Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.
– Peter Ducker, The father of business consulting
Peter Drucker’s idea may seem provocative, especially in the current corporate culture, which values business activities primarily through finances, sales, and production. This perspective is understandable from the point of view that these functions are easy to monitor and measure, particularly in the short term. On the other hand, marketing and innovation can be perceived as functions whose effects are challenging to observe, control, and predict. This is partly due to the role of marketing and innovation: both contribute to the long-term future, while other functions utilize the results of their construction work in the shorter term. One could say that where R&D sows, production reaps the fruits, and similarly, where marketing sows, sales reap the rewards.
As numerous marketing decision-makers grapple with the same challenge of marketing effectiveness and considering that scientific research has extensively explored the effectiveness of marketing along with its most reliably successful conditions, I have opted to present a few findings identified through scientific investigation. We begin by examining the role of marketing and the marketing director, alongside its evolution. Unfortunately, the message derived from this initial review sums up to a “minor victory,” yet I hold the belief that it’s worthwhile to underscore these findings, nevertheless.
I anticipate that these scientific insights will demonstrably benefit all those involved in the field of marketing.
Markus Kivikangas,
CEO & Founder, Steinheide Oy
markus.kivikangas@steinheide.com
Fading Influence
The objective of companies is to generate value for various stakeholders. According to the principles of the prevailing economic system, this value creation is primarily intended for the owners. Consequently, the distinct functions within a company must demonstrate their individual contributions to shaping the company’s financial outcomes. This aspect has historically proven to be quite challenging for marketing, to say the least. Multiple surveys have underscored that the most prominent predicament facing marketing directors revolves around establishing a credible connection between their own activities and the company’s performance (see Figure 1)1. This natural outcome has led to a continuous weakening of the marketing department’s influence within companies.
Let’s begin with a somewhat earlier survey conducted in Germany between 1996 and 2013, involving 178 companies. The sample encompassed companies spanning various industries, with turnovers ranging from a few tens of millions to more than 20 billion. This study delved into leadership across eleven marketing-related domains: pricing, new product development, strategic direction determination, major investment choices, market expansion, selection of strategic partners, planning and execution of customer service and support, enhancement of customer satisfaction, distribution strategy, advertising, and measurement of customer satisfaction (the sub-areas are presented in the order of priority indicated by the companies).
The initial observation that grabs attention is that the surveyed companies’ marketing departments indicated a clear deference to the sales department, particularly for decisions pertaining to marketing that hold significance for the company’s operations (see Figure 2), with a notable margin of up to 42%.
A more detailed examination of the results (see Figure 3) unveils that among the eleven scrutinized areas, the sales department wields greater influence than marketing in eight of the most pivotal ones. Additionally, influence is equally shared in one domain (customer satisfaction), while marketing holds the upper hand solely in the two areas that are least esteemed by companies (advertising and customer satisfaction measurement).
Moreover, the trend of change does not bode well for the future: the influence of the marketing department within companies decreased significantly over the measured seven-year span with a statistical reliability level exceeding 95%. In contrast, the influence of the sales department saw an increase during the corresponding period (refer to Figure 4). Interestingly, the influence of other departments showed comparatively minor shifts concerning the measured domains.
The aforementioned research provides an intriguing snapshot of the status and evolution of marketing. However, it’s now slightly outdated to offer insights into the current situation. Consequently, it’s advantageous to examine this matter in the context of more recent information.
According to the more recent “The CMO Survey” from 20201, marketing managers still lack significant decision-making authority in any of the four components of the marketing mix (refer to Figure 5). Communication appears to be the area most evidently within the control of the marketing department (65%). However, this control is most pronounced in the domain of advertising (86%; see Figure 7). Conversely, the marketing department’s influence over product decisions, product design, pricing, and pricing strategies, as well as distribution, is relatively limited. Decisions pertaining to these aspects are predominantly made elsewhere.
The marketing mix should present the marketing department with a diverse range of approaches to accomplish their objectives. However, the practical reality appears to diverge significantly.
This outcome can, naturally, be recognized due to the marketing mix being just one definition and perspective. The set of tools utilized by the marketing department can also be evaluated from alternative perspectives, such as the standpoint of strategically vital resources for marketing. As per the same report, the marketing director exercises slightly firmer control over strategic tools, despite the primary leadership being situated elsewhere, barring the brand (refer to Figure 6).
A more in-depth examination of the report further uncovers that, in reality, the marketing director has substantial decision-making authority primarily in the domain of brand advancement through diverse advertising methods (see Figure 7). Specifically, the marketing director holds decision-making control of over 80% for both digital and traditional advertising, as well as social media initiatives. The practical application of the “four P’s” of marketing appears to have been condensed to essentially just “one P.” In other words, has the role of the marketing director been confined to that of an advertising purchaser and a specialized expert?
And in which direction are we heading? How does the assessment of marketing managers, when gauged by shifts in decision-making authority and trust, appear to evolve in the future? Predicting the future is notoriously challenging, yet this question can be addressed by revisiting the evolving dynamics of power within companies. By comparing the data from 2020 with the readings from the preceding two years, as per the report’s findings, the trend unfortunately appears to be predominantly negative. Between 2018 and 2020, marketing directors indicate a systematic decline in their influence concerning communication, positioning, business information management, market entry strategies, new product initiatives, and pricing (refer to Figure 8). Conversely, there has been a noticeable rise in influence in only two domains: traditional advertising (+6%) and digital advertising (+3%).
While the marketing director is frequently anticipated to deliver results, it appears that they lack sufficient authority to attain these outcomes. Moreover, their diminishing standing does not facilitate the accomplishment of future objectives. A marketing director might be employed with the aim of “overseeing sales and profit expansion,” yet based on conducted studies, their role frequently becomes confined to procuring advertising and overseeing social media, which is quite unfortunate.
FADING POSITION
The division of roles is somewhat comprehensible. Collaborative effort is integral, and numerous roles are encompassed within the management team alone. Hence, the marketing director, unlike any other director, might even bear sole accountability for the company’s success trajectory. Consequently, one might assume that decision-making authority across all functions diminishes as the management team expands. However, this rationale falters when we recall the earlier research finding, wherein the transfer of power from crucial marketing tools isn’t diffused throughout the organization but specifically shifts from marketing to sales (see Figure 4). This observation contradicts the notion that marketing, like other functions, would suffer from the dispersion of responsibility.
A major challenge in marketing lies in the difficulty of establishing clear links between its operations and accomplishments and the company’s overall operations and outcomes. Factors such as the product, distribution, customer service, discounts, and even advertising are influenced by various agendas, including those of the CFO, line management, IT department, and CEO. Consequently, verifying the effectiveness of marketing proves challenging, leading to a situation where the successes of marketing are credited to multiple parties, while the failures are often attributed primarily to the marketing management.
As the position becomes increasingly uncertain, the weakly demonstrable connection between actions and achievements, along with the lack of operational authority, unfortunately raises questions about the value of marketing management in the eyes of others. This skepticism seems to be notably evident in the relationship between the marketing director and the CEO. According to a 2017 study1, a staggering 80% of CEOs lack trust in the marketing director or feel let down by their accomplishments. Remarkably, the marketing director (refer to Figure 9) boasts the shortest tenure among management team members (3.5 years), in comparison to the CEO (6.9 years), CFO (4.7 years), CIO (4.6 years), and HR director (3.7 years).
According to another study that delved into this issue, the trajectory is even more unforgiving (see Figure 10). According to this study, the majority of marketing managers either switch companies or are compelled to do so within a maximum of three years after commencing their work. Only a handful of marketing directors manage to establish long-lasting employment associations.
There are likely several reasons contributing to this unfortunate situation, but an intriguing aspect we wish to highlight is a study conducted in both Germany and the United States. According to this study, only 18% of German universities that offer marketing education provided specific training units related to pricing management, while 55% offered training units specifically focused on communication. A similar pattern emerged in the United States (39% vs. 100%).
Considering the previously reviewed research’s conclusion that companies prioritize pricing as the most significant aspect of marketing and consider advertising as the second least relevant, a valid question arises: Are universities already addressing the gap in marketing education, particularly concerning pricing?
SUMMARY
In light of previous studies, the role of the marketing director, unfortunately, appears to be both weak and constrained in terms of decision-making authority. Furthermore, the responsibility and control over the utilization of marketing tools seem to be increasingly shifting away from the marketing department, primarily toward sales. Looking ahead, a concerning image emerges, where the marketing department risks being reduced to a mere unit specialized in advertising and social media marketing. But are there tangible reasons behind the lack of recognition and the diminishing decision-making power? This question will be addressed in the upcoming review titled “The Significance of Marketing and the Marketing Director in Enhancing Company Value.”
References
1 Gruca, T. S., & Rego, L. L. (2005). Customer satisfaction, cash flow, and shareholder value. Journal of Marketing, 69, 115–130.; Lehmann, D. R. (1996). Some thoughts on the futures of marketing. In D. R. Lehmann & K. E. Jocz (Eds.), Reflections on the futures of marketing: practice and education (pp. 121–135). Cambridge, MA: Marketing Science Institute.; Engelen, A., & Brettel, M. (2011). A cross-cultural perspective of marketing departments’ influence tactics. Journal of International Marketing, 19, 73–94.; Deloitte, Duke University & Amerikan Marketing Association. (2019). The CMO Survey, February.
2 Deloitte, Duke University & Amerikan Marketing Association. (2020). The CMO Survey, February.
3 Deloitte, Duke University & Amerikan Marketing Association. (2019). The CMO Survey, February.
4 Deloitte, Duke University & Amerikan Marketing Association. (2018). The CMO Survey, August.
5 Whitler, K., A., & Morgan, N. (2017, July-August). Why CMOs Never Last, Harvard Business Review. Retrieved from https://hbr.org/2017/07/the-trouble-with-cmos#why-cmos-never-last.
6 Age and tenure in the C-suite: Korn Ferry study reveals trends by title and industry. (n.d.). Retrieved from https://www.kornferry.com/about-us/press/age-and-tenure-in-the-c-suite.
7 Whitler, K., A., & Morgan, N. (2017, July-August). Why CMOs Never Last, Harvard Business Review. Retrieved from https://hbr.org/2017/07/the-trouble-with-cmos#why-cmos-never-last.
