Does A CMO Add Any Value To A Company?


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Well there’s a loaded question. This question has been posed for many years (at least 12) and the answer depends on who you ask. In 2003 a paper was written showing that CMOs increase revenue. (Though given the small percentage of companies with CMOs then, I have some reservations about the validity of the study.) Another study done in 2008 found opposite results, and in 2012 Forbes wrote an article suggesting “The CMO is dead.” A study published in the December 2013 issue of The Journal of Business and Economic Research purported to show that companies with CMOs generated 3% greater shareholder wealth.

In the October 2015 issue of The Harvard Business Review, they discuss a new study from the Journal of the American Marketing Association, which demonstrates another positive correlation between companies who outperform on revenue and those having a CMO. Thus, we now have lots of contradictions. Why is that?

The HBR article reminds us that correlation is not causality. The newest study clearly states that just bringing on a CMO will not necessarily result in more revenue. So, what conclusions can one draw from these studies?

The authors themselves suggest a few things, but I have a different issue to consider. In these studies they assume that the CMO in company “x” has a job description/responsibility similar to that in company “y.” This is a false assumption. The responsibilities of CMOs vary greatly among companies. Studies have found that CMOs self-describe their responsibilities as ranging from simply “director of advertising” to full-on strategic partner for all things “marketing” with the CEO. (I have railed about this disparity and the resulting title issues on this blog for years.)

How can one purport to know if CMOs add value when the term has no consistent meaning? What variables can you consistently hold constant to try to understand any such thing?

It seems obvious to me (and I would think any rational person) that a CMO adds value if they are needed. All companies have a CMO from day one; the CEO is the acting CMO. However, as the company grows, the CEO may become too busy elsewhere to be a useful CMO. Somewhere around $100MM in revenue that may happen in my experience. At that point all Marketing (Product Management, Product Marketing, Marketing Communications and Marketing Strategy) are probably still centralized, so you need a true CMO.

At the other end of the spectrum, $1B and up in revenue (and possibly well before then), it is likely the company has organized into Strategic Business Units (SBU) or Product Lines or another diversified structure. This then usually results in much of Marketing being placed within the hands of each SBU and the “centralized” part is really Marketing Communications. Thus a CMO in this company has very different responsibilities from that of the CMO in the $100MM company, unless they are also “dotted line” responsible for all of Marketing, including that done in the SBUs.

So, does a CMO add value to the company? It depends what you mean by CMO, but somebody better be the Chief Marketing Officer, either within the business units or for the company as a whole. As we note in our book, Value Acceleration, Marketing (creating alignment between the capabilities of your company and the current and future needs of your customers) is the only real source of sustainable competitive advantage.


Republished with author's permission from original post.

Mitchell Goozé
Mitchell Goozé is the president and founder of Customer Manufacturing Group. His broad scope of business experience ranges from operations management in established firms, to start-up and turn-around situations and mergers. A seasoned general manager, he has headed divisions of large corporations and been CEO of independent firms, always focusing the company strategy on the most important person in business . . . the customer.


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