Marketing 2.0

It is well documented, and indeed has often been discussed on these pages, that marketing is still not finding its place at board level. Who better to ask for his views on the reasons for this than the father of modern marketing himself, Philip Kotler. Professor of international marketing at the Kellogg School of Management in Illinois, Kotler’s book Marketing Management, now in its 13th edition, is referred to as the bible of marketing.

When we met in London recently, he had a fairly clear idea of where the responsibility for this omission lay.

“It’s the board’s fault, the CEO’s fault,” he tells me when I ask why this phenomenon prevails. “In the US, we have some 2,000 CMOs [chief marketing officers], but this, of course, is still a very low percentage if you look at the number of companies.

“You’ll notice that CMOs are usually found in companies that are large and have multi-businesses, so each business may have its own VP [vice-president] of marketing — but these are often not at a board level. So, now the question is, ‘How do we get the voice of the customer at  board level?’

“Theoretically, the CMO should be of equal influence to the CFO [chief financial officer] — but we know in practice no one is of equal influence to the CFO.”

Kotler’s six rules for the marketing director

Kotler says he advises marketing directors or CMOs there are six things that they should do when appointed. “A company might say, ‘We’re doing them anyway without a CMO’, but let me list what they seem to me to be, and then it’s for the company to decide if that is the case.

“If I had a company and I appointed a CMO, for one: I would want that person to be bringing in the voice of the customer to our deliberations — in other words what is the customer like? And are we paying enough attention to the changes happening with our customers?

“Two: I’d like the CMO to be a source of generating new customer insight. It’s a magic word, ‘insight’, and you don’t get it from normal marketing research, which gives you demographics and a lot of numbers. It’s really getting methodologies that will tilt your understanding of a market in a new way, allowing you to zoom in. Not that this is delivered by the CMO, but the CMO will make sure there is training in what we call ideation —idea-generation techniques — so that each business unit will have ways to think creatively.

 “The third thing is to be responsible for the branding in the company — the corporate brand — and for protecting it. Now, that’s done by PR as well, but also the various brands within the company, building them and even getting a measure of what we call brand equity because, if I know I’m losing some brand equity, I’ve got to worry about that. So, I want a measurement system in place.

“The fourth is we’ve got a lot of brands in our product mix, some of which may be dead wood, and the CMO should point out those ones that could be eliminated.

“The fifth thing is to bring in the new technologies in marketing, to have a strong understanding of new techniques out there like marketing mix modelling.

“The sixth thing is to create a set of metrics that will be used to measure the performance of campaigns, so we don’t just claim that they work. Today, we need to be more scientific.

“Now, given those six things, you’ll have companies that say, ‘Oh, we do have the voice of customer coming at us all the time, we’re doing a good job with our brands, someone else looks at the product mix’ and so on. But I am talking about placing this more centrally as a function.”

The new marketing director

Kotler says he advises professionals coming into a new role as marketing director not to attempt to tackle all six, particularly if new to the role. “The CEO is paying a lot of money for this person and wants some early sign that it is helping. Usually there are two of those six things that are really needed, and will show early results. That’s our advice always to CMOs. Especially after research shows that many of them only last about two years!”

He says this statistic may be somewhat deceptive. “What if we found that the reason the CMO is no longer there is because he or she has been promoted, or pirated away by another company that needed a great CMO. So the statistics are perhaps a little unreliable about the short termism of CMOs.”

Marketing metrics at board level

In our last issue of Irish Director, Professor Malcolm McDonald questioned the value of profit and loss accounts and balance sheets in the boardroom, which he said showed scant regard for the real value of the company — its intangibles. I put the point to Kotler.

“Yes, let me tell you that a board should prepare not only a financial scorecard for their meeting, but also a marketing scorecard. A marketing scorecard is more predictive of your future. A financial scorecard is really more about history.”

And how would such a scorecard look? “In the marketing scorecard, I would like to learn how many customers have we gained; how many customers have we lost; what’s the quality of the customers we’re gaining and losing; and what has been the return on investment on our campaigns, just to get a sense that we do have metrics even for marketing. What’s our brand equity? Is it growing, flat or declining? I would also like a measure of our customer equity — the customer lifetime value.”

Marketing-savvy CEOs

He says former chief of Intel Andy Grove truly understood the importance of board access to this kind of knowledge. “He himself complained at a board meeting, ‘For two hours we’ve been talking about financial numbers. None of you asked me whether our customers are happy or happier. Let’s talk about the people who buy our chips’.”

So, by extension, does Kotler think the great companies are those whose CEOs have a true understanding of marketing and its fundamental importance to all aspects of the business?

“Well, here’s what’s happening. I think now a large number of CEOs are talking the customer game and saying, ‘We love our customers, we stay close to them.’ I’d like to ask the CEO what percentage of his or her time is spent with customers.

“When I asked that of Jack Welch, former chief at General Electric, he told me that 50pc of the time he was with the president of American Airlines, or Boeing, or Coca-Cola. That’s because the president or CEO makes a major difference in key account maintenance these days.”

Strategy v tactics

Kotler says it is the role of the real marketing professionals to get this message across at the highest level.

“For those CEOs who don’t seem to know much about marketing, I think we’ve got to do a good job of increasing their understanding of the potential of having top people who are strategically minded and not just tactically minded about marketing. Namely, it’s nice to have a set of very skilled marketing people in communications, but I also want to have someone very skilled in strategy, who thinks long term.”

When we met, Kotler had just given a detailed presentation to an enthralled audience at the Leaders in London event in December in Westminster Hall, where he spoke, among other things, of today’s obsession with the return on value — leading to the financial director often being the natural enemy of the marketing director. How can a good marketing director bridge that gap?

“If they don’t talk to each other, it’s fatal. I would put their location next to each other in the company. I would urge a CMO to say to the CFO, ‘Can we go to lunch once a week? I want to tell you what’s happening, how I’m spending your money and what the metrics are that I’m using. I want you to criticise the metrics. I want you to work with me on the metrics that would satisfy you.’

“If that happens, it will be the CFO who becomes the advocate of the marketing spend because, after all, he helped design the metrics.” Now that’s strategy over tactics.

Photo: Rex Features