Growth Insights for CEOs

Do CMOs Really Matter? Harvard Business Review Says Yes!

Posted by The Chief Outsider

do cmos matterThe October 2015 issue of Harvard Business Review contains an interesting article that discusses the value that Chief Marketing Officer bring to organizations, Do CMOs Really Matter? The business press and academic studies have questioned the value of having a marketing person as a member of the executive team over the past few decades. As you can imagine, the answers have varied. 66% of CMOs recently surveyed indicated they are continually under pressure to demonstrate the value of marketing.

This article summarizes The Chief Marketing Officer Matters, the latest study of CMO effectiveness, published in the Journal of Marketing in May 2015. The authors found that organizations with CMOs perform 15% better than those without CMOs. More specifically, the study shows that ratio of the market value of a company compared to the book value is higher in companies with a CMO. For those of you with a finance bent, that ratio is called Tobin's q after Nobel prize winning economist James Tobin.

Looking at 155 publicly traded companies across many industries over a 12 year period, the study reveals how a CMO impacts corporate performance. One role of the CMO is to act as the voice of the customer in the C-suite. The CMO is viewed as the steward of a firm's customers. Bringing the customer into the boardroom can have a positive impact on corporate performance. The advocacy of the CMO on behalf of the customer can also make a difference in companies with high sales growth. Generating and acting on customer-focused scenarios provides greater benefit in a high sales growth scenario. In firms that are relatively small, a CMO can have a bigger impact on that firms direction or strategy. Companies pursuing a strategy of high differentiation increase the need to quickly identify market opportunities and to implement the strategies necessary to exploit those opportunities. The CMO as part of the management team helps develop and nurture those capabilities. Finally, a CMO working with a relatively new CEO tends to increase the impact on organization's performance. The customer and market focus that a CMO brings to the top management team helps the CEO create and implement his vision for the organization.

The research finds that the presence of a CMO in the executive suite is a credible signal that the firm embraces the market concept and marketing has a more prominent role in the firm. The CMO at the strategy table does matter. The CMO can then be chartered with implementing the vision that a CEO has for the company. Working with the members of the executive team, the CMO can bring the customer focus and he or she can make a difference – a measurable difference.


Topics: Chief Marketing Officer, Fractional CMO

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