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…

Brands are an outcome

I’ve just finished the major part of the book we’re doing, published by Butterworth-Heinemann. Hence the long gap between the last post and this. So expect more content from now on.

Anyway, one of the research themes we look at is the influence of brand on decision making. Did you know that there is no research available that supports the assertion that “building the brand” leads to more sales? None.

In simple terms, this means that any money pumped into branding is unlikely to translate into business success. This, presumably, would include the hilarious London Olympics 2012 pink splodge. Spookily, Seth Godin comments on more or less the same thing here.

But if brand is not a prerequisite for success, what is it? Firstly, brand is a consequence of success. Google is successful, so its brand becomes trusted. Secondly, brand is a measure of trust and expectation, not awareness. Anyone can get awareness is they spend enough. Ford is well-known – does it have trusted brand? (Answer: not if business success is the measure.)

Finally, it’s interesting to see how fragile a brand is, only as robust as the product or service quality it represents. In the UK, the banks are taking an absolute pasting on their charging regimes, and it seems that the US banks are having a few problems too. The trust with which we approach banks is being severely dented. And I predict that the first bank to promise no more unfair charges will be deluged with new custom, irrespective of their current brand status.

Brand effectiveness - does it exist?

Here's an interesting exercise you can try at home, if you have access to research databases. I'd love to get some feedback on this.

I searched in EBSCO, a database of journals and academic papers, for "Brand" in the title. I got 2028 hits. I then narrowed the criteria to "Brand + effectiv*" - 21 hits. This means that there is less than 1% of research articles relating to brand that deal with its effectiveness. It gets better.

I then searched for "Brand + ROI" and got one hit. I even read this article - a weakly researched piece of assertion by a brand consultant.

Just in case EBSCO is particulalrly weak in articles on branding, I tried the same exercise with ProQuest. Similar results: "Brand" = 2262 hits, "Brand + effectiv*" = 12 hits, "Brand + ROI" = zero hits.

Now, this exercise is less than scientific. But at best it does indicate a paucity of robust research into brand effectiveness. At worst, it confirms scepticism of the value of brand and rubbishes the idea of brand equity.

If anyone knows of research that demonstrates the value of brand and can directly relate it to sales, I'd be really interested.