What enables some businesses to weather the changing economic climate and the cold wind of market forces, while others wither? The most successful businesses grow income and budgets steadily, while the weakest are left with diminishing income and budgets or none at all. Thus, just as Darwin observed, the fittest survive or thrive, and the weak are acquired by others or become extinct. So what exactly is the role of marketing?
Evidence for successful marketing
There have been many studies into what drives business success over the years. A study by Jim Collins and Jerry Porras (1) revealed business success factors such as having an ambitious and engaging business goal. However, the role of marketing has received less attention. Nevertheless, the pre-eminent role of marketing is best understood and acknowledged by leading consumer goods companies. It is also most influential in the most successful ones; such as Procter & Gamble and Unilever. However, the discipline remains less influential or plays second or third fiddle in companies operating in sectors such as business-to-business (b2b) and utilities.
The effects of marketing communication campaigns are also well documented. Some show positive results, some negative. Though it is harder to find empirical evidence to demonstrate what aspects of marketing drive business success, and inform strategic direction. Thus, this article draws on a number of studies published in the last few years. It also attempts to unearth ‘hard’ evidence and ‘lift the lid’ on what really works.
In 2006 Booz & Company (2) surveyed over 30,000 businesses and identified that businesses with ‘healthy marketing DNA’ were almost 60% more profitable than their competitors. Also that those with ‘super DNA’, some 9% of the sample, were 20% more likely to exhibit superior growth. But what is ‘healthy marketing DNA’ and also how can it be ‘bottled’?
Decoding Superior Marketing DNA
Here’s a summary of the three marketing functional characteristics that correlate with businesses success or ‘out-performance’:
1. Ability to measure contribution to business growth
While a challenge, successful business development requires sophisticated measurement and also modeling to correlate marketing activities to sales. As long ago as 1955, Peter Drucker famously wrote ‘what gets measured gets managed’ (3). Yet still in 2005, a CMO Council study of US CMOs (4) revealed that more than 80% of organisations had not developed meaningful, comprehensive measures or metrics for their organisations. Conversely, the 20% of organisations that instituted useful measures substantially outperformed their competitors in terms of revenue growth, market share and profitability. Thus the importance of measuring ROI remains high on CMO’s agendas. Further, according to IBM’s Global CMO Study (2011), nearly two-thirds (63%) believe that measuring marketing ROI is the most important measure of success for the next 3-5 years (5).
So it is disappointing therefore that many organisations continue to hire marketers with lots of experience in a business sector and then rely on them to make judgment calls on what to do and where to invest. This is a false economy. It also contributes to the perception that marketers are ‘fluffy bunnies’. It also compounds the perception that marketers are unworthy of a place at the board-room table.
2. Broad capabilities, scope of operation and ability to influence senior decision makers
In some organisations marketing operates solely as a communications or promotion department. In others, as a management ‘gopher’, responsible for tactical initiatives, and also reactive to management demands. Organisations with marketing functions that work closely with the CEO, operate across the organisation, and assume broader strategic responsibility, are more successful. Their roles include, for example, business analysis and development, product innovation, and also approving large investments. This allows them to grasp customer insights quickly. Also to communicate and make decisions based on those insights across organisation boundaries. Thus implementing a marketing model. Looking at this another way, marketing functions in outperforming organisations are also better at engaging both management and employees.
3. Deep customer understanding, adding value proactively
Successful business development requires deep business and customer understanding, and also strategic know-how to design, promote and deliver experiences that customers want. Outperforming organisations therefore invest significantly more effort in capturing and using customer information to drive decision making and foster customer relationships. IBM’s CMO study confirms that market research is the single most important source of information to influence strategy decisions (cited as important by 82% CMOs). In addition, 63% of CMOs believe that being the voice of the consumer increases their influence (5). Further research by The Chartered Institute of Marketing adds that marketers’ influence is greater when competition is intense and the market turbulent (6).
Unlike the DNA of living organisms, organisational DNA is able to change. Change starts with understanding where the business and marketing capability is now, needs to be and should be in the future. From The Marketing Directors’ research (7), there are just 14 executive marketing directors on the main boards of the UK FTSE 100 companies. At one level this suggests that marketing is relatively unimportant in 86 of those companies. Yet the role of marketing to drive business growth is widely misunderstood. All marketers should therefore embrace and address the challenge to explain what marketing is, can and should do to drive business success.
Effective and superior marketing involves understanding customers, accumulating facts, and influencing and making decisions based on those facts, in order to advance the growth and profitability of organisations. Marketers should therefore view themselves as the voice of customers and directors of organisation growth. They should therefore champion the role of marketing. To do this they should also champion understanding customers and use this information to make better strategic decisions. In turn this will advance their case to sit at the boardroom table.
(1) Porras Jerry and Collins Jim I, Built to Last, 1994. Involved researching and analysing pairs of companies in 18 industries. The insights covered their history, organisation characteristics and financial performance from 1915 to 1990.
(2) Landry Edward, Tipping Andrew, Dixon Brodie, The DNA of Marketing, Booz & Company and the Association of National Advertisers, 2006. Based on over 30,000 responses to an online survey in 12 languages
(3) Drucker Peter F, The Practice of Management, 1955
(4) The CMO Council, Assessing Marketing’s Value and Impact, 2004
(5) Korsten Peter, Heller Baird Carolyn, et al, From Stretched to Strengthened, Insights from the Global Chief Marketing Officer Study, IBM, 2011. Based on face-to-face conversations with 1734 CMOs in 64 countries. In this study outperforming organisations are rated 5/5 in terms of performance by their CMOs, though additional tests were undertaken to ensure this correlated with superior financial performance
(6) Argyriou Dr. Evmorfia, Leeflang Prof. Peter, Saunders Prof. John, Verhoef Prof. Peter, White Paper: The Future of Marketing, The Chartered Institute of Marketing, 2009
(7) Arnold Tim, Tomlinson Guy, The Marketing Director’s Handbook, 2008
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