Should CMO’s Lead the Corporate Growth Agenda ?

December 28, 2009

From my December 6th guest post on Mike Ferry’s  blog “Leading Good Brands to Greatness” and December 22 guest post on Branding Strategy Insider:

The CMO’s job is simple—to drive growth, right? As Lou Gerstner ex-IBM and American Express CEO once put it: the role of Marketing is to build the brand and deliver a great customer experience. But is it really that simple?

At the recent CMO Club Summit in San Francisco, I was part of a panel discussion with Joe Ennen, SVP Consumer Brands at Safeway and Scott Thurm, Management Bureau Chief of The Wall Street Journal, titled “CMO’s as Leaders of the Corporate Growth Agenda.”

How CMO's can Lead the Corporate Growth Agenda (image courtesy of CorpGrowth.net)

Scott led off the discussion by reframing the topic, asking, “What are the barriers to CMO’s leading the corporate growth agenda?” Joe, Scott and I spent the session discussing and debating this important question. To see another take on this topic, see Brand Autopsy’s “The New Complete Marketer.”

Barriers to CMO’s Leading the Corporate Growth Agenda

CEO/CMO Alignment – The best CMO is a CEO who believes in Marketing. The CMO’s ability to lead the corporate growth agenda starts with alignment with and support from the CEO. Not all business models and CMO’s are created equal. The role of Marketing in an organization can vary widely. And the CMO role can range from a narrow Marcom role all the way to something like a Chief Growth Officer. The CEO and CMO must be aligned on the role of Marketing in the organization for the CMO to effectively lead the growth agenda (see my blog post “Leading Your Brand Beyond Marketing”).

Growth Means More Than Marketing – The CMO has to think more broadly than Marketing. What are all of the potential growth drivers – Marketing or otherwise ? Companies such as Zappos.com have actually gone so far as to define a non-Marketing function like customer service as Marketing. A critical part of the CMO’s job is to understand the business model and all potential drivers of growth.This is becoming even more important as digital and social media blur the lines between Marketing, Public Affairs and Customer Service.

For example, at UBS, we learned from Corporate Reputation research that being “open and transparent” was a key driver of reputation, and that reputation scores correlated  with “willingness to refer others” and other business growth metrics. This led the Marketing function to explore programs to communicate to stakeholders in more open and transparent ways.

Corporate Growth: More than Marketing.

CMO as Voice of the Customer – Another key barrier to the CMO driving the corporate growth agenda is customer neglect. The CMO needs to continually advocate for keeping the customer front and center. All CMO’s could learn from A.G. Lafley, ex CEO of Procter & Gamble, who continually reminded employees that “the consumer is boss.”

Customer satisfaction surveys not only measure satisfaction. They also measure the important factors contributing to satisfaction and quantify the relationship between those factors and satisfaction. Understanding these drivers enables Marketing to define areas outside Marketing that are central to driving growth.

For example, at UBS we learned that client contact frequency was an important satisfaction driver—more was better. Yet, the majority of client advisers were contacting clients well below the threshold. This led to a concentrated effort to improve contact frequency—and drive growth.

Connecting Customer Needs with Enterprise AssetsI stressed the important role the CMO plays in getting the organization to think about the entirety of the enterprise’s assets and capabilities. Connecting customer needs with assets from outside a business unit is a great way to drive growth—and one that organizational structure often stymies.

Crest: Consumers had an unmet need for whiter teeth, and paste formulations simply didn’t do the job. A smart R&D person connected this need with synthetic bleach technology from laundry and substrate technology from paper making to create—voila–Crest WhiteStrips.

Amex Gift Card consumers wanted to buy the cards in retail. The Amex Gift Card group had no relationships with grocery and drug store chains, but another group within Amex did. So, the organization leveraged the other organizations retailer relationships to facilitate introductions and help gain distribution in over 70k locations in less than two years.

Keys to CMO Success

CMO’s clearly have a tough job, with an average lifespan of just 28 months. Lou Gerstner’s formula for CMO success is a good starting point, but CMO’s need to go further.

Building the  brand and delivering a great customer experience plus driving the corporate growth agenda can help CMO’s and their firms be more successful in the future.

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Coke CEO Muhtar Kent: What 1B Future Middle Class Consumers Can Teach Marketers

December 21, 2009

What can 1 billion future middle class consumers teach Marketers? Muhtar Kent, the Coca-Cola CEO, thinks he knows the answer. It’s about investing in your brand — in good times and bad.  

At the recent AdCouncil annual dinner, I had the privilege of hearing Mr. Kent accept the annual Public Service Award. You may know the AdCouncil as the organization behind such famous Public Service Announcement (PSA) campaigns as, Smokey the Bear and “Only You Can Prevent Forest Fires;” and  The United Negro College Fund’s “A Mind is a Terrible Thing to Waste;” etc.  

Muhtar Kent -- Marketing Investments in Tough Times Pay Big Dividends

Beyond imploring the audience to continue its support of the AdCouncil, which was the obvious topic, Mr. Kent devoted his speech to making an impassioned plea to those present — Marketers, Ad Agencies, and the Media — about what Marketers should do during a recession.  

Learning from the Great Recession

The key learning? Well, it’s not about value marketing, it’s not about more predictive models, and it’s not about being more price competitive. It’s something more basic, but also more challenging for Marketers to do — invest. In Marketing. In brand building. Even when the market is bad. Really bad.  

Mr. Kent’s point was more than a brand plea–it was an economic one:  globally, 1 billion consumers will move into the middle class in the next 10 years. Let me say it differently: these are your future consumers and your future revenue stream–and they can’t afford your brand today. But that’s going to change.  

Brand Choice: Yours or Someone Else’s?

And when it does, they’ll be making a choice: your brand or someone else’s. The critical point is this: today, these 1B consumers probably don’t know your brand, its benefits, and why they should consider buying it in the future. Advertising and Marketing have a critical role to play in engaging these future consumers with your brand now, so that when they have the wherewithal to buy your brand in the future, they will.  

Increasing marketing spend boosts long-term ROI, even during recessionary times.

Investing in Marketing during a recession is tough. Challenging economic times scare everyone — CMO’s included. So, what’s the standard CMO response? Cut spending. Invest less. Economize wherever possible. I know, I’ve been an unfortunate actor in these kinds of plays before.  

Why Invest When Times Are Tough?

There’s now a sizable body of research which empirically proves that companies which invest in Marketing during downturns tend to outperform their competitors coming out of the downturn. What’s the evidence?  

  1. Advertising in Downturns Yields Better Financial Performance — John Quelch, a professor at the Harvard Business School, conducted a study which compared companies which followed one of two strategies–investing in Marketing or cutting back. Results showed a consistent pattern of superior performance for the companies which invested during tough times. Guest blogger Susan Kanefield Lauinger highlighted Quelch’s research and the temptation to make quick cuts in marketing dollars.
  2. Advertising in Downturns Builds Confidence — Nielsen IAG reviewed financial companies which invested in advertising during the recent economic crisis versus those which didn’t (Disclosure: I work for The Nielsen Company). The key learning? Firms which invested had higher confidence in them than those which didn’t.

It is more important than ever for financial institutions to build confidence among consumers.

But How To Do It ?

Fine you may say, but how do you continue investing in Marketing when sales are falling, revenue is down, and Wall Street continues to have high expectations for your quarterly profit? What’s a CMO to do?  

  • Educate Senior Management — The CMO has to educate the CEO and CFO so they understand and really believe that Marketing is an investment and not just another cost item. Show them the research cited above, walk them through case studies, and even find examples within your own company of where downturn Marketing has made a difference. Educating your C-Suite about the proper role and impact of Marketing is an on-going responsibility (read more in my post “What Do CEO’s Really Want From Marketing?”)
  • Drive Financial Accountability in Marketing — CMO’s must be committed to being accountable for the money they spend. The more the Marketing function can demonstrate that it spends money wisely and generates positive return of Marketing investment, the more likely CEO’s and CFO’s will support investments during a downturn. The CMO’s job is to demand financial and brand building accountability of the Marketing organization.

Courage is never in more short supply than when a CMO proposes to invest more when times are tough. But investing in a recession is a proven way to gain advantage versus competition. Whether you can get the money you need in the next downturn depends entirely on educating the C-Suite and being accountable for good financial results behind your Marketing initiatives.  

It’s really that simple. So simple, in fact, that 1 billion emerging middle class consumers already know this:  invest in your brand in good times and bad–or risk having them buy your competitor instead.  

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The Double Edged Sword of Celebrity Endorsements

December 17, 2009

Pundits everywhere are speculating on the damage to the Tiger Woods brand. But what about the corporations and brands he pitches? CMO’s must always remember that celebrity endorsements are a “double edged sword” that carry both benefits and risks alike. 

Tiger Woods - What Impact on Sponsored Brands ?

I’ve written previously about the importance of Marketers contributing to corporate reputation efforts (Should Marketers Care About Corporate Reputation?), but the Tiger Woods story presents a new angle: how celebrities impact corporate and brand reputation. 

Celebrity Impact on Sponsored Brands

I was recently interviewed by Alex Witt on MSNBC about Tiger’s impact on his sponsored brands like Accenture, Cadillac, EA Video Games, Gatorade, Gillette, Nike, and others. We discussed  a range of topics and how Tiger has become a double-edged sword for sponsored brands: 

  • How does Tiger’s presence and performance affect PGA Tour TV ratings ? What impact will his absence have ?
  • What do we know about the effectiveness of ads which featured Tiger Woods versus those which didn’t ?
  • What impact has the late night talk show monologues, riffs, and skits had on Tiger’s sponsored brands ?

Clearly, Tiger Wood’s personal reputation has taken a crushing and perhaps irreversible dive. What about the brands that he represents? Learn more about the impact on his sponsors, as well as my own take on the issues, in Reuters, USA Today, BloombergThe New York Times, AdWeek, and BrandWeek, or watch my MSNBC interview with Alex Witt

Lessons For Marketers

There are three important Marketing lessons Marketers should take away from the Tiger Woods story: 

  1. Assume the Worst – CMO’s should assume that any celebrity they use in their Marketing, no matter how seemingly “pristine,” will have an issue at some point. And with the web’s ability to spread “spurned media” at an unprecedented rate, brand damage can be fast and severe.
  2. Diversify your Marketing Assets – Put simply, brands should use celebrity endorsements as one element of a multi-faceted Marketing program. Building your entire Marketing program around a single celebrity and related creative idea can put the brand at serious risk if problems arise.
  3. Have a Back-Up Plan – If disaster strikes,  brands must be prepared. What’s the plan to deal with any celebrity disaster fallout, including the digital trail of negative media that will live on for months and years on the web? And what’s the back-up Marketing plan?

It all reinforces an important, but oft forgotten point about the “double edged sword” of famous spokespeople:  brands can benefit from the association of a strong spokesperson brand–but face the constant risk of that reputation turning negative, no matter how unlikely it seems.  Accenture, Cadillac, EA Video Games, and others are relearning this lesson all over again while they recover from the collateral damage of a spokesperson gone awry. 

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What Really Drives Web Advertising ROI

December 14, 2009

The old adage “When you only have a hammer, everything looks like a nail” could certainly apply to web advertising. Like a hammer, click thru rate (CTR) has been the core metric used by many Marketers to measure web ad effectiveness since the early days of the web.

Does Click Through Rate Predict Sales Lift?

But with growing evidence that CTR is not the “hammer” of web effectiveness it was once deemed, marketers are learning that  no metric may be more meaningful than a poor one.

What Marketers Should Be Measuring

Marketers should be measuring brand building and business outcomes. Growing brand equity and consumer engagement, along with volume and share, should be at the top of the priority list for every CMO. Ultimately, these need to be translated into a return on Marketing investment (ROMI) measure, just like any other investment.

But because it has been so hard to measure these things, even on the web, Marketers have often settled for what they thought was the next best thing—in this case, CTR. And what made CTR particularly appealing was that it measured a consumer action. What could be better than that ?

The Real Impact of Web Advertising

Improvements in measuring and monitoring consumers web activities, coupled with off-line purchase panel data, now gives us insight into what really works.

How can web advertising ROI really be measured ?

  • Web Behavior – Consumers are provided software which, when downloaded, monitors and provides a comprehensive view of their web behavior (consumers opt-in and understand this when they agree to use the software).
  • Off-Line Purchase Behavior – These consumers also participate in an off-line purchase panel. They shop as they normally would shop. Once home, they scan their purchases into a purchase panel database using a handheld wand.
  • Fused Data – The web behavior and off-line purchase panel data sets are then fused together so that the they can be analyzed to determine cause and effect relationships.
  • Test vs. Control Analysis – Ancova (analysis of co-variance) analysis is then performed on the test (those consumers seeing an ad) vs. control (those not seeing one) to determine the single variable impact of the advertising.

So what does the data tell us?  Nielsen reviewed 28 CPG campaigns using the above methodology (disclosure: I work for The Nielsen Company). Surprise: there is virtually no relationship between CTR’s and volume growth (correlation < .10). What is clear is that campaign reach had a significant impact on likelihood for success: higher reach campaigns were more likely to drive business growth than lower reach campaigns.

Click Through Rates - Not Predictive of Sales

Learnings for Marketers

CTR is not a good metric in predicting business growth for web advertising. Additionally, it’s clear that Marketers should put more emphasis on developing and running campaigns with broad reach, as campaigns with higher reach tended to deliver higher ROI’s.  And while the data says nothing about the creative itself, you have to believe that the primary driver of business results is the quality of the value proposition and creative– is it special, different and better ?

There’s another important learning here though. In the quest for bringing greater accountability to the Marketing function—a laudable goal—Marketers also need to be careful not to adopt metrics for the sake of having metrics. As the data above shows, even consumer behavior based metrics may not be meaningful.

Which brings us back to the original point. The CMO’s job is to build the brand and the business, and not just to hammer a bunch of nails. 

So what’s in your brand’s tool kit?

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Guest Post: 5 Ways for Market Leading Brands to Drive Profitable Growth

December 7, 2009

This is the 3rd in a series of periodic guest posts Mike Ferry is a senior general management and marketing executive, with extensive experience at Procter & Gamble, Segway, Abbott Labs, and Campbell Soup.

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If you have ever had the opportunity to work on a market-leading brand, you know from experience it is both a privilege and a challenge.  On the positive side, market leaders typically have strong brand equity, excellent profitability, and score well on key measures such as awareness, trial, and loyalty.

Bounty - How Do You Grow a Market Leading Brand ?

On the challenging side, companies expect strong, consistent profitable growth from their market leading brands, and in many categories this can be exceptionally difficult to deliver.  Trying to continue growing share when you are already the market leader often results in heavy price competition which has the unintended result of driving profit out of the category for everyone.

In many ways, it can be even harder to stay on top, than it is to get there, as the low-hanging fruit has already been picked.  With that in mind, here are five suggestions to help market leaders continue driving profitable growth:

1. Focus On Growing The Category, Not Stealing Share

Years ago when I was working on the Bounty paper towel business, the brand was market leader with a share nearly triple its closest competitor.  Rather than seeking to simply grow share, our team recognized that the paper towel category had expandable consumption, and as market leader it was our responsibility to drive category growth.  Read on for more detail on how this worked for Bounty.

2. Get In Bed With Your Heavy Users 

Really understanding what makes your heavy users tick has multiple advantages.  First, it helps ensure you don’t do anything which will alienate them, which can have catastrophic consequences.  Coca Cola would have avoided the whole New Coke fiasco had they shared their plans to change the formula of Coke with their heavy users. 

New Coke - Did Coke Really Understand Heavy Users ?

In addition, studying your heavy users allows you to understand what differentiates them from your typical user, and can lead to strategies to get more users to adopt the heavy user behavior.  In the Bounty example, the brand’s heavy users tended to use paper towels for tougher cleaning tasks than typical users, and tended to keep larger quantities of Bounty on hand.

3. Don’t Define Your Competitive Set Too Narrowly

Step back and see how the consumer views your category, and what alternative products they consider when selecting your product.  In the Bounty example, while heavy users were using paper towels for tough cleaning tasks like washing dishes, cleaning large spills, or scrubbing carpets, typical users were using sponges and rags for these tasks.  By understanding that Bounty was competing with sponges and rags, we were able to show the benefits of using a disposable paper towel versus a durable product like a sponge, which can be a breeding-ground for germs.

Campbell Soup - Building the Business by Broadening the Category Definition

A second example here would be Campbell Red & White condensed soup.  If you define the category as condensed soup, Campbell has an 85% share, with little room to take additional share.  Defining the category as all shelf stable soups and broths helps some, but doesn’t reflect how the consumer really views the category.  By studying consumer behavior, the Campbell team was able to understand that the consumer is considering condensed soup along with other quick “minimeals” like a sandwich, frozen microwave entrees, etc.  This insight led to sharper consumer communication on when and why to choose Campbell condensed rather than some of the other alternative foods.

4. Stretch Your Brand Equity By Launching Innovative Line Extensions…Consistent With Your Current Brand Equity

Continuing with the Bounty example, we launched Bounty Quilted Napkins, bringing Bounty’s strong and absorbent equity to the napkin category.  A second positive example would be Crest, which figured out they could extend their brand equity beyond simply cavity protection to total mouth care.  This led to a stream of new products including tooth brushes, oral rinses, and of course, Crest White Strips.

Crest WhiteStrips - Extending the Brand's Equity with Successful Line Extensions

On the other end of the spectrum, Jif Peanut Butter, whose equity has consistently focused on “more peanutty taste”, attempted to launch a line of flavored spreads called Jif Smooth Sensations which came in flavors like Chocolate Silk, Apple Cinnamon, and Berry Blend.  Jif’s brand equity could not be logically extended to non-peanut flavors, and the line failed.

5. Optimize Your Product Lineup To Maximize Productivity From Every SKU

Finally, in the current world where retailers are closely watching SKU count, it is critically important to take a hard look at your product lineup to make sure that every SKU plays a meaningful role, and the whole maximizes productivity.  On Bounty, for example, we found that productivity went up when we concentrated our lineup on larger sizes.  Driving consumers to large count packs resulted in consumers’ increasing their in home consumption, and resulted in higher loyalty as measured by share of requirements. 

A second example here would be Ensure nutritional shakes, which typically retail for $7.99 or higher per six pack.  Consumers were often hesitant to spend eight bucks to try a product they might not like.  By launching single bottle trial size, that barrier was overcome and overall brand volume went up.

Certainly there are many more ways to drive leading brands to profitable growth than those we briefly reviewed here, but I have been fortunate enough to have a positive personal experience with each of these five. What are your thoughts on other ways for leading brands to drive profitable growth?

I hope you’ve enjoyed this post, welcome your comments, and also would like to invite you to stop by my blog, Leading Good Brands to Greatness.

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Mike Ferry currently serves as an independent consultant and advisor.  His experience includes Vice President and General Manager for Abbott Nutrition, Vice President Marketing for Campbell Soup, Vice President Marketing for Segway, and various brand management roles for Procter & Gamble. Mike holds an MBA from the Kellogg Graduate School of Management at Northwestern University, and a BS in finance from Miami University.

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