"The vast majority of companies cannot actually calculate the ROI of their marketing spending programs to uncover the hard truth about their performance," writes author Michael Dunn in The Marketing Accountability Imperative: Understanding the Marketing Accountability Gap and Beginning the Journey to Close It (Jossey-Bass). "Our survey suggests that as few as 19 percent of companies can consistently and accurately determine what they are getting — if anything — from untold millions in marketing spending."
In this excerpt from The Marketing Accountability Imperative Dunn explains the rift that mystery can cause between the chief marketer and the rest of the C-suite:
Today's perceptions about the marketing accountability gap are deeply rooted in old organizational tensions. Marketing has always been a group that stands apart from the rest of the company. No other function is so crucial to business performance and yet so little understood by the rest of the executive suite. Other complex business functions, such as R&D or IT, are characterized by learned skills that smart executives could theoretically master if they put their minds to it. But this is not the case with marketing. Marketing is an invitation-only club because it balances learned skills and hard-to-define intrinsic skills. Although the sales function may also rely on intrinsics, these skills are more easily understood and therefore are not a source of tension.
This intangible nature of marketing, characterized by marketers as "magic" and by nonmarketers as "voodoo," is at the crux of the marketing accountability gap. Because marketing relies on art as well as science, the CEO and CFO cannot confidently collaborate with marketing leaders to help steward the needed improvements. This places them in the uncomfortable position of being able to identify the issues around marketing accountability without being able to proffer a solution. Without collaboration as an option, the CEO and CFO must rely on either nagging the CMO to force changes or taking arbitrary actions to effect change, such as cutting marketing budgets or changing out the marketing leaders.
These differing skills and mind-sets are further exacerbated by different timescales. Although the CEO should be a company's most strategic position, the CEO and CFO are compelled to focus most of their attention on the three-month increments between quarterly earning announcements. This often does not jibe with the CMO's long-term investments in brand building — particularly if these programs do not offer proven returns during periods of earning shortfalls.
Although the CMO and the marketing organization may bear the lion's share of responsibility for creating the marketing accountability gap (we will discuss this shortly), ultimately it takes two to tango. All the executives — including the CEO — have had a role in creating the problem and must now play their parts in the solution. Some of these contributing factors are described here.
Allowing value propositions to converge: When did all the cars start looking alike — with an "Oldsmo-Buick" indistinguishable from any other "Camry-ola"? Probably about the same time that all the other functional features started converging and ceasing to be a real source of product differentiation. Sticking with our auto example, we can see that year after year the band between best and worst performance in the same car class has become smaller and smaller on functional features, such as the time to get from 0 to 60, horsepower output, fuel economy, warranty coverage, and defect rate. The same is true across B2B and B2C categories, as new business models give every company equal access to the best innovation, engineering, and manufacturing.
The remote on a $ 500 DVD player may have more buttons, but can you really tell the difference in picture quality from a $ 50 player? Without real functional differentiation, companies must place much greater emphasis on brands and marketing spending to fill the void. This is an issue of CEO and C-suite accountability, because nonmarketers must recognize that (1) they could have done more to help make their propositions competitive, by investing more in R&D and physical plant and collaborating with marketing to create new sources of customer value (such as financing, partnering, and service); and (2) this reduced differentiation has increased the expectations they are placing on marketing performance, whereas marketing's actual performance may or may not have changed at all.
Short tenure of the CMO: If you knew that you had just twenty-three months to live, how would you spend your time? You probably wouldn't focus on anything long term that didn't offer immediate gratification. Why then would a CMO be expected to behave any differently, when surveys consistently show their "lifespan" to be just two marketing budget cycles or less? Marketing accountability is a long - term proposition, and it requires a marketing leader with both the vision and the mandate to begin a multiyear journey. Constantly churning through CMOs does not increase their incentive to perform; it simply places an unhealthy emphasis on managing the "optics" of their performance.
Accountability without authority: Not only do CMOs have a short lifespan, but they also are on a very short leash. A senior marketer survey conducted by the Marketing Leadership Council found that the majority of CMOs did not control many of the elements that determine in - market success, including pricing, sales force activities, and customer service. Demand forecasting was strangely outside of the CMO's scope, given that officers need to be more accountable for market outcomes. There are also interesting differences between B2B and B2C scope, with B2B marketing leaders having more control over upstream activities (planning and development) and B2C leaders more control over downstream activities (sales force and customer service).
Not allowing marketing programs to run their course: Clawing back funding from marketing programs that are already in the field, whether to fund profit shortfalls or other needs, is a classic problem created by the CEO and CFO. Although some changes cannot be avoided, it is hard to justify the frequency with which imposed changes are made. CMOs rightly consider this one of the top barriers to improving marketing accountability (cited by 45 percent of senior marketers), as this renders marketing programs essentially immeasurable. Moreover, it perpetuates a negative cycle of declining marketing accountability — wherein abrupt program changes cloud their returns and make them more likely to be cut again in the future — while simultaneously freeing the CMO of the burden of performance, which in turn increases the likelihood that questionable programs will be fielded. And so it goes.
About the author: Michael Dunn is the Chairman and CEO of Prophet. He oversees the development of the firm's people, practices, and thought leadership and also serves as a strategic adviser on client engagements. He is coauthor of Building the Brand-Driven Business with Scott Davis.
Learn more about The Marketing Accountability Imperative at http://www.josseybass.com/WileyCDA/WileyTitle/productCd-078799832X.html