Part 1: Chief Marketing Officer and Diminishing Authority

Any company aims to bring value to different stakeholders, and by the principles of the predominant economic systems, primarily to the owners, which is why the different functions of a company need to prove their part in the development of a company’s financial outcomes. This has traditionally been very challenging. Various reports have proven that the biggest problem faced by a CMO is linking their performance to the performance of a company convincingly (graph 1) , and a natural repercussion of this is the constant decrease of the marketing department’s authority within different companies.
Let us start with some older research conducted in Germany between the years 1996 and 2013 in 178 different companies. The sample comprised of companies in different fields whose turnover varied between a couple of tens of millions to over 20 billion. The research defined the leadership of the following eleven marketing-related sectors: pricing, development of new products, strategic decision-making, large investment decision-making, expansion into new markets, choosing strategic partners, planning and execution of customer service and support, improving customer satisfaction, strategy for distribution, and finally, advertising and measuring customer satisfaction (the sectors have been listed from the most to the least important according to the companies).
Graph 1. CMOs feel that their biggest challenge is to prove the influence of marketing actions to the rest of the management group. (The CMO Survey 2019).
Graph 2. The authority is moving from the marketing towards the sales
The first conspicuous observation we make is that the marketing departments of the companies studied announced that they were clearly overshadowed by the sales department primarily in marketing-related decisions that were important for the operation of the company (graph 2) by as much as 42%. Further examination of the results (graph 3) shows that, of the eleven studied sectors, the sales department has more authority than the marketing department in eight of the most important sectors, in one sector the authority is divided equally (customer satisfaction) and marketing has the upper hand in only two of the least valued sectors (advertising and measuring customer satisfaction).
The current trend does not suggest any improvements either. Over the measured seven-year period, the authority of the marketing department within companies decreased the most with over 95% statistical reliability, whereas the authority of the sales department increased (graph 4). Perhaps somewhat surprisingly, there was no significant change in the authority of all the other departments considering the measured sectors.
Graph 3. Marketing feels primarily responsible for the two sectors ranked the least important within companies (advertising and measuring customer satisfaction).
Graph 4. The biggest decrease in the inner authority of a company between 1996 and 2013 was seen in marketing, whereas the sales had the biggest increase.
The study we went through above gives an interesting insight into the status of marketing and its development, but it is slightly too outdated to be able to provide any reliable data about the current situation. For this reason, it is better to view the subject at hand by considering more recent data.
According to the more recent 2020 “The CMO Survey”, CMOs still have no real authority in any of the four sectors of the marketing mix (graph 5). Communication is most clearly in the hands of the marketing department (65%), however, even that is most likely because of advertising (86%). The marketing department barely manages production decisions and planning, pricing, and pricing measures, not to mention distribution. For these, the decisions are primarily made somewhere else.

Graph 5. The share of CMO’s authority in different sectors of the marketing mix.

Graph 6. The authority of a CMO by strategic instruments.
The marketing mix should offer the marketing department a large variety of different methods for reaching their targets. However, this idea only provides an insight into what tools a marketeer is supposed to be able to use. In practice, the reality seems to be completely different.
Of course, the outcome can be dismissed by the fact that the marketing mix is only one expression and only one kind of vision. The tools that the marketing department has can be viewed by other premises too, for example, from the aspect of the tools that are strategically important for marketing. According to the same survey, the CMO has a slightly tighter grip on strategic instruments, though even for them, the directorship lies elsewhere, excluding the brand (graph 6).
Further analysis of the survey also shows that the only sector that the CMO truly has power over is the development of the brand through different forms of marketing (graph 7). The CMO has 80% authority only over digital and traditional advertising as well as social media activities. The implementation of the “four Ps” of marketing seems to have narrowed down to only “one P”, so is the role of the CMO diminished to only the buyer of advertising services and a “social media talent”?
And what direction are we taking? How will respect for CMOs develop in the future if it is defined by changing authority and trust? The future is known to be hard to predict, but we can search for an answer by again mirroring the changing trends of the companies’ inner power dynamics. By comparing this year’s readings to that of the two previous years’ surveys, the trend seems to be, unfortunately, primarily negative. Between the years 2018 and 2020, CMOs were reported to have systematically lost authority within brand, communications, positioning, control over business information, market-entry strategy, new products, pricing, and customer service (graph 8). Respectively, an increase of authority has only happened in two sectors: traditional (+6%) and digital (+3%) advertising.
Graph 7. The authority of a CMO is centred around the different forms of branding and advertising.

Graph 8. The change in the authority of a CMO between the years 2018 and 2020.

Even though the CMO is often expected to bring profit, it would seem that they do not have enough authority to accomplish that, and their diminishing status will not make reaching goals any easier in the future. The CMO can be hired to “lead the growth of sales and profit”, but according to these surveys, their role, unfortunately, seems to be often limited to buying advertisement services and controlling social media. The division of the roles is somewhat understandable.

SHORT CAREER

Work is done collectively, and there are many different roles represented within the management group. Thus, the CMO, not unlike any other director, could never be solely responsible for the increase or decrease of a company’s success. One might think that the bigger the management group becomes, the smaller the authority of all the functions within it becomes. However, this logic is compromised if we remember the earlier research results, according to which the change of authority from the important instruments of the markets is not equally divided for the whole organization, but specifically shifted from marketing to sales (graph 4). This observation is against the idea that marketing would suffer from the divergence of responsibility the same way other functions do.

Graph 9. The career of a CMO ends faster than anyone else’s (in 3.5 years).

One huge challenge in marketing is the difficulty of linking its actions and accomplishments with the actions and the outcomes of the company as a whole. The product, distribution, customer service, discounts, and advertising, are influenced by the agendas of, for example, the financial director, line management, IT-department, and the chief executive officer. This proves that the effectiveness of marketing is challenging, which is why the merits of marketing are shared by different parties, but the failures are mainly endured by marketing management alone.
The position growing all the more uncertain, the weakly proven link between actions and accomplishments, and the lack of authority are sadly often manifested by others questioning the utility of marketing management, which seems to be reflected surprisingly often in the relationship between the CMO and the CEO. According to a study published in 2017, up to 80% of CEOs do not trust the CMO or feel disappointed by their accomplishments. Out of the management group, the CMO (graph 9) has the shortest career life (3.5 years) compared to the CEO (6.9 years), Chief Financial Officer (4.7 years), Chief Information Officer (4.6 years), and the Chief Human Resource Officer (3.7 years).
According to another related study, the difference in career length is even more ruthless (graph 10): according to the study, the majority of CMOs switch, or are forced to switch, their company after a maximum period of three years after starting the job. Only a handful of CMOs manage to hold their position for longer.
There are probably multiple reasons for this unfortunate situation, but out of interest, we want to bring up a study from Germany and the United States. According to that study, out of the higher education institutions teaching marketing in Germany only 18% offered training modules specifically related to pricing control, whereas 55% offered training modules specifically related to communications. The results were similar in the United States (39% vs. 100%).
According to the survey we went through above, companies regard pricing as the most important issue and marketing and advertising as the second most useless. It seems reasonable to ask whether the decrease of marketing authority stems all the way back to higher education?

Graph 10. Most CMOs change employers within three years.

SUMMARY
In the light of the surveys we have gone through, the role of the CMO is, all things considered, unfortunately weak, their authority low, and their responsibility and power to use marketing tools also seem to be moving further away from the marketing department – and especially towards sales. In the future, we predict the threat is that the marketing department may degenerate into nothing more than a specialist department for advertising and social media marketing. But are there real grounds for lack of respect and decrease of authority? We will answer this question in the SCIENCE+BUSINESS™ series document: “The meaning of marketing and CMO in the increase of a company’s value.”