McKinsey On Maximizing Marketing's Ability to Drive Growth

Recent research has shown that CEOs now expect marketing to be a primary driver of revenue growth in their organization.

• In a 2023 survey of CEOs by The Conference Board, respondents were asked to identify their plans for growing profits in 2024. The second most frequently selected option was "Increase sales via marketing."

• A 2023 survey of CEOs by Boathouse asked respondents to identify the top five problems they wanted marketing to help them solve. The two problems most frequently selected by the respondents were "create new customers, retain existing customers, drive revenue growth" and "drive sales and grow market share."

Unfortunately, there's also evidence that CEOs aren't completely satisfied with the performance of marketing or their CMO as a growth driver. For example, less than 40% of the CEOs in the Boathouse survey gave their CMO a grade of "A" on his/her ability to drive company growth.

Recent research by McKinsey & Company identified several factors that can inhibit marketing's impact on growth and described what CEOs and CMOs* can do to realize the full potential of marketing to drive revenue growth.

McKinsey's research consisted of a survey (conducted with input from the Association of National Advertisers) of more than 100 C-level growth executives (chief marketing officers, chief revenue officers, chief growth officers, etc.) and 21 CEOs from B2B and B2C companies of various sizes from several industries. The researchers also interviewed more than 60 CEOs and C-level growth leaders.

The McKinsey study found that CEOs who put marketing at the core of their growth strategy are twice as likely as their peers to achieve an annual revenue growth rate of more than 5%.

A CEO/CMO Disconnect

However, McKinsey's research also identified several operating conditions that often limit marketing's ability to deliver on growth expectations. Most importantly, the researchers found that CEOs and CMOs are often on different pages about the role of marketing in the business.

Ninety percent of the CEO survey respondents said marketing's role is well-defined in their company. But, when McKinsey asked CEOs and CMOs from the same company what the primary role of marketing is in their organization, only about 50% of the pairings gave the same answer.

Fragmented Growth Responsibilities

Marketing's ability to drive revenue growth is also often constrained because marketing no longer has responsibility for many activities that impact growth. Many companies have created new C-level positions (such as chief revenue officer, chief growth officer, chief customer officer, etc.) to manage various growth-related activities.

More than two-thirds (67.3%) of the CMO respondents in the McKinsey survey said there are two or more executives in their company who oversee growth-related activities and report directly to the CEO.

This is not an optimal management structure for maximizing growth. The fragmentation of responsibility for managing growth-related activities makes it more difficult to maintain a consistent growth strategy and assign accountability for achieving growth objectives. McKinsey found that companies with only one C-level growth executive generate up to 2.3x revenue growth compared to companies with multiple C-level growth roles.

No Involvement In Strategy Development

Marketing's ability to impact growth is also hampered when CMOs aren't involved in developing their company's growth strategy and other major strategic decisions. Unfortunately, this lack of involvement is fairly common, especially in large enterprises.

Using publicly available information, McKinsey analyzed the C-suite composition of Fortune 500 companies and found that 40% of them didn't have their chief marketing officer (or another C-level growth executive) as a member of their CEO's executive committee.

Involving the CMO in strategy development contributes to more robust growth. McKinsey found that when the CMO is deeply involved in strategy development, companies achieve 1.4x higher topline revenue growth compared to companies where the marketing leader isn't involved in the strategic planning process.

Recommendations for Improvement

McKinsey recommends that CEOs take several steps to maximize marketing's ability to drive revenue growth. Here are two of the most important.

• Clearly define marketing's role - CEOs should develop a blueprint that spells out the role of marketing in the business and communicate the blueprint to their CMO so that he or she has a clear understanding of what marketing is expected to accomplish.

• Centralize growth management - CEOs should appoint one C-level executive as the company's "general manager of growth." All companies perform numerous activities that can impact growth, but those activities must be thoughtfully orchestrated to maximize growth. Having one general manager of growth enables a company to manage its organic growth initiatives more holistically.

You can learn more about the McKinsey research in this article and this presentation.

*In this research, McKinsey used the term "CMO" to refer to marketing/growth executives with a range of job titles, including chief marketing officer, chief revenue officer, chief growth officer, chief customer officer, etc. This post uses the term in the same way.

Image courtesy of ccPixs (CC).

[Book Review] A Primer on Using Benefits to Guide Marketing Decisions

Source:  BenBella Books

Successful marketing is the result of many distinct, but interdependent, decisions and actions. Marketers must understand the structure of markets and recognize that most are composed of multiple segments that differ in important ways.

To be successful, marketers must also make the right decisions about where (in what market segments) they will compete and how they will position their company and their offerings (their "brand") to win in those segments.

If marketing were a house, market segmentation, target market selection, and brand positioning would be the foundation and the "load-bearing" walls. And, just as the foundation and load-bearing walls are essential components of a well-built house, marketing segmentation, target market selection, and brand positioning are essential for successful marketing.

A new book by Allen Weiss and Deborah J. MacInnis addresses these topics:  The Brand Benefits Playbook:  Why Customers Aren't Buying What You're Selling - And What to Do About It (BenBella Books, 2024).

Allen Weiss is the founder and CEO of MarketingProfs, LLC and an Emeritus Professor at the University of Southern California. He has consulted with numerous high-profile enterprises including Intel, Texas Instruments, and AIG.

Deborah MacInnis is the Charles L. and Ramona I. Hilliard Professor of Business Administration and an Emerita Professor of Marketing at the University of Southern California's Marshall School of Business. She has consulted with many well-known enterprises including Proctor & Gamble and Hallmark.

What's In the Book

The central message of The Brand Benefits Playbook is that marketers should make benefits the paramount concept when developing marketing strategy and planning marketing activities.

Weiss and MacInnis state their view in unambiguous terms when they write:  ". . . a focus on the benefits that customers want in the brands they buy can provide an integrated lens on marketing decision-making - from market segmentation, to target market selection, to brand positioning, and more."

The book contains nine "plays" (chapters), and the authors use the first two chapters to introduce the concept of benefits and explain why focusing on benefits is critical for marketers.

In the first chapter, Weiss and MacInnis define benefits as, ". . . the desirable outcomes that customers expect to receive from your brand." Then, they discuss the three types of benefits customers might want from brands - functional, experiential, and symbolic - and they argue marketers should consider all three types when deciding how to market their brand.

The authors also use the first chapter to argue that focusing on brands can help marketers:

• Avoid "marketing myopia"
• Identify potential competitors
• Identify paths to growth
• Develop new product ideas
• Better understand shocks and trends

In the second chapter, Weiss and MacInnis discuss why organizations should focus on brands. They note that customers have perceptions about the benefits a brand offers and make choices based on those perceptions. They also observe that organizations earn revenue when customers purchase brands and that marketing activities are often organized around brands.

Weiss and MacInnis conclude the second chapter by describing perceptual maps and explaining why they are valuable and how they are used.

In the remaining chapters, the authors discuss several ways brand benefits can be used in marketing. For example:

• Play #3 explains why marketers should segment their market based on brand benefits.

• Play #4 discusses why marketers should use brand benefits when choosing target markets and positioning their brand in those markets.

• Play #5 and Play #6 explain how to determine whether a proposed brand positioning will be credible and defensible, and how benefits factor into making that determination.

In the final chapter (Play #9), Weiss and MacInnis discuss three ways to grow a brand, and they conclude the book with four brief appendices that expand on some of the topics covered in the main text.

My Take

The Brand Benefits Playbook is well-written and easy to read. And, the topics Weiss and MacInnis cover in the book are all vital for successful marketing.

The argument for using benefits as the basis for making fundamental marketing decisions is also compelling because a focus on benefits fosters an understanding of competitive dynamics that is meaningful and actionable.

What prospective readers should know is that The Brand Benefits Playbook addresses these important topics at a fairly basic level. If you have limited experience with market segmentation, target market selection, and brand positioning, the book will be a worthwhile read and a good starting point.

Once you've read The Brand Benefits Playbook, I recommend two other books for further learning.

• On brand positioning - Positioning for Advantage:  Techniques and Strategies to Grow Brand Value by Kimberly A Whitler (which I reviewed here)

• On market segmentation and related issues - The Organic Growth Playbook:  Activate High-Value Behaviors To Achieve Extraordinary Results - Every Time by Bernard J. Jaworski and Robert S. Lurie (which I reviewed here)

[Research Round-Up] Insights From "The CMO Survey" and Nielsen's Annual Marketing Report

(This month's Research Round-Up discusses some of the major findings found in the Spring 2024 edition of "The CMO Survey" and a set of interesting perspectives from the "2024 Annual Marketing Report" by Nielsen.)

Source:  Christine Moorman

Spring 2024 edition of "The CMO Survey"

• A survey of 292 marketing leaders at U.S. for-profit companies
• 94% of the respondents were VP-level or above
• 62% of the respondents were with B2B companies
• Survey was in the field February 6 - March 5, 2024

"The CMO Survey" is a semi-annual survey of senior marketing leaders that has been conducted since 2008. The survey is directed by Dr. Christine Moorman and is sponsored by Deloitte LLP, Duke University's Fuqua School of Business, and the American Marketing Association.

For several years, each edition of the survey has asked participants about overall economic conditions, current marketing spending patterns, and future spending expectations. Here are some of the major findings on those topics from the Spring 2024 survey.

Economic Outlook

The survey asked participants to rate their optimism regarding the overall U.S. economy on a 100-point scale, with "0" being the least optimistic and "100" being the most optimistic. The mean rating given by respondents was 67, up from 58.3 in the March 2023 survey edition.

The survey also asked if participants were more or less optimistic about the U.S. economy compared to the previous quarter, and 43.7% of the respondents reported being more optimistic. That was up from 30.1% in the March 2023 edition of the survey.

Marketing Spending

Respondents reported that marketing spending represented 10.1% of total company revenue, which was down slightly from 10.9% in the March 2023 survey.

Respondents also said that marketing spending increased 2.5% during the 12 months preceding the survey, and they expect marketing spending will increase 4.7% during the 12 months following the survey. In the March 2023 survey, respondents expected marketing spending to grow 5.7% during the following 12 months, which shows that forward-looking expectations aren't always accurate.

The relative change in spending on digital marketing vs. traditional advertising remains significant. In the Spring 2024 survey, respondents reported that spending on digital marketing grew 8.9% over the 12 months preceding the survey. In contrast, respondents said they expect spending on traditional advertising to decrease by 2.1% over the 12 months following the survey.

Use of Marketing Technology

The Spring 2024 survey included several questions relating to marketing technology. One of these questions produced a result that is difficult to understand or explain. Nearly a fourth (24.7%) of the respondents said their company is not using marketing technology systems.

Scott Brinker (a/k/a chiefmartec) wrote that when he saw this result, "I fell out of my chair." He went on to write:  "So this is obviously false. If you have a website, you use marketing technology. If you have a database of your customers . . . you use marketing technology. If you create essentially any kind of content on a computer, you use marketing technology."

****

"The CMO Survey" consistently provides a wealth of valuable insights for B2B marketers, and I encourage you to read the full report.

Source:  Nielsen

"2024 Annual Marketing Report" by Nielsen

• Based on a survey of 1,514 global marketing professionals
• Respondents were brand marketers at or above manager level
• Respondents worked with annual marketing budgets of $1 million or more
• Survey was conducted December 5 - 21, 2023

This report takes an interesting approach. It describes the survey results, but the report's authors also point out several issues with the prevailing sentiments expressed by the survey respondents.

The report identifies four major themes based on the survey findings.

Advertising Spending

Seventy-four percent (74%) of the respondents expect their ad budget to increase this year, and on average, they expect to allocate more than 63% of their budget to digital channels. The survey results also show that a majority of the respondents perceive that digital channels are extremely or very effective.

The report's authors note that the effectiveness of any given channel varies significantly across brands. Therefore, what's effective for one brand might not work as well for another.

Marketing Misalignment

Seventy percent (70%) of the respondents said they plan to increase spending on performance marketing and decrease spending on brand building.

The report's authors note that marketers' most important KPIs are long-term ROI and full-funnel ROI and that a shift toward performance marketing (and away from brand building) won't fully support those goals.

Media Balance

The third theme in the report addresses the performance marketing vs. brand building issue from a media selection perspective. The report's authors note that globally, only 36% of marketing channels perform above average for delivering both sales and brand building. They also contend that using multiple, diverse channels improves campaign reach.

Measuring Performance

On average, 84% of the survey respondents said they are either extremely or very confident in their ROI measurement capabilities, but only 38% said they evaluate the ROI of their marketing efforts holistically by measuring traditional and digital media spending together.

The report's authors argue that holistic measures of marketing ROI are necessary to avoid blind spots that can result in an inaccurate picture of the true impact of a brand's total marketing efforts.

Unveiling the Mechanics of B2B Buying Triggers

A recent LinkedIn post by Dale W. Harrison ignited a lively debate about whether marketing can "create demand." The post has received nearly 500 comments, and there are thoughtful views on both sides of the issue.

Harrison observed that there's an "almost universal" belief that marketers can create demand "out of thin air." This belief, he wrote, is based on the assumption that everyone is always "in-market" and will buy if persuaded "hard enough."

Harrison forcefully argued that this belief and its underlying assumption are flat-out wrong. He contended that people in B2B buy something when changes in their organization surface an "urgent, high-value, and widely recognized need" that didn't previously exist.

The reality, Harrison wrote, is that most prospective customers ". . . are NOT in-market and represent future buyers who will only bring THEMSELVES in-market once a need emerges." Therefore, he concluded, marketers simply can't create demand.

Reframing the Issue

Whether marketing alone can or can't create demand is an important, but usually underappreciated, issue. It should affect the shape of marketing strategy, the allocation of marketing resources, and the substance of marketing messages and other content.

Unfortunately, how you resolve this issue depends on how you define "create" and "demand." And, because those terms can be defined in several ways, conversations about the issue can easily become unproductive.

There's a way to frame the issue that's more useful for B2B marketers. The practical question is:  Can marketing activities alone cause a business decision-maker* to begin considering options that may involve a purchase, i.e. a buying process.

With rare exceptions, the answer to this question is "No." In almost all cases, a "trigger" is required to ignite a serious buying process.

What Is a Buying Trigger?

In B2B, a buying trigger is an event that causes a business decision-maker to perceive a need or desire to change something in order to solve a problem or take advantage of an opportunity.

A trigger can be a single event, or it can result from the cumulative impact of several events, and triggers can arise from events inside or outside of the decision-maker's organization.

Trigger events can take many forms, but there's little research about what specific kinds of events most frequently act as buying triggers. One study that directly addressed this issue was a 2021 survey of business decision-makers by WSJ Intelligence and B2B International.

This survey asked participants what kinds of events triggered their decision to search for a new supplier. The following table shows the percentage of respondents who selected each of twelve trigger events.

These survey results show that events involving the consumption of marketing/sales/news content (shown in red in the table) were ranked near the bottom of the list. This indicates that marketing content alone won't be sufficient to trigger a buying process in most cases.

The Psychology of B2B Buying Triggers

For an event to act as a trigger, it must produce a particular psychological impact. This impact results from the interplay of three factors - rewards, goals, and motivation.

Humans are programmed to seek rewards. Neuroscience research has shown that the human brain has a "reward center" that is activated when our brain processes information that signals a reward we value. So, for an event to function as a trigger, the decision-maker must perceive that satisfying the need or desire evoked by the event will produce a reward.

If the potential reward is valuable enough, the decision-maker will make satisfying the need or desire a goal, and he or she will be motivated to achieve the goal. 

Recent advances in decision science have established that motivation is the primary driving force behind all human behavior, including buying behavior. 

The American Psychological Association defines motivation as, "a person's willingness to exert physical or mental effort in pursuit of a goal or outcome." The existence of motivation is what causes a decision-maker to begin a process that may result in a purchase. So, what ultimately transforms an event into a buying trigger is its ability to evoke motivation in the mind of the potential buyer.

Implications for B2B Marketers

So, what does this mean for B2B marketers? The key lesson here is that you need to use different marketing messaging with potential buyers who have yet to experience a triggering event.

If you were using messaging to prompt a buying process, you should focus on the "pain" created by the buyer's issue or challenge and emphasize the need for change. Your objective would be to cause potential buyers to feel the pain of their current state sufficiently to provoke a willingness to consider change.

However, since marketing messaging alone isn't sufficient to provoke a buying process in most cases, the better strategy with potential buyers who haven't experienced a triggering event is to use messaging that emphasizes how an issue or challenge can be successfully addressed and describes the benefits such a change will produce for the buyer's organization and for the individual buyer.

This type of messaging will make it more likely potential buyers will remember your company when they experience a triggering event.

*I'm using the term "decision-maker" to mean anyone who is involved in making or can influence a business purchase decision.

Top image courtesy of Thomas Quine via Flickr.com (CC).