Does Pressure to Prove the Value of Marketing Help or Hurt Company Performance?
November 21, 2013
Two-thirds of all top marketers report they feel pressure from their CEO or Board to prove the value of marketing according to August 2013 results from The CMO Survey. Of those, 60% describe that pressure as increasing. These numbers are consistent with the fact that most CMOs continue to find proving the value of marketing elusive. Survey results indicate that only 36% of top marketers report being able to prove the value of marketing quantitatively in the short-run and 31% in the long-run. Demonstrations of the value of social media are even more elusive with only 15% able to offer quantitative evidence for the value of social media spending.
A key question that needs to be asked is whether pressure on CMOs to prove the value of marketing helps or hurts company performance. These are reasonably good arguments on both sides. On the positive side, increasing pressure might make marketers work harder. On the negative side, increasing pressure could make marketers focus on strategies that are easily measured or that only provide short-term boosts so that proof is in hand when the CEO or board comes knocking. This means that instead of designing and selecting strategies that are optimal for company goals, strategies are selected to help marketers defend their spending decisions.
To investigate this question, we examined the performance of companies in which the CMO is and is not under pressure to prove the value of marketing. Results indicate that CMOs reporting more pressure from their CEOs and boards to prove the value of marketing have higher financial performance. As shown in the Figure, CMOs that report pressure experienced a 3.5% improvement in marketing return on investment (MROI) in the past 12 months compared to 1.72% improvement by CMOs that report no pressure to prove the value of marketing. This 100% difference in MROI is mirrored by a 50% improvement in company profits among CMOs that report more pressure to prove the value of marketing (+3.66% in profits) compared to a 2.42% increase in profits for CMOs that do not experience pressure.
Figure. How Pressure to Prove the Value of Marketing Affects Company Performance
These data support the view that pressure to prove the value of marketing improves marketing and company financial performance.
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