Jose Lozano is convinced that marketing has lost its relevance and power within companies. That’s because CMOs don’t control enough—certainly not the four Ps: product, price, place and promotion. And this is a business crisis.
When CMOs say they are gaining a broader hold within organizations, contends the CEO of Houston-based agency 9thWonder, they are largely referring to the communications responsibilities—even talk of data is in the context of communications—and CMOs are still largely at the mercy of chief financial officers, who hold their (purse) strings.
Jose Lozano, CEO, 9thWonder.
I caught up with Lozano–whose agency counts Samsung, Quiznos, Public Storage, American Heart Association and Panasonic as clients, among many others–to learn more about his perspective on how agencies’ primary job should be to elevate CMOs to CEOs, which, he says, used to happen years ago but happens only rarely now.
Our interview follows.
Jenny Rooney: What’s the biggest challenge facing CMOs?
Jose Lozano: Marketing has lost its relevance and power. It’s come to stand for advertising, after several decades where we all celebrated the art of the ad because it’s exciting, fun and showy. CEOs, COOs, CFOs and increasingly boards don’t believe in marketing the way they once did because the chief marketing officer has really become the chief advertising officer.
Marketing can’t be a real growth driver until it’s a coordinated effort with all the 4Ps of product, price, place and promotion. What you make, how you price it, and where you sell it are the foundation of the business that marketing no longer controls. And arguably they have more to do with the results you get than how you communicate in advertising, even with all the forms advertising takes today. It’s all got to be in sync, and today it’s not, because the COO controls product development, and independently finance is setting the price while sales is dictating distribution.
To get the growth businesses need, and restore marketing, CMOs need to regain control of the foundation. Without it, they will keep losing the confidence of CEOs and boards. We’re seeing this in companies like Johnson & Johnson, Uber, and Hyatt Hotels eliminating the CMO job altogether.
Rooney: Why is their turnover so high?
Lozano: It’s this simple: CMOs inherit expectations they’re mostly unequipped or powerless to meet.
There’s so much more that goes into producing marketplace results than the ingredients of advertising, no matter how far you extend the notion of communication beyond a TV commercial. Businesses set an expectation of growth in hard measures, from sales and profit to market share and volume of customers. But the CMO doesn’t have the power to focus all the elements required to get there. What’s more, because we as an industry have gotten so enamored with advertising, CMOs now speak a different language. They speak brand, whereas the inner circle speaks business.
Every day, a CMO is celebrating successes that their bosses and boards dismiss as proxies. A national brick and mortar retailer was facing slower growth with more competition, so they hired a new CMO and charged her with a bigger increase in sales and market share. She bet the business on a creative revamp, hired a hot shop and launched a dramatic TV campaign. The campaign got lots of press, won several awards and got her named CMO of the Year by at least one organization. But sales declined. She made a triumphant presentation to the board about the campaign and was fired 15 minutes later.
Rooney: How and why are they not controlling the levers that will both ensure business growth and their career growth?
Lozano: When the non-advertising/marketing decision is made by someone else’s department, you’re not only not controlling it, you’re not even influencing it.
As a result, CMOs aren’t even controlling their marketing budgets. It’s becoming commonplace for CFOs to raid the marketing kitty when the company has a shortfall. I talked about the lack of power with three CMOs at a conference recently, and one insisted he still had it. When I asked him, “Has your CFO ever come to you at the end of a quarter and said, ‘I need to pull back a portion of your budget to cover a shortfall?’ he nodded his head. One of the other CMOs said to him, ‘Then you don’t have real power either.’”
Rooney: What can CMOs do to turn around this reality?
Lozano: They can’t seize the power back. They’ve got to earn it back.
CMOs will need to have a different conversation with the inner circle of the C-suite and with the Board. Not just talking about how many people a campaign is going to reach and how much they’ll engage with the message, but showing a clear path to revenue and profit. “We’re putting $100 million behind the campaign to produce $900 million in sales at $90 million profit, and I’ll come back next year and push for $150 million.”
Part of this is a different approach to data. Today, the CMOs who talk about expanding their purview are really focused on a wider communications spectrum, and they’re concentrating on the data surrounding it. When they look at the data on business outcomes, it’s to prove results enough to justify budgets. They need to see the full range of business data to set and guide strategy from sales data to operations and pricing.
The realistic way to do this is to start small. Pick a pilot project where the CMO can control all the variables and has access to all the data, engineer and prove a business success. Then expand on it.
Rooney: What role can agencies play in changing this reality?
Lozano: The change starts with how we see the assignment. We need to look at the client’s business in its entirety, and that means analyzing a lot more than what’s in the marketing brief. It’s a far more in-depth and intense market scoping. We need to start at the business not the brief.
To support this, we need to take the lead in incorporating the elements of marketing, so CMOs can prove the value of a complete approach. We have more flexibility to do this. We can hire the expertise we need on a consulting basis at first, then buy specialist firms and incorporate them into full-time capabilities.
For our part, we’re doing that with product development and pricing specialists. The same goes for distribution. While now we’re contracting, we are looking at selective acquisitions so we can bring the specialties in-house. Obviously, we need to combine all the assets to start thinking holistically if we’re going to bring clients a bona fide ability to produce business results.
To incorporate the specialists, we need to change the way we operate. They can’t be distinct steps in the process; they need to be eyes and voices in a continuous team collaboration. That can happen when we give everyone a stake in the overall agency performance, and make multidimensional thinking the standard approach to client work.
Then we need to bridge the gaps between data, which is a leverage point for CMOs. Beyond having the specialists who can interpret and then collaborate to understand the data, agencies need to invest in the technology to plan, deliver and prove marketplace results. It’s faster, easier and more powerful for agency teams to get and use the data to produce than it is to wait for it to be run, reported and interpreted by a third party. It also has the benefit of looking contained because it can be part of the agency compensation vs. a line item expense from the marketing department.
This is particularly important for the growing number of middle market brands, which typically don’t invest in advanced modeling techniques. We’ve invested in the ability to do mix modeling in-house, and I believe this will be a must for agencies of any scale in the years ahead.
Our primary job should be to elevate CMOs. We’ll know we’re there when more CMOs become CEOs. That happened many years ago before we called the head of marketing a CMO. We can make it happen again.
