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5 facts about marketing every CEO (and CMO) needs to know

by | Sep 3, 2016

Even decades after leadership thinker Peter Drucker said his famous sentence “the business enterprise has two–and only two–basic functions: marketing and innovation” there’s still a—surprisingly lively—debate as to whether marketing’s (and marketers’) role should be exalted. Here are five research-backed facts that prove all marketing skeptics wrong. Marketing and CMOs are crucial for company success! Full stop (from my Forbes column).

Fact 1: Strong marketing departments have a clear positive effect on firm performance.

A new breakthrough study of 612 publicly traded U.S. firms over 16 years, across 60 industries, published in the Journal of Marketing, reported an important discovery: powerful marketing departments have a clear positive impact on long-term stock returns and short-term return on assets (ROA). Researchers Feng et al proved: firms that gave marketers a prominent role execute stronger marketing and make overall better strategic market decisions.

In short: A strong marketing function drives business performance.

Fact 2: Firms with a Chief Marketing Officer perform better financially.

A second breakthrough study proves that companies with a CMO in the top management team, compared to firms without a CMO, achieve on average 15% better financial performance (measured by Tobin-q). Using data from 155 publicly traded U.S. firms over a 12 year period, the findings of German et al make a strong case for the positive financial impact of having a CMO.

In short: CMOs drive financial performance.

Fact 3: CEOs recognise CMOs as the number one shapers of forward-looking company strategy.

With Patrick Barwise and I, supported by INSEAD’s Global Leadership Centre, recently analysed 67,278 360-degree surveys to understand how bosses rate senior marketers versus how they rate all their other direct reports. CEOs rank senior marketers first compared to all other leaders when it comes to challenging the status quo, trying to change people’s opinions about the right course of action, and actively shaping company strategy.

In short: Marketers drive forward-looking firm strategy.

Fact 4: Marketing’s power is rising.

In the digital age, other C-suite leaders are becoming more and more involved in marketing, from the Chief Technical Officer to the Chief Operating Officer. You may have heard talk recently about the possible decline of marketing’s influence. Not true. Feng et al (see above) could prove that over a period of 16 years, the power of marketing departments in US firms has steadily increased.

In short: The trend is marketing’s friend.

Fact 5: Marketers can influence much of their own success.

Many marketers work in complex structures and often lack decision power over all four marketing Ps: price, product, promotion, and placement. But marketers are more powerful than many think. In a second study we researched the causal effects of marketers’ perceived business impact and career success. In a large sample of 1,232 senior marketers from around the globe, we could prove that leadership behaviors and skills drive over 49% of CMO’s career success and over 63% of their market success. Of course, external factors like budgets, aligned goals, company culture, role clarity, and top management support matter. But marketers can overcome many of these challenges by displaying strong leadership.

In short: Marketers have the power to drive both their firm’s and their own success.

There has never been more evidence for the importance and benefits of strong marketing teams.

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