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IN THIS ISSUE

OCTOBER 2006

A Letter from CEO Michael Dunn
The Shift to the Empowered CMO
David Aaker discusses "Qualities That Make an Empowered CMO"
How Empowered CMOs Tackle the Tougher Aspects of Brand Building
Recommended Reading
News and Events

A Letter from CEO Michael Dunn

Senior level marketers are sitting in a real hot seat these days. The pressure is on marketers to prove their value – in driving and solidifying customer relationships in a way that links back to business performance. And their ability to deliver depends significantly on the extent to which they’ve been empowered.

Of course, empowerment is both bestowed and earned. It implies a certain mindset within the organization, senior management, and, of course, marketing’s leadership – a mindset that allows for expanded influence, confidence, thinking, and, ultimately, impact. And what we call the “Empowered” CMO is, in the process, helping to bring about business transformation and growth, while removing the heat and adding more authority to their positions.

In this issue of Prophet’s newsletter, we explore various facets of this emerging marketing role model. In my piece titled, “The Shift to the ‘Empowered’ CMO,” I discuss what defines this new senior marketer, and some of the capabilities that set them apart. David Aaker weighs in with his reflections on this evolving role in "Qualities That Make an Empowered CMO". In “How Empowered CMOs Tackle the Tougher Aspects of Brand Building,” Judy Hopelain discusses how we worked with one CMO to prove the value of brand operationalization versus awareness building.

As we move into the final stretch of 2006, it’s interesting to see how our thinking continues to evolve with the benefit of client experiences. And we trust that at the same time, we’re continuing to help you enrich your understanding of the critical issues faced by senior marketers.

As always, we welcome your feedback.

Best Regards,

Michael Dunn
President & CEO
m_dunn@prophet.com

Building Great Brands and Businesses

The Shift to the Empowered CMO

By Michael Dunn

In many of today’s leading corporations, marketing is front and center in driving not only sales, but solid business performance as well. And helping bring that shift around is a new kind of CMO – one who has been “empowered” with the expanded influence and authority necessary to help shape the company and propel growth. Like others in the C-suite, these executives view themselves as thought leaders with a particular expertise in customer-related strategies and a view of marketing’s capabilities in the broader business scheme.

Critical to the success of the “empowered” senior marketer is the “empowerer”; a chief executive who “gets it” and is a public proponent of an expansive, influential, and results-driven marketing organization. At GE, CEO Jeffrey Immelt has empowered marketing executive, Beth Comstock. At Microsoft, CEO Steve Ballmer has directed a sea of change in marketing, empowering Mich Matthews to bring it all about.

How do senior level marketers achieve the kind of stature that empowerment implies?

Here are some of the key attributes:

The ability and know-how to pull all levers that influence the customer experience, a rarer capability than you’d think: Prophet’s 2005 study on marketing’s role in driving business growth, found approximately 300 senior marketers ranking “customer service and delivery” and the “customer experience” as “most critical” growth drivers (31%). Yet, they admitted to not playing a significant role in the pulling many of the levers closest to the customer, such as customer experience (18%), customer service (33%), pricing (43%), and sales force strength (45%).
The confidence to take risks and to make decisions that may seem contrary to what research indicates.
The ability to effectively partner across multiple disciplines. The Empowered CEO uses his or her knowledge to help ensure that products and services offer the right features and increased productivity while meeting customer needs and expectations of the brand.
The know-how to achieve marketing accountability. A greater focus on measurable results will shift the perception from marketing as a cost center/support function to a profit center that contributes to the bottom line, just like the business units.

The Empowered CMO creates business and brand alignment that breed true success. Sustainable growth and shareholder returns are the long-term objectives of the day and are increasingly difficult to accomplish in a complex and competitive marketplace. This puts a premium on empowered marketers who can prove their mettle.

Michael Dunn (m_dunn@prophet.com) is CEO and Chairman of Prophet. This article is adapted from one published in the September issue of Marketing Management, entitled Power Switch.

Qualities That Make an Empowered CMO

By David Aaker

In major businesses around the world, the CMO role is being empowered to deal with two forces that are central to strategic success.

The first is the need to address inefficiencies and lost opportunities created by product and/or geographic silos. Decentralization has a host of advantages, but it does inhibit synergistic cross-silo programs such as sponsorships, promotions, and new media strategies. Also, brands shared across silos suffer from lack of central coordination, which results in wasteful, if not destructive, inconsistencies.

A second force is the perceived need to generate market-driven growth. After years of focusing strategy around operations and acquisitions, many businesses are seeking to redirect resources toward internal growth. This creates a visible need to elevate marketing from a tactical support function to a strategic partner responsible for creating and implementing products and programs to achieve growth objectives.

This makes the CMO’s job difficult, partially because people are reluctant to relinquish control, especially in the strategic realm. With the life expectancy of CMOs at just under two years, it begs the question: What CMO qualities are required to be successful?

Some are obvious: Credibility in brand strategy and other functional areas of marketing, and an understanding of offerings and their context. Well-honed communication skills to help teach, persuade, motivate, and develop relationships. The ability to design and implement effective processes that enable objectives to be met despite opposition.

Yet, I believe three other qualities make the greatest difference in the CMO’s success or failure.

The first is keen customer insight relative to their user experience, unmet needs, and underlying issues and motivations. This also requires a familiarity, if not facility, with research methods. Ultimately, customer insight will be the trump card that overcomes organizational obstacles and provides the credibility to get things done.

The second quality is strategic flair, which is also critical for getting the CEO on board. This means having the ability to think strategically instead of (or in addition to) operating at a highly tactical level. Ultimately, the big problems and opportunities must be conceptualized and addressed strategically. What products and markets? What competencies? What assets? What brand portfolio?

Finally, the ability to develop a collaborative culture within the marketing group and the broader organization is crucial especially when the organization’s incentives are silo-oriented. At IBM, being collaborative is part of the performance evaluation criterion; the goal is to have people with a real desire to learn about the products, operations, and programs of other business units and an ability to work across silos. In fact, top central marketing people at IBM evaluate silo-marketing people on this dimension.

Various forces are causing the re-invention of the marketing function. The CMO who has or can develop these three qualities will earn stature, influence, and empowerment and will play a critical role in driving the business’ success.

How Empowered CMOs Tackle the Tougher Aspects of Brand Building

By Judy Hopelain

We often encounter senior executives who equate “brand building” with advertising. Sales executives, in particular, believe low awareness is the critical bottleneck to meeting their sales goals since “if they don’t know about us, they can’t possibly invite us to the party.” Thus, they are often content for marketing to focus almost exclusively on the next ad campaign.

The reality is that building awareness is only a small part of brand building, and arguably the easier part. We have worked with numerous CMOs to build awareness to be certain, but we have focused the bulk of our efforts on driving tangible business impact in areas other than marcom e.g., by identifying their most profitable segments, improving the in-store experience, training customer service reps, etc.

Empowered CMOs get the difference and find ways to make their case. Our work with one CMO with a diverse professional services firm led to hard facts confirming this argument.

We found that brand awareness matters in driving preference, but getting key aspects of the client experience right can drive three times the impact. Even more impressive, we found that buyers are willing to pay more – in some categories, a lot more – for a service provider who can deliver the desired client experience. Yet brand awareness alone did not appear to justify a premium at all!

These findings sprang from discrete choice research with buyers of these types of professional services that were asked to choose between hypothetical combinations of team interaction; type of team expertise; nature of the solution offered; thought leadership; visibility within the professional community; brand name awareness; and price. Buyers of virtually all services tested Level of Team Interaction (a key barometer of an operationalized service brand) as the most important service feature when considering alternative offers.

Isolating the impact of price on respondent choices revealed the price premium potential of operationalizing the brand. Even after a 15% price increase, preference share for the partially operationalized brand increased by over 20%. A fully operationalized brand gained 18 points of preference share after a 20% price increase!

No question, bringing the brand to life is hard work – harder than handing over an assignment for a new ad campaign to your agency. Success requires alignment and accountability for doing different things and for doing things differently.

These results gave our CMO client the ammunition he needed to sway his leadership toward action. By heading off the temptation to take the easy way out and rely on ad spending to drive share, he was able to demonstrate how the hard work of bringing the brand to life pays back, in dollars and cents.

Judy Hopelain (jhopelain@prophet.com) is a partner with Prophet, working out of our San Francisco office.

News and Events

News

In the “good work pays off…with more work” category, Kevin O’Donnell has moved up the ladder to Senior Partner from Partner at Prophet. His added responsibilities include membership on our Executive Committee, where he’ll help lead the management and strategic direction of the firm.

In a separate move, Niren Sirohi has joined Prophet as an Associate Partner from Accenture. Sirohi, a valuable addition to our fast-growing brand and marketing research and analytics practice, is well-known for his work developing real-time, in-market test-and-learn experiments designed to advance clients’ marketing effectiveness.

Finally, because we believe that our ability to give back to the wider community is an important facet of our own brand-building activities, we have agreed to a major sponsorship of Champions for Children, a notable charity event benefiting Children’s Hospital Boston. Funds raised at the dinner and silent auction (one of last year’s items was a private performance by famed cellist Yo-Yo Ma) is earmarked for patient care, research, and community outreach programs. For further details, visit http://giving.childrenshospital.org/events/championsforchildrens/default.aspx.

Upcoming Events

Andy Pierce, Senior Partner, is co-presenting a web seminar with Chris Gibson, CMO of United Healthcare Thursday, October 5. The seminar is titled "Evaluating Marketing Mix Tradeoffs: A Case Study of United Healthcare," and will discuss how Prophet helped United Healthcare assess the effectiveness of their marketing communications efforts and helped identify the link between spending on brand building, brand awareness, and member enrollment. Click here to register.

Andy Pierce is also co-presenting with Peter Vaughan, Vice President of Brand Management at American Express, at the Conference Board 2006 Marketing Conference on November 1 in New York. The session will feature a case study outlining the steps taken to drive a new positioning for the American Express brand. Prophet’s Chiaki Nishino will present at the pre-conference workshop on October 31 in a session titled "Managing the Customer Experience to Deliver Exceptional Brand Experiences." Click here for more information.

David Aaker will speak on the topic of Pillars of Brand Success at the Global Brand Forum in Singapore on November 6. The event is themed "Keys to Brand Transformation," and features David as well as Faith Popcorn, Martin Lindstrom, and Jack Trout. For more information on this event, please click here.