigorous analytics. The CMO needs to provide this detailed understanding to the CEO and rest of the management team. This type of insight is infinitely valuable in helping the broader management team understand the pivot points in consumer behavior and whether the organization writ large is strategically equipped to deal with them. Finally, the CMO must use a charm offensive to connect to the other members of the management team. By ensuring that each individual senior team member understands the purpose and value of marketing, the marketing plan for the organization, how it will be measured and how it will impact their own organization, the CMO can start to expand the influence of marketing across the organization. Understanding the consumer, the competitive landscape and buying into the marketing plan is critical. Only when this happens will the CEO not only be able to support, but also advocate for marketing within the organization. What Does This Mean for CEOs? When thinking about the role of CMO, each CEO should ask themselves the question of what they are looking for. What stage is business in, and what are its strategic imperatives over the next five years? That knowledge will help define the CMO characteristics that are needed. Is a growth accelerator right or a big picture strategist or a phenomenal day-to-day manager? The CEO must give the CMO a seat at the leadership table and give heightened importance to the role of marketing within the organization. For this to happen, the CEO must spend time with the CMO. Understanding the consumer, the competitive landscape and buying into the marketing plan is critical. Only when this happens will the CEO not only be able to support, but also advocate for marketing within the organization. The CEO must be able to see where the plan links back to those 4Ps, and ultimately, to driving more 72
8 VISION 2017 consumer engagement and thus more sales. When these messages and positions are aligned, the power of that consistency is tangible and brings extraordinary commercial benefit to the business. 73
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