You might not realize it, but your most important executive today other than your CEO is probably your CMO or head of marketing. Surprising? Not really.
Business has changed dramatically over the last twenty years, and CMOs and marketing leaders have had to adapt and change with it, elevating their contribution along the way. Now, CMOs are being tasked with the highly critical position of leading growth for many businesses, which makes them probably most the important C-level executive in the company. It was not always this way.
All About Brand
Twenty years ago marketing was all about brand and media, with advertising and public relations being the primary areas of spend and focus. Most heads of marketing (few were called CMO back then) came from creative backgrounds in advertising, brand development or communications. Good marketing was a catchy tagline or a creative ad. Marketing was not very measurable beyond brand recognition and recall studies. “Closed loop” lead generation strove to be able to link campaigns to closed business, but it never really worked. These were the Dark Ages of Marketing. You threw some stuff against the wall and hoped for the best.
“You are just corporate overhead.”
During this time, I was product manger for Sun Microsystem’s largest product line, and was introducing new products at a Sales Kickoff in Hawaii for our APAC team. After dinner overlooking a beautiful Hawaiian sunset, our CEO Scott McNealy made his way around the tables, saying hello to the APAC sales teams. He came up to my table, where I was seated with other product managers and marketing execs that had presented during the SKO. I assumed he had come over to thank us for a great SKO, or perhaps congratulate us on the product launch? No. He looked at us and said, “Oh I don’t need to talk to you guys, you are just corporate overhead. I need to talk to the revenue generators,” and moved on to the next table. Overhead! Part of it was Scott trying to be funny in his quirky kind of way. But it was one of those jokes that had a little too much truth in it.
Twenty years ago, marketing was overhead. It was an expense to be minimized along with office supplies and travel costs. It was tolerated as mildly necessary but not considered critical to revenue generation. But times were about to change.
Dawn of a New Medium
Things started to change in the late 1990’s and early 2000’s when internet usage exploded, creating a new, untapped advertising platform. Digital campaigns consisting of display and paid search ads were highly measurable. A new industry, Adtech, sprouted up to deliver highly targeted, trackable ads across this new medium. Suddenly at least one component of marketing, the digital side was measurable and it garnered more budget and attention.
More of marketing became measurable as CRM and Lead Management solutions like Salesforce, Eloqua and Marketo emerged with the ability to manage and track leads from all channels through the buyers journey all the way to revenue. It was a game-changing capability. Now marketing could track a large part of its spend and determine which campaigns, messages, and channels were working the best at generating revenue. This spawned another new industry, Martech, which exploded in size to thousands of vendors and commands a significant investment from most companies.
With these new technology capabilities, the new generation of CMOs and marketing leaders were no longer creative types: they were analytical, tech-savvy, comfortable with numbers and models, and obsessed with optimizing marketing’s spend to generate the most pipeline and revenue. And with that, Marketing became a little more important to every company’s growth.
The Growth Teams
Around 2007, Facebook had the innovative idea of creating a “growth team”: initially an 8 person cross-functional team of marketers, product mangers, technologists, and designers all working together to drive the growth of Facebook. It worked incredibly well, helping Facebook grow from 500M users to over 2B users in short order. Companies all over the valley began to copy this approach and put together their own growth teams focused on driving growth.
Upon hearing about these new growth teams that were “solely focused on growing the business,” my initial reaction was “what does everyone else do?” If you build a growth team, then you have to wonder what does marketing do? Do you even need marketing in its current form? Recently, a number of prominent companies have concluded that they didn’t, and eliminated CMO positions and reorganized marketing.
Was this the end of marketing? No, but perhaps the end of marketing as we knew it.
Today, SaaS and subscription businesses are the dominant business model in technology and many other industries, and they present many challenges. Subscription businesses need to grow or they die. Customers sign up for a certain period of time, a month, a year or maybe a few years at most. But every year some percentage of customers churn (typically 10-20% for SaaS companies) so you need cover that churn with new acquisition growth just to break even. And then add more growth on top of that if you want increase revenue year over year. And on top of that, you need to acquire customers efficiently and retain them long enough to turn a profit to minimize cash burn and become profitable.
To achieve this, companies religiously track and execute on a blizzard of metrics like customer acquisition cost, lifetime value, retention and expansion rates, and conversions through every stage of the buyers journey. Succeeding on these metrics requires the coordination and execution of many functions. A colleague of mine used to say, “SaaS is a team sport.” And he was right that it takes a coordinated multi-department effort to build a successful SaaS business. Yet every team needs a leader to organize separate functions into a coordinated effort. Increasingly for subscription businesses, that leader is coming from marketing.
This rise of marketing has come about organically simply because they are in the best position to assume this growth role. Sales is focused on hitting sales targets and not responsible for metrics like acquisition cost or lifetime value. Product teams are tasked with building good products on schedule and are a bit removed from retention and expansion. Customer success is usually held to Net Promoter Scores and customer satisfaction targets.
And while each of these areas touch and rely on each other, no one is tasked with bringing it all together to maximize growth. Hence the creation of the growth teams. But what many companies are now realizing is that their growth team is called marketing.
A Growth Team Called Marketing?
Why marketing? It is in the best position to direct the entire go-to-market lifecycle, given that they work closely with product on product-market fit and product strategy. Marketing owns messaging, value prop, generating leads, creating awareness and buzz, and filling the pipeline with opportunities. They work closely with Sales on opportunity development and closing deals. And they help Customer Success retain customers and set the table for new products and expansion.
But in order to tie multiple departments together to deliver an optimal customer experience from start to finish, marketing needs to step up from its tradition role. Being analytical and tech savvy won’t be enough anymore. Marketing leaders, and specifically the CMO, need to show cross-function leadership that rallies disparate departments to the cause of growth. It must create and lead a growth team without the title or the authority.
Now a new generation of CMOs and marketing leaders are emerging to embrace responsibility for driving company growth. They are first and foremost strong leaders who excel at bringing people together, and they are comfortable directing business discussions with product, sales execs and customer success teams. They track and execute on a battery of metrics, but their primary metric for success is revenue growth. And they take responsibility for all aspects of the company to achieve that growth.
The days of measuring marketing by brand recognition or media hits are long gone. And no one considers marketing overhead anymore.