CMOs have zero impact on sales - official
Sometimes marketing shoots itself in the foot (example: voting to carry on lying). Other times, research does the dirty work. So it is this week. Ad Age reports a new study that demonstrates no impact from marketing on sales. None, nyada, zilch.
The study, to be published in January 2008 in the Journal of Marketing, analysed the performance of 168 firms and concluded that CMOs have zero effect on their company’s financial performance. The firms surveyed include IBM, Intel, Procter & Gamble, Microsoft and Apple.
What’s more worrying, though, is Ad Age’s analysis, questioning whether CMOs should be measured in financial terms, or in such “amorphous concepts” like brand equity or awareness. It’s questions like these that get marketing into trouble in the first place.
Why would a firm reward a CMO for awareness? Awareness of the BBC has just shot up, but for all the wrong reasons. Kwiksave has high awareness – so what?
Brand equity is a great response by marketers to weasel its way out of an awkward situation. “Look at the value our brand creates,” they say, citing the latest study from Millward Brown. But brand value is an outcome of sales, not marketing. It’s a proportion of the market value of the firm less tangible assets. Market value is driven largely by financial results, not by marketing campaigns.
Ad Age also contrasts the short term financial targets with longer term marketing goals. I agree that the impact of marketing programs can take some time to emerge, but we should be able to measure some impact in the course of a financial year. Perhaps not the quarter, but within two-to-three quarters. Otherwise, why are we doing it? The study cited by Ad Age tracked performance over five years. How long does marketing expect to take before it affects financial performance?
As long as the marketing community continues to debate whether it should be measured in financial terms, it will be subject to regular criticism by those that wield the real power in firms: the finance director and the sales director.
End of rant…
The study, to be published in January 2008 in the Journal of Marketing, analysed the performance of 168 firms and concluded that CMOs have zero effect on their company’s financial performance. The firms surveyed include IBM, Intel, Procter & Gamble, Microsoft and Apple.
What’s more worrying, though, is Ad Age’s analysis, questioning whether CMOs should be measured in financial terms, or in such “amorphous concepts” like brand equity or awareness. It’s questions like these that get marketing into trouble in the first place.
Why would a firm reward a CMO for awareness? Awareness of the BBC has just shot up, but for all the wrong reasons. Kwiksave has high awareness – so what?
Brand equity is a great response by marketers to weasel its way out of an awkward situation. “Look at the value our brand creates,” they say, citing the latest study from Millward Brown. But brand value is an outcome of sales, not marketing. It’s a proportion of the market value of the firm less tangible assets. Market value is driven largely by financial results, not by marketing campaigns.
Ad Age also contrasts the short term financial targets with longer term marketing goals. I agree that the impact of marketing programs can take some time to emerge, but we should be able to measure some impact in the course of a financial year. Perhaps not the quarter, but within two-to-three quarters. Otherwise, why are we doing it? The study cited by Ad Age tracked performance over five years. How long does marketing expect to take before it affects financial performance?
As long as the marketing community continues to debate whether it should be measured in financial terms, it will be subject to regular criticism by those that wield the real power in firms: the finance director and the sales director.
End of rant…
posted by Duncan Brown at 11:42 am
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