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).
