A Big Marketing Budget Is Nice, But Marketing Capabilities Matter Most
While attending the CRM Association’s inaugural National Conference earlier this week I got a speak peak at an interesting research study on marketing ROI. The study was jointly conducted by Raj Srivastava, director of the Zyman Brand Science Institute at Emory University, and Naveen Donthu, the Katherine S. Bernhardt research professor and professor of marketing at Georgia State University, working with Naras Eechambadi, Ph.D., CEO of Quaero.
During their session they gave a brief preview of the results, which they’ll be analyzing in depth over the coming weeks. The gist of what they’ve found so far suggests that although marketing budget is important, what truly separates companies is marketing capabilities.
The professors surveyed chief marketing officers and marketing vice presidents at nearly 160 companies, including such well-know brands as Cisco, Kodak, Microsoft, and Wendy’s. Results suggest that overall the respondents fell into two groups, the Haves and the Have Nots. The Haves have marketing as a core competency, consider direct marketing as a critical channel, and play in intensely competitive markets. The Have Nots are sales driven, are most often B2B firms, and are usually in a low-margin business.
The preliminary findings suggest that marketing capabilities significantly impact strategic performance (e.g. growth, stock), as well as being a multiplier for the positive impact of short-term performance (e.g. share, brand). Companies that are long-term focused and customer oriented are the ones that excel in both of these areas, suggesting that marketing capabilities make a greater impact on results than marketing expenditures do. “If we consider marketing to be an investment, then we need to look at the long-term pay offs,” Srivastava said.
What are the implications of this? According to Srivastava and Donthu, organizations must broaden their focus beyond spending and marketing mix allocations. They must understand the capabilities in their environment and build a realistic business case based on those capabilities.
Ginger
The capabilities view of marketing is not new, although the Zyman research is a welcome addition to the literature.
George Day probably started the marketing capabilities discussion back in 1994 with his seminal paper on "The Capabilities of Market-driven Organisations" published in the Journal of Marketing. This and the contemporaneous research on Market-Orientation at the Marketing Science Institute sparked a frenzy of activities in forward thinking market-driven organisations, and the creation of a whole generation of 'Marketing Maturity Models' by pretty much every marketing consultancy worth its salt. I was involved in creating them in the late 90s whilst a CRM consultant at PricewaterhouseCoopers. I still use them today with clients.
The Zyman Institute of Brand Science published its own report on the topic in 2006 called "Market-Based Assets & Capabilities, Business Processes and Financial Performance - http://www.zibs.com/techreports/Market-Based%20Assets%20and%20Capabilities.pdf .
The capabilities framework proposed by Zyman is similar to that proposed by John Hagel in his article "Unbundling the Corporation" published in the McKinsey Quarterly - http://leeds-faculty.colorado.edu/lawrence/mbat6450/Articles/Unbundling.pdf . But I think Hagel has pushed the boundary further than the Zyman researchers in his visionary thinking about customer pull versus company push - http://www.johnseelybrown.com/pushpull.pdf .
This is a very interesting area. Capabilities, Customer outcomes and Cashflow are the three Cs of customer strategy today. But they are not new.
Graham Hill
Independent CRM Consultant
Interim CRM Manager