Strong brands produce significant, sustainable value for the firm. There is no real debate about this fact. The value of a brand can also be readily measured: it is the price premium the brand commands relative to a comparable unbranded product. And, unlike other easily imitated product or service differences, like quality and price, a brand is unique to the firm that offers it. Thus, it is not surprising that Boards and CEO’s seek to build brands and maintain brands over time. Such brand building efforts often include hiring a Chief Marketing Officer to work their magic. And, indeed, it is often magic that is expected.
The Spring 2024 CMO Survey included a report on marketing responsibilities, that is, the activities for which marketing is primarily responsible in survey participants’ firms. Not surprising, high on the list are brand, digital marketing, advertising, and social media. More than 80% of the survey respondents reported that marketing was primarily responsible for these actions in their organizations. These are all activities that can contribute to building and reinforcing a brand. However, they can also be little more than incantations to the gods asking for a favorable climate. And, indeed, other data in the survey suggests that this is often what branding efforts are in many firms.
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The survey found that less than a third of the survey participants reported that marketing was primarily responsible for new products and services, only a quarter were responsible for pricing, and only four percent were primarily responsible for distribution. Such figures make clear why branding efforts often fail. Successful branding depends on a strong, differentiated offering around which compelling customer experiences and messaging can be created, on a sustainable price premium that customers regard as fair, and on the ready and convenient availability of the product. If marketing is not responsible for these activities, which are fundamental elements of a firm’s profitability, all of the branding, advertising, and digital media efforts are little more than magical incantations.
Without the ability to manage the product offering, the price, and availability of the product, marketing cannot build a brand. It most certainly cannot contribute to the firm’s profitability or stock price. Stated in other words, marketing cannot contribute to profit and loss without decision rights related to product, price, and distribution. Without such decision rights marketing is a staff function supporting the efforts of other functions in the best case. It is not a line function, which may be one reason so few people with marketing backgrounds are found on boards of directors.
Thus, there exits a paradox. Marketing is often called on to build brands but is not given the authority, resources, and P and L responsibilities that are required for successful brand building.
This state of affairs represents a significant change from the early days of the marketing discipline, which emerged early in the twentieth century in response to the need for processes and institutions for matching supply and demand as society became more urbanized and consumers became more affluent. The focus was on product, price, and distribution. Indeed, advertising was a late addition to marketing’s early responsibilities. Marketing textbooks still teach marketing as a discipline responsible for the four P’s, product, price, promotion, and place (distribution). This is clearly not how marketing is manifest in most organizations.
While it is possible to define this problem as a “marketing” problem, it is actually a problem at the firm level – it is a Board and CEO problem. Demand management is fundamental to the short- and long-term financial health of the firm. If marketing, or some other discipline, is not responsible for deliberate, coordinated management of demand, the firm is living on borrowed time. Expectations that marketing, with no decision rights related to pricing and distribution, will create and maintain product offerings that command a price premium, because customers really do value them, are unrealistic. No magician can change this fact, no matter how great their stage presence.
Successful brand building, and profitable firms, require aligning expectations and responsibilities. Responsibilities must be aligned with decision rights. However, it is also important that responsibilities and decision rights align with abilities and experience. This will happen only when marketing career development includes specific P and L responsibilities. It is time to reconceptualize the marketing function and return it to its roots in demand management. Firms and their shareholders will benefit from this change, but it cannot happen without the leadership and direction of Boards and CEO’s. It’s not about magic; it’s about management.
Contributed to Branding Strategy Insider by Dr. David Stewart, Emeritus Professor of Marketing and Business Law, Loyola Marymount University, Author, Financial Dimensions Of Marketing Decisions.
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