IDEA WATCH

HBR.ORG

ORGANIZATIONS
DO CMOS REALLY
ADD VALUE?

others? They found that three characteristics

make a CMOs presence especially valuable.
One is robust sales growth. Previous studies
have shown that high-growth firms are the

What the latest data shows about the role

most apt to benefit from generating and acting on customer-oriented information, so it

stands to reason that having a CMOin effect,
a customer advocate in the C-suitewould
disproportionately help those companies.

Do companies benefit financially from

The second characteristic is small firm

having a marketing executive in the C-suite?

size. That often means a relatively small se-

A widely cited 2008 study, for example,

nior management team, and the researchers

found that the presence of a chief marketing

posit that each member, including the CMO,

officer has no effect on firm performance

then has more influence over strategy and

direction. The third characteristic

contradicting a 2003 paper show-

is short CEO tenure. Studies

ing that these leaders boost

sales growth. Then came a
2012 Forbes article proclaiming, The CMO is dead.
The uncertainty plays out
inside organizations themselves: According to a recent
survey, two-thirds of CMOs

Companies with
a CMO perform

suggest that a chief execu-

on average,
than companies
without one.

that the CMO, like other top

15% BETTER,

feel pressured by the board or

the CEO to demonstrate the value
of marketing.

tives power increases with

time in office, so it may be
managers, has more impact
when the CEO is fairly new.
Correlation isnt causation, however, and Germanns
team warns that simply bringing a

CMO on board wont necessarily boost the

MARKETING
THE WRONG WAY
TO REDUCE CHURN
Offering customers a more cost-effective
plan can drive them away.

ustomer attrition plagues many businesses in the service industry, from

telecom and cable TV providers to

credit card companies to health clubs. The

Seeking a once-and-for-all answer, a team

bottom line. The research results may reflect

churn rate for mobile phone customers in

led by Frank Germann, of Notre Dame, exam-

the strength of companies overall marketing

Europe, for example, was recently estimated

ined the question through a wider lens than

functions rather than CMO presence per se.

to be 21% to 38% a year.

those of previous studies. The researchers

If firms employ a CMO, marketing is likely to

Efforts to prevent churn by helping new

looked at 155 publicly traded U.S. firms across

play a more prominent role...and that could

customers choose the best plan for them (with

tools such as cost estimators, for instance)

a broad range of industries, applying a vari-

be the source of the performance effects, the

ety of econometric models to analyze perfor-

researchers write. Still, their findings could

have proved largely futile, in part because of

mance from 2000 to 2011. Their conclusion:

help quiet the debate and bolster the CMOs

complex pricing menus that are hard to navi-

Companies with a CMO perform 15% better,

clout at the strategy table.

gate even with assistance. Many people end

ABOUT THE RESEARCHThe Chief

Marketing Officer Matters! by Frank
Germann, Peter Ebbes, and Rajdeep Grewal

they use more phone minutes than theyre

on average, than companies without one.

The researchers then wondered, Do some
types of organizations benefit more than

FROM THE ARCHIVE / 1972

One thing seems beyond question:

eventually the United States will join the rest
of the world in the use of the metric system.

The issue for business leaders

is not whether but how.

MOVING TO METRIC MAKES DOLLARS AND SENSE, BY DANIEL V. DE SIMONE (HBR, JANUARYFEBRUARY 1972)

32Harvard Business ReviewOctober 2015

up with plans that dont meet their needs

allotted, sayand then they jump ship because of the mismatch. So firms have taken
another tack: identifying customers who
are at risk of defecting and suggesting other
plans that would better serve them. On the
face of it, such outreach should be a winwin: If your provider finds a way to save you
money, why wouldnt you accept the offer
and stick around?
Turns out its not that simple: Customers
who are overspending and are pitched a better deal are actually much likelier to defect
than overspenders who arent approached.

MUTI

ts been a long-running debate in aca-

demic research and the business press:

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