The following is a guest post from Mark Stouse, Founder and CEO of Proof, a sponsor of DMA’s 2017 Marketing Analytics Conference (June 5-6 in Austin, TX).
If you’re a CMO today, there is an invisible and utterly implacable enemy stalking you, and it’s all but guaranteed to hurt your success and maybe even kill your career.
That is a big, even sensational statement, but hear me out.
What’s happening now
- A record number of CMOs were fired in 2016. According to data from various top recruiting firms, the job losses averaged almost two per day.
- These CMO departures were concentrated in long-cycle businesses, a fact that is very instructive all by itself.
- Typical CMO tenure is now 18-22 months – by far the shortest of any CxO function. Various recruiters have published recent research with somewhat different numbers, but none of it is good news for CMOs.
- 94 percent of CMOs still can’t demonstrate revenue impact to the satisfaction of the rest of their C-suites, despite the boom in data and the billions spent on marketing technology.
- Yet more than 70 percent of CEOs believe revenue impact is a huge part of the CMO job description.
- The survey of Fortune 1000 business leaders showed that “failure to prove business impact” was the No. 1 reason for CMO termination.
But the clearest indicator of how business leaders currently see the CMO’s ability to deliver provable revenue impact may be these brutal stats provided by Spencer Stuart and the National Association of Corporate Directors:
- There are roughly 10,000 board seats in the Fortune 1000.
- Fewer than 80 currently are occupied by senior marketing leaders.
- More than 3500 are occupied by senior sales leaders or other executives with significant sales and sales leadership experience on their CVs.
Soundings taken from the big recruiting firms indicate that 2017 is shaping up to be the same or worse than last year. And there’s a new wrinkle – a small but increasing number of companies are appointing a seasoned business leader without direct marketing experience to be CMO rather than recruiting a new marketing leader. Some are calling this new role the Chief Growth Officer, and like Coca-Cola, they no longer have a designated CMO. This approach has recent precedent: between 2005 and 2013, a very significant percentage of companies chose to put business leaders in charge of their IT departments to drive change and business alignment.
Business leaders are demanding change now
Business leaders know they need marketing. But as always, business leaders are looking for dependable cause-and-effect relationships between what they spend and the value they get back. It’s how they manage opportunity cost within a finite pool of resources. Marketing’s inability to prove business impact means that CEOs and CFOs in many companies have only one lever to control their risk, and that means reducing the marketing budget until something breaks.
There’s nothing new about this dynamic except for one important thing: Business leaders have finally had enough. 2016 is a signal that the marketing status quo is done, finished, over. If you’re still employed as a CMO, 2016 was a shot across your bow. If you were one of those who lost their job last year, it was something a lot worse.
At Proof, we’re now talking to companies that have asked their risk management team to assess the materiality of spending so much money on marketing without any provable impact. That’s new. Provable impact and opportunity cost are the bywords in these conversations.
Why this is happening
Like a lot of things in life, there’s good news and bad news.
Let’s start with the very good news. There is a ton of great marketing out there today. In many companies, CMOs and their teams are creating huge business impact and business value. And I don’t mean in a vague, anecdotal way. I mean substantial, measurable cash impact. At Proof, we know this because our software helps marketing teams compute it.
The bad news is that most business leaders in most companies still don’t see it. While the CMO role may be all about provable revenue impact, most CMOs don’t live that reality. According to CMO Council reports, less than 6 percent of marketing teams have successfully connected their efforts to revenue, margin and cash flow impact, and almost all of those are in short cycle B2C companies. But that doesn’t mean that the revenue impact isn’t there.
But C-suites are very frustrated that this problem still exists despite the millions upon millions spent on martech and sales tech. It still exists despite the explosion in available data, and despite all the promises that a solution was just around the corner.
The business leaders we speak to are really frustrated, even angry, about it. After speaking at SxSW this year, I was approached by a very prominent technology CFO who liked what he had heard. But he said one thing that should absolutely freak you out.
“The useless millions spent on martech will be for marketing what Y2K was for IT.”
Let that sink in for a second.
What’s stalking so many CMOs?
Business leaders and board members look for economic alignment between marketing investment and business impact. For all of its own shortcomings, Sales typically makes that alignment very obvious. Marketing has not.
At Proof, we’ve identified the major roadblock to demonstrating visible economic alignment between marketing and the business. Left unresolved, this factor is the deadly enemy of every CMO, the clear majority of whom are doing great marketing and creating real business impact. Warning: it’s not what you probably think it is, and it is even sort of boring.
The obstacle to economic alignment for many CMOs and marketing teams is Time to Impact, or what many simply call Time Lag. In simple terms, this means that nothing you do as a marketer has an instantaneous effect on your audiences. There’s always a delay. And it’s a lot worse in B2B companies than B2C, probably for obvious reasons.
In most B2B companies, this lag between marketing programs and any discernible business impact can be 9-12 months or even more. Assuming sound strategy and excellent execution, the CMO’s failure to compute – and then help the business understand – Time to Impact is what is causing many of them to lose their jobs. In fact, the awful part is that many CMOs are getting fired just as the positive impacts of their organization’s work are becoming apparent and discoverable.
Think on that for a moment too.
Let’s look at the nexus of marketing impact and time lag a bit more. Marketing and communications actions are like big rocks thrown in the pond of the marketplace. Each rock creates one or more ripple effects, radiating outwards with different levels of power, time lag and persistence. Some have greater power than others, but take longer to manifest impact. Others move the needle quickly, but dissipate fast too.
This idea of a ripple effect or a knock-on effect is crucial. If you can’t compute how long it takes for the totality of marketing’s ripple effect to be evident in audience behavior and thus in the business, you won’t know where in the calendar to look for correlated evidence of its strength.
As you might guess, there are often additional complicating factors. If you’re the new CMO of company X, and it has external headwinds bearing against it, demonstrating marketing’s business impact is going to take you even longer. But your C-suite may not see or understand this fact, so you’re going to need a plan to deal with that. That means being able to compute Time to Impact, handicap its impact on your organization’s performance, and then socialize that fact successfully with the company’s leadership. If you don’t, you’ll run out of time and political support, often about the same time that your bets are starting to pay off.