You would think in the age of big data and being blessed with more information about customers and tools to target them at a creepy level of granularity, CMO’s would be the most venerated members of the C-suite with a seat at the right hand of the CEO but with CMO’s tenure hovering around just 40 months, CMO’s are quickly finding themselves getting kicked to the sidelines just as the role grows in complexity and opportunity.
There are a number of reasons why this happening but one of the main reasons is, in our opinion, is much of the information that should inform CMO’s marketing strategies actually empower other units who are naturally inclined to using numbers to make decisions.
This leave CMO’s in a precarious position as they’re largely trained on top of the funnel aspects such as brand, reach and the messaging that largely gets seen at corporate level as a cost center especially if the brand or reach aren’t linked to business value. This focus especially frustrates CFO’s who (if they’re any good) operate in metrics that drive value not only for the business but shareholders. CMO’s and CFO often clash because of this frustration and in that clash, there’s only one winner (and it’s not marketing).
Avoiding this clash is going to get harder over time as marketing is now more a science than art and that empowers the CFO who also align greatly with another number driven function in the business famous for clashing with marketing, sales.
Most CMO’s aren’t number driven by nature and are often failed by their training which doesn’t take into account business value. brand, reach, targeted campaigns and creativity is valuable but CFO’s struggle to see how this effect the income statement outside of cost. Some marketing gurus think this can solved by marketing leaders becoming more strategic which is part of the answer but even then, CMO’s may find themselves out of work because not being to communicate with other business leaders isn’t the problem.
Our theory about why CMO tenure is declining is that companies are finding out not so much how effective their marketing is but valuable their customers are and aren’t liking what they see. CMO’s aren’t getting their budgets cut because they can’t justify extra spend but companies are finding out their LTV numbers aren’t great and their CAC is bloated. CFO’s are in the capital allocation game and if they see they’re getting $1 or $2 out of a customer for every dollar spent on marketing, the growth engine every business, it's no surprise companies are returning cash to their owner in the form of buybacks and dividends at record levels.
CMO’s aren’t getting cut quicker because they’re bad at their job or have an outdated mindset but rather companies coming to the realization that increasing or even shrinking marketing spend won’t change the economics of the business. Companies are finding out that they don’t have a business in their tenth year of operations because they can’t charge at cost which leaves the company with no room to maneuver. CMO’s are being asked to fix things or prove their value without the actual power to do so. The fallout is marketing leaders are moved on.
One of main reason CMO’s don’t last long is that much that made them valuable has been swallowed up by other C-Suite executives. Thanks to the technological advances and explosion of data in recent years, the classic four Ps of marketing (Product, place price promotion) are not owned by the CMO which has made CMO less important to the overall business strategy. Marketing is still a vital cog in the value chain but how companies reach and sell to their customers has changed drastically. Many Modern CMO’s largely see the four P’s as outdated as its importance was largely wrapped up with physical channels such as stores and with all the change in the last 15 years, using the four P’s to guide a company marketing strategy isn’t smart (unless you’re P&G or Unilever).
The balance of power between customers and marketers has swayed almost completely to customers who are now more educated about products, know what they want and are largely immune to the messaging and hype churned out by marketing departments. With this in mind, marketers have to lead with another paradigm that’s built around the customer rather than channels. What this means is that CMO’s have to find another way to reach customers that isn’t in their remit as marketing has become less and less strategic in an age where marketing should be seen as an investment rather than a cost of doing business.
To address this, marketers have been following the SAVE framework (Solutions, Access, Value and Education) as customers that are in the market are looking for products and services that solves a problem. This framework requires a major rethink on how to reach out to potential customers and more importantly how marketing delivers value to customers and track the value of customers to the business.
However, recent reports suggest that CMO’s are finding it hard to put this framework into action as marketers largely struggle to measure the effectiveness of the channels they use in dollar terms despite the data being available to do so.
This turn of events why other members of the C-suite don’t really respect what CMO’s or marketing itself brings to the table. It wasn’t that long ago when a report came out that two out of three CEO’s don’t trust their CMO which is crazy statistic not only because its so high but CEO’s were so honest. With this level of distrust among their bosses, it’s no surprise CMO’s time in their seat is so short. Marketers are often first to get their budgets cut, have their ideas questioned due to the subjective nature of the craft and are put on the spot to produce numbers on ROI that thanks to the vast and convoluted modern marketing stacks, can be difficult to cobble together.
Marketers do themselves no favors as 80% of CMO’s struggle to grasp the concept of customer lifetime value (CLV) which is concerning as being able to determine which customers are worth chasing (which is really the whole point of tracking CLV) is why CMO’s tenure is shrinking. This revelation is especially concerning as CMO’s are blindly pursuing customers who may not move the needle and 80% of market leaders don’t have clue until the company start missing quarters or when they have to build their budgets from the ground up. This stat is a big black eye on CMO’s as tracking metrics such as CLV and customer acquisition cost (CAC) won’t just help marketers target acquire and retain customers more effectively but also serves as an effective tool to secure buy in from CFO’s as marketers can point to the capital efficiency of the marketing department and impressive return on every dollar spent.
CMO’s ignorance around key metrics like CLV/CAC often leads to other functions such as finance and sales picking up the slack and which can lead to frustration among both finance and sales leaders. This frustration has bred the creation of a new role, the chief revenue Officer (CRO) largely put in charge of sales and marketing and aligning them around revenue growth. What’s even more concerning is the advent of fractional CMO’s who fill in part time and with the CMO’s losing their seats in record time, this growing service could become a fixture in the C-suite.
Chief Information officers (CIO) faced similar struggles earlier last decade as more was being asked of them with rapid advance of new technologies which saw the creation of new roles such as the CTO, CISO and CDO as CIO found themselves being asked by their leaders to prove their value to the business. The main beneficiaries ironically were marketers who back then and still today have larger technology spends than most technology/information leaders. Now it the turn of CMO’s to prove marketing’s value the business as CEO and CFO are asking more of marketing leaders to make marketing departments the growth engine the onset of big data and the explosion of customer metrics once promised.
It’s safe to say many CMO’s and their departments have fallen short of these expectations with a whopping 68% of marketers rate their LTV/CAC ratio as “below average, or very poor”. As mentioned before, bad or low LTV:CAC ratios are bad news for CMO’s as they can’t justify bigger budgets as marketing on a per dollar basis makes no sense. The onset of COVID led to a drastic drop in marketing budgets as a percentage of revenue but it was notable when Google made it public that it would cut half of its marketing.
It’s easy to see this as a response to COVID-19 effecting demand with companies across the board cutting marketing spend but we can argue that Google can do this because much of the work from a brand, segment, targeting and positioning perspective has been done already. Everybody knows Google’s brand and use their products across the globe and with google formidable trove of customer data, the mountain view giant is highly aware that marketing spend won’t affect the economics of the business either positively or negatively.
Google massive marketing budget coincides with worrying trend of companies getting rid of marketing leaders and not replacing them which has led to predictions the role of CMO may disappear altogether with brands like Uber, Mcdonalds and Johnson and Johnson in recent memory not replacing departed CMO’s. What particularly worrying about this trend that these companies not only not replaced marketing leaders but spun out their responsibilities other units. However, the growing role of CMO’s means that much of their value is sitting in other departments.
This struggle to see the dollar value of marketing is that marketing is often not aligned with the sales in the worst way possible. Sales and marketing departments are notorious for clashing with each other especially when don’t go to plan but that’s usually a product of poor communication marketing and sales leaders. However, CMO’s must align with sales as much of data that validates the value of marketing is locked in CRM’s. Add to that most marketers often measure the ROI of their campaigns or initiatives quicker than their company’s sales cycle, Marketing can look more ineffective than it really is.
Better sales and marketing alignment can solve this problem over time with a stronger alliance over time but with the tenure of marketing leaders falling by the wayside, the odds are they won’t get it or see the benefits of their work. Marketing has always been a function looked at with a certain undercurrent of derision in the C-suite even as their role has become ever more complex and more being asked of them.
CEO’s and CFO’s are the main culprits of this lack of respect for marketing as they’re looking for marketing to be a growth engine even if intervening factors such as vanishing value propositions, mature business cycles, saturated markets and sclerotic growth are outside of marketing’s control. CEO’s as much as CFO are looking to allocate capital even when it doesn’t make sense to do so (The vast majority of CEO’s are notoriously bad at capital allocation) so often lean on their CFO’s who have at best at trying relationship with their CMO’s who only 40% report a positive relationship with their CFO’s. Much of that tension is driven around the unclear value of the marketing department to the business.
In sum, the decline of CMO tenure in a number of places but if CMO’s want to reverse this trend, CMO must make use of the growing number of tools that can help them track key metrics they can show to their CEO or CFO proving marketing’s value to the business. However, if marketers continue to lean on old school tools or even exclusively lean on numbers, the worry trend of declining CMO tenure will continue for some time to come.
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