Monday, July 09, 2007
What Is the Value of A CMO? Take Your Pick.
byTwo stories in this week’s Advertising Age appear to deliver deeply divergent viewpoints on the value of Chief Marketing Officers (CMOs). This first AdAge story highlights a soon-to-be-published study in the Journal of Marketing that demonstrates CMOs don’t have any effect on a company’s financial performance. No wonder boards of directors and business leaders are clamoring for increased evidence of ROI in advertising and marketing spending. The study accessed information from 167 public companies with revenues north of $250 million, and included some of the biggest, most active marketing organizations.
The study’s authors admit the research conclusions are limited because it focuses purely on more short-term sales and profitability metrics rather than longer term and “softer” performance measures such as brand equity or awareness. It will certainly add fuel to the debate on whether a CMOs focus should be on the short term or long term? I can hear the resounding reply to that question from most business leaders: “Both.”
In a story published just two days earlier in AdAge, there is quite a different conclusion. According to a joint paper published by the Association of National Advertisers and Booz Allen Hamilton, the companies with the most revenue growth and profitability are those that promote marketing to the C-suite level.
Both reports seem to be credible, but contradictory. It is obvious that a more thorough examination of the data and methodologies from these studies will be needed to ascertain the true effectiveness of a C-level marketing position. In the meanwhile, it seems pressure will continue to build for marketing execs to justify substantial budgets. As Olaf Göttgens of Mercedes-Benz said in the story:
“Our role is to improve the brand image and increase sales. And we need to be able to prove that we do this. We have to show that we are business partners who are also capable of calculating a business case. If we ask for investment X, we need to be able to demonstrate the result of that investment. By doing so, we can demonstrate how the brand’s marketing support has affected the company’s profits.”
