What you need to know:

• In the latest CMO Awards podcast episode, four former marketing and finance chiefs turned business and commercial growth leaders – ADMA’s Andrea Martens, Lounge Lover’s Samuel Viney, Seek’s Cambell Holt and Adobe’s John Mackenney – share why they’re unfortunately not surprised at the persistent gap between CEO, CFO and CMO when it comes to aligning expectations on marketing’s commercial impact – and how we do something about it.
• Fresh Gartner figures show only 27 per cent of CEOs and CFOs believe their CMO’s performance exceeded expectations over the past year, and half lack faith in the CMO’s ability to prove the value of marketing to the enterprise.
• For Viney, a chicken-and-egg scenario exists around alignment, exacerbated by short CMO tenure and overinflated, unrealistically short-term expectations of the CMO. These, he says, are often driven by the failure of the last marketing leader in the job to meet expectations held by the CEO and CFO. Finding alignment is critical to overcome these problems and be successful as a CMO, he says.
• For Martens, marketers continue to report on outputs – campaign performance for example – instead of strategic business outcomes such as customer growth, retention, margin, contribution, pricing power and overall business improvement and performance. The ADMA chief also stresses “incremental revenue with a clear understanding of its impact on profitability” as the killer commercial stat CMOs must be able to harness to win the CEO’s and CFO’s respect as being a growth driver, not cost centre.
• As well as misalignment on what metrics and value expectations, and a belief “marketing ROI is only a secondary metric to marketing’s contribution to business”, Holt also questions whether more than one in 100 marketing teams can even articulate the value driver trees for the organisations they work for today.
• While less black-and-white about it all being on the shoulders of the CMO to translate what they do into the language of finance, former Tourism CFO and now APAC digital strategy group director, John Mackenney, does believe marketers need to do a better job of explaining the business outcome to be achieved from what they’re going to do. To achieve this, it’s vital marketers can also be clear upfront with the problem statement of what it is they’re trying to solve for – whether it’s to improve acquisition of new customers, or lift retention.
• Listen to the podcast here.

There is an ongoing refrain marketing leaders need to do more to build and demonstrate commercial acumen and their value to the c-suite. And we have a fresh report making the point again: In the latest Gartner survey, only 27 per cent of CEOs and CFOs reported their CMO’s performance exceeded expectations over the past year.

Confidence in a CMO's ability to prove the value of marketing to the enterprise is held by just half (54 per cent) of senior executives. Gartner’s survey also found only 34 per cent of CEOs and CFOs agree with CMOs on the role of marketing in supporting growth. And only one in five CEOs and CFOs report receiving significant clarity from their CMO regarding marketing accountabilities.

They’re sobering figures, and they’re not in isolation. That’s the view of four luminaries participating in the latest CMO Awards Podcast episode who were once in the position of needing to prove marketing’s value as CMOs, but now sit on the other side of the c-suite: ADMA CEO and former FMCG CMO, Andrea Marten; Lounge Lovers CEO and former Aldi and Westpac marketing chief, Samuel Viney; Adobe director of digital strategy group APAC and former Tourism Australia CFO, John Mackenney; and Seek head of commercial growth APAC and former consumer marketing lead for ANZ and customer chief at Mercer, Cambell Holt.  

The CMO-CFO-CEO alignment problem

Viney wasn’t surprised by the numbers, which he sees painting an all-too-common, rather unpretty “chicken-and-egg” scenario. It reads like this: New CMO comes into an organisation and is confronted with demands to improve marketing’s performance “after the last person didn’t achieve what we expected”.

“When asked if you’re going to be able to do it, the CMO will say ‘of course I am, that’s why I’m here’,” Viney comments. “What you get then is two challenges. Number one is you're perhaps being unrealistic with the expectations you're setting – ‘I’m  going to change the world really, really quickly, you watch me’. Secondly, just understanding the metrics that matter in the context of a new organisation, particularly if you're changing sectors, takes time. I think there is a tendency and misalignment between what a CEO and CFO expects versus what a CMO might consider to be important. Pull those things together and you have a recipe for trouble.”

Holt agrees that “lack of mutual understanding around what drives business outcome” is an Achilles heel for marketers. “That’s often an ingredient that’s completely absent, regardless of whether or not you’re a new CMO, or you’ve been in the role three years and you’re still speaking a completely different language, or focused on metrics that are different from your other stakeholders.”

As a former CFO, Mackenney has firsthand experience of the translation issue between the language of finance and marketing. He’s constantly coming up against it in his current digital transformation advisory role at Adobe too, and often finds himself being the “CFO whisperer” for marketers.

“In the first three years of my [Tourism Australia] career, working with the CMO and agencies, I spent a whole bunch of time being frustrated: I’d see interesting things, and what I would regard as sort of bright, shiny objects, and I couldn’t understand the why of what we were trying to achieve off the back of them,” Mackenney admits.

But he doesn’t lob all the blame into the CMO’s court.

“I think it's incumbent on a lot of CFOs to better understand what are the levers that the CMO has, and what are the some of the cost drivers and the benefits drivers there, so we can have a better understanding between two really critical roles in the organisation,” Mackenney says. “It required me to better understand what marketing was trying to achieve, but then also be able to better educate and bring financial acumen into the CMO suite.

“The good thing is there are very clear translations that can be made between what marketers and CMOs are trying to achieve into clear business outcomes. It’s just about drawing those lines.”

For ADMA's Martens, we're still seeing many CMOs reporting on outputs like campaign performance instead of strategic business outcomes and things like customer growth, retention, margin, contribution, pricing, power and overall business improvement and business performance.

“They're the metrics that, at the end of the day, the CEOs and the CFOs are looking for, and they're the metrics that actually influence the total enterprise value. They're the conversations that are not being had,” she says.

As a former CPG marketer, Martens cites an expectation from the outset that you are driving a business, adding cross-functional training cemented this practice. “The expectation is you understand your supply chain, net revenue management, your optimisation of range factory utilisation, as much as you understand your brand and how to drive that through your marketing programs,” she explains. “It meant understanding what the metrics were that the business was looking to drive, and exactly what levers were there to pull.

“It used to be a joke within the ice cream team when I ran Streets at Unilever that if the factory manager went on leave, he’d happily give me the run of the factory because I understood the operations and implications as much as I did my own role. That then translated into every role I’ve had since, and also in the expectations of the marketers around me.”

The problem is many marketers now coming into senior roles grew up in the narrower channels of digital and performance marketing, and many lack traditional CPG, 4P marketing grounding. Panellists agree this has left gaps in the foundational principles of marketing strategy across marketing teams today. Add in sweeping job cuts to marketing ranks – often at the expense of mid-level brand and strategic experience, according to recruiters – and you again face a marketing workforce that hasn’t had as much ability to learn and flex its commercial muscle across all of what marketing can deliver.

Cross-functional partnerships

A second critical element Martens points to is the business partnering side of proving marketing’s worth. “It’s about collaboration and building stronger, proactive relationships with finance, operations and product teams across the c-suite, so that understanding [of marketing] can be built,” she advises.

Holt is another who believes CMOs need to do a better job of business-grade insight to align their own ability to deliver value. As the former consumer marketing leader at ANZ, then Mercer, rising to chief customer officer and now, head of commercial growth APAC at Seek, he says understanding marketing’s role as an enabler of success of other functions is a good way of framing the situation.

“Early on, I discovered I needed to speak their language, they weren’t going to learn or necessarily have any interest in speaking my language as a marketer,” Holt comments. “The best way to align yourself and to create mutual understanding is to take on the task of learning someone else's language, then also take on the task of translation within the marketing function. Don't make it the CFOs challenge to learn your language, learn their language and speak it, and train as many people in your function to speak the other person's language as well.”

In Viney’s case, such cross-functional empathy came in his first client-side role at Aldi Australia as marketing director, sitting within what was otherwise a buying-heavy team. “One marketing director and 35 buying directors, and my leadership were all ex-buyers or ops people,” he recalls.

“It was just learning by immersion. Each week in my team meetings, the topics were buying-related: Pricing, what’s been discontinued, what we’re launching, all this sort of stuff. It really opened my eyes that actually marketing is an important function, but in something like a retailer, it’s a support function. It was incumbent upon me to understand their language.

“Don’t sit there in those meetings daydreaming about the next ad campaign. Chat to them about why you have made this change of this product… What you start doing is you start connecting your world to their worlds. That is really, really important. As marketers, we spend all this time, effort and money developing our agency relationships. I don’t think we consider the relationships with other key stakeholders internally quite as much. That’s something that is critical if you’re going to really make a difference as a CMO.”

The measurements that matter

So how do you know the measurements that matter, beyond them being “commercially sound” or “business grade”? Martens sees the most critical KPI as incremental revenue “with a really clear understanding of its impact on profitability”.

“Ultimately, if we want a greater investment in marketing, we’re going to have to demonstrate a really direct and measurable correlation between the activity we do and those bottom and top-line outcomes,” she advises. “It is this balance of all of the metrics we have in place. Yes, customer lifetime value, ROMI, share of market – they’re all useful, but they have to ladder up to that incremental value and those metrics that the CEO, the CFO and the business ultimately care about. Then you need to make sure as a whole you’re justifying marketing spend as sound investment to deliver growth of the business.”

Holt labels marketing ROI a “secondary metric” around contribution. “Marketing contribution is an absolute or relative measure of impact on a business and ROI is just the efficiency with which I go about achieving that outcome,” he argues. “There aren’t enough marketers talking about the contribution they’re making.

“How many marketers can draw the growth or value driver tree for the business they’re working for today? I would hazard virtually none. That’s a problem because to Samuel’s point earlier, unless you are part of the business and focused on running the business to the same degree as everyone else around you on a leadership team, then you’re at risk of being deemed discretionary or redundant.”

Mackenney also brings it back to the problem you’re trying to solve with the work undertaken as marketers.

“Sometimes it’s growth in terms of acquisition of new customers – just to keep it simple – or it may well be a brand issue. Ideally, we’d love to throw that problem to the agency and that’ll get solved with one big bright idea. But the reality is, sometimes that is not the case,” Mackenney points out. “It’s about trying to understand: If the issue in the business is that we’re not acquiring customers, is that a brand problem? Is it the quality of the digital experience? Are we in the wrong channel? Start with a problem statement and at least a hypothesis of why we’re not getting there.”

However, Mackenney was less swayed by the point raised by his fellow podcast panellists about ongoing perceptions of marketing as a cost centre.

“I do think there is an interesting opportunity now for marketers in a world that is becoming more and more crowded when it comes to advertising and how we consume content. If we don’t have great craft that’s going to cut through, the ability to drive growth in the absence of that will be a critical driver. How you measure that will be the next critical step,” Mackenney claims.

“Content is a way that we change consumers’ behaviours and get them to either join our brand, buy more, or be loyal to us. So how do we use that? It always comes back to what that piece of communication is actually trying to achieve and what’s the business outcome we’re trying to deliver on. If we can always link that back, it’s easier to get people on-board. Because we know we’re either trying to grow customers, or keep them, or increase lifetime value, which for a CFO, is a lot easier to measure because it ties nicely back to the revenue or cost line.”