What enables some businesses to weather the changing economic climate and the cold wind of market forces, while others wither? The most successful grow income and budgets steadily, while the weakest are left with diminishing income and budgets. Or none at all. Just as Darwin observed, the fittest survive or thrive, and the weak die.
Business success factors
Business strategy, and marketing were first recognised as important in the middle of the twentieth century. Though while research by Jim Collins and Jerry Porras (1) revealed the benefit of an ambitious, engaging business goal and vision, the role of marketing has received less attention.
The role of marketing is best understood by leading consumer goods companies. It is most influential in the most successful businesses, such as Procter & Gamble and Unilever. However, the discipline plays second or third fiddle in companies in sectors such as business-to-business (b2b) and utilities.
Marketing is a success factor
The effects of marketing communication campaigns are well documented. Some show positive results, some negative. Though it is hard to find empirical evidence to prove how or what aspects of marketing drive business success. Or explain what businesses should do strategically. So we’ve done some research. This article attempts to unearth ‘hard’ evidence on what really works.
In 2006 Booz & Company (2) 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 show superior growth. But what is ‘healthy marketing DNA’ and how can it be ‘bottled’?
Here’s a summary of three marketing functional characteristics that correlate with business success:
1. Ability to measure contribution to business growth
As long ago as 1955, Peter Drucker famously wrote ‘what gets measured gets managed’ (3). Yet as recently as 2005, a CMO Council study of US CMOs (4) revealed that more than 80% of organisations had not yet developed meaningful, comprehensive measures or metrics for their organisations. In contrast, the 20% of organisations that had instituted useful measures substantially outperformed their competitors in terms of revenue growth, market share and profitability. Further, the importance of measuring ROI remains high on CMO’s agendas. According to IBM’s Global CMO Study (2011), nearly two-thirds (63%) believe that measuring marketing ROI will be the most important measure of success in the next 3-5 years (5).
It is disappointing that many organisations continue to hire marketers with lots of experience in a business sector and then only rely on them to make judgement calls on what to do and where to invest. This contributes to the perception that marketers are ‘fluffy’. It also compounds the view that they are unworthy of a seat at the board-room table. While a challenge, successful business development requires sophisticated measurement and modeling to link marketing activities to sales and profitability.
2. Broad capabilities, scope of operation and ability to influence senior decision makers
In some organisations marketing operates solely as a communication or promotion department. In others, as a management ‘gopher’, responsible for tactical initiatives, and reactive to management demands. Organisations with marketing functions that work closely with the CEO, work across the organisation, and assume broader strategic responsibility, are more successful. Their roles include business analysis and development, product innovation, and approving large investments. By grasping customer insights quickly, and communicating and making decisions based on those insights across organisation boundaries, helps fuel success. In other words, better engaging management and employees, also enables out-performance.
3. Deep customer understanding, adding value proactively
Successful business development requires deep business, customer and strategic understanding to design, promote and deliver experiences that customers want. Outperforming organisations invest much more effort in capturing and using customer information to make decisions and foster customer relationships. IBM’s CMO study confirms that market research is the single most important source of information influencing strategy decisions (cited as important by 82% CMOs). Reassuringly, 63% of CMOs believe they can grow their influence by being the voice of the consumer (5). In addition, research by The Chartered Institute of Marketing suggests that marketers’ influence is also greater when competition is intense and the market turbulent (6).
So what to do? Unlike the DNA of living organisms, organisational DNA can change. So start your business strategy process by understanding where the business and marketing capability is now, 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. This suggests that marketing is relatively unimportant in 86 of those companies, or that competition is benign. Yet the role and ability of marketing to drive business growth is widely misunderstood. Thus the onus is on marketers to explain what marketing is and does to drive business growth.
Effective and superior marketing involves understanding customers and accumulating facts. Also using the facts those to influence your colleagues and help make better decisions to advance growth and profitability. To this end, marketers should view themselves as the voice of customers and directors of growth. Success will further justify a marketers’ place 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.
(2) Landry Edward, Tipping Andrew, Dixon Brodie, The DNA of Marketing, Booz & Company and the Association of National Advertisers, 2006. Based on online survey with 30,000 responses.
(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 1,734 CMOs in 64 countries. In this study outperforming organisations are rated 5/5, though more tests verified 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.