‘Integral Part of the Strategic Calculus’

To a large extent, organizations have been evolving to the point where marketing is viewed as a strategic rather than a tactical function. The typical thinking previously was that the company’s strategy was set by the CEO, CFO, and other C-level executives, and marketing would be involved only when it came time to translate these strategic objectives into tactical actions: How big a salesforce do we need? How much do we spend on advertising? And the like.

In many organizations, however, the realization has dawned that marketing is an integral part of the strategic calculus of the company. Without thinking about which customers it wants to serve, what its capabilities are in terms of delivering value to these customers, and how it can account for competitive actions and reactions vis-à-vis these customers and capabilities, a company is likely to be ill-equipped deciphering what product configurations to offer, what pricing mechanisms to put in place, how to communicate the value of the offerings to its customers, and what channel setup to leverage.

The consequence is that more and more companies are hiring CMOs—a casual online search reveals the number of companies hiring first-time CMOs—and these CMOs are increasingly getting a say at the strategic decision-making table.

Data versus information

At the same time, a parallel trend is taking shape with respect to the CIO (and occasionally the chief data officer) and her office. As companies are becoming more cognizant of the need for data as a critical input to decision-making, some organizations have moved in the direction of separating the data silo from the marketing silo. This can be a potentially counterproductive trend. Without ready access and integration of the data, distilling them into marketing information and intelligence will become difficult, thereby potentially hindering the strategic marketing function. If a company starts equating data to information, it might fall into the trap of elevating the office of the person gathering, storing, and processing the data into something beyond what he is. On the other hand, a successful organization is one that either tightly integrates the data and marketing tasks or brings the two functions together under a common umbrella.

Several things have changed, and are still changing. The first is the customer landscape. The customer today is much better informed about products, services, and providers. Further, due to the direct connectivity among customers (think social media), information also travels much faster than it used to. While the customer was always in the driver’s seat, today she is really revving the engines. As a consequence, the company needs to make sure that all aspects of the customer experience are superior, not just for the moment but also when the customer goes speeding away from the current offerings. Many a well-established company has fallen prey to the inability to continuously adapt and stay relevant to the customer.

At the same time, the competitive environment has sharpened as well. No longer are companies competing with just their well-known rivals; today there are new competitors from every corner of the globe with new capabilities, insights, and offerings, ready to entice the customer away.

The third is the point I alluded to above: we live in a data-rich environment with bits and bytes pouring in from people (e.g., customers), companies (e.g., rivals’ promotional campaigns from TV to mobile devices, channel partners’ data, etc.), objects (think the “internet of things”), and the environment (e.g., weather patterns, environmental patterns, etc.). To continuously record, assimilate, and transform the data into insights is no simple task. All these factors together have strained the capabilities of the company—not only do your competencies need to address these issues, but they need to also adapt to stay current.

Clear the hurdles

First and foremost, a CMO dropped into a new organization must step in with the clear understanding that there is no right or magic formula that applies to all businesses in all markets. Each organizational situation represents a unique challenge that must first be understood and then acted upon. Second, the CMO must be willing to experiment. For example, I may not know that the amount I am spending on advertising is too much or too little. But unless I change my advertising level, I will never know whether it is one or the other. With the willingness to experiment comes the third trait, a willingness and ability to learn and adapt. If something does not work, take away the key learning from the experience to make sure you do not repeat it. Fourth, it is important to institutionalize the insights. The more widespread the sharing of knowledge regarding the company’s successes and failures and their likely causes, lesser the danger that others will make the same mistakes. Indeed, autopsying both positive and negative outcomes provides a better understanding of what tends to work when. Fifth, eliminate siloed existence. While it might be hard to do, bringing in insights from other disciplines and functions could lead to insights that might have been difficult to identify otherwise.

This post appeared in Hindu Business Line on December 18, 2014

Pradeep K. Chintagunta is the Joseph T. and Bernice S. Lewis Distinguished Service Professor of Marketing at Chicago Booth.