October 26, 2021
With just over two months left until the new year, a great deal of planning has been done and yet as marketers, there’s still so much to do. When we’re in this constant state of planning, the one question that’s always top of mind is: how do we stand out to our audiences? Offering an inside look at the decisions that VP-level marketers are making at hundreds of U.S. companies, the bi-annual CMO Survey extrapolates backward- and forward-looking data to help inform future decisions. In today’s episode of The 19: Entrepreneur Edition, we have an exclusive interview with the report’s founder–Professor at Duke University’s Fuqua School of Business–Christine Moorman.
Rochelle Reiter: [00:00:05] This is The 19. In 19 minutes or less game-changing insights from Orange Label, the leading response marketing agency for established brands that are driven by a fearless entrepreneurial mindset.
Rochelle Reiter: [00:00:24] Welcome to The 19 Entrepreneur edition! I’m Rochelle Reiter, President of Orange Label. Author Tom Fishburne once said, “the best marketing doesn’t feel like marketing.” Behind the scenes, we know the magic of marketing isn’t magic after all. It’s constant planning, research, optimizing and more. And while we know the plans that we’re making, it’s always good to take a pulse on trends as a whole. The biannual CMO Survey pulls back this curtain and details data points from hundreds of VP-level marketers across the U.S. to help guide future decisions and innovate marketing strategies.
Rochelle Reiter : [00:00:59] Here to share key insights from the latest report is Christine Moorman, Professor at Duke’s Fuqua School of Business and founder of the CMO Survey. Christine, thank you for joining us on The 19!
Christine Moorman: [00:01:10] Thank you, Rochelle. Happy to be here!
Rochelle Reiter : [00:01:16] So you created the CMO survey in 2008. What led you to create the survey?
Christine Moorman: [00:01:21] You know, I was part of several organizations like the American Marketing Association, the Marketing Science Institute and just talking to a lot of practitioners. There was a lot of concern and hand-wringing over the fact that marketers really weren’t getting that seat at the table. They weren’t getting the respect within organizations that they frankly deserve. It was unclear what I could do as a single academic, but one of the things that I thought about and was inspired also by my colleagues who were running something called the CFO survey at Duke University, was to create the CMO Survey and to provide a way for the regular collection of information from marketers as a way to get that information out because people were asking about, say, what was going on in the marketplace and they were asking CFOs about that because there was no regular source of information about what CMOs we’re thinking. That’s changed a lot over the last thirteen or so years. There’s more and more of these sources, but I think the CMO Survey is very unique, and I think it’s had some of the impact that I hoped it would had, which was to bring attention to what marketers were thinking, but also to provide some benchmarks to to marketers.
Rochelle Reiter : [00:02:35] Yeah, it’s been great for us to access for sure as an agency. So it comes out twice a year. The most recent release in August. In your opinion, what value does the report bring to marketing leaders and brands?
Christine Moorman: [00:02:48] Well, part of it is really to collect and disseminate the opinions of these top marketers, and we use that and we ask them a lot of forward-looking questions. What will you be doing over the next year? so, because often I think marketing is driven by a backward-looking view. We ask about what happened in the past, but we don’t have any way to extrapolate into the future. So we ask them a lot of forward-looking questions and then we ask for a lot of benchmarks so that marketers have some way of understanding. Well, is my marketing budget, you know, sufficient? You know, how do I compare with regard to this aspect of digital spend? And so being able to provide that information, I think, has been helpful. And also, we’re an objective source. I’m not really trying to sell anything with the survey I’ve provided the reports at cmosurvey.org free over these last thirteen years, and we’ll continue to do so. So there’s not really I’m not looking for a trend so that I can later on say, “Oh, you know, here’s this service that will solve that problem.” So it’s really noncommercial in that sense. I’m really interested in helping the field. And then the other thing is it’s longitudinal. We do this twice a year, so we can really capture trends in a way that many of the single-shot surveys or surveys that don’t ask the same questions over time really cannot.
Rochelle Reiter : [00:04:11] Mm hmm. How have you seen the role of market leaders shift in this issue of the report?
Christine Moorman: [00:04:17] This was a very promising report. I mean, the pandemic overall. To be frank, has been very good to marketing. The digital imperative that’s been brought about by COVID has really elevated marketing within most organizations. When we asked in February of 2021 and that survey, we asked marketers to report the degree to which marketing was more or less or similarly important in their organizations, and 72% reported that the importance of marketing in their organizations had increased during the last year. That’s that’s huge. And so I think, you know, companies turn to marketing as I think they should have helped guide a lot of their activities. And, you know, the digital transformation in most organizations, we’ve asked about that as well. In 73% of companies, marketing leads that digital transformation. So that’s also very promising. And then maybe finally, just to make one point about these more kind of what I would call sort of upper echelon effects that marketing is really getting that seat at the table with the CEO, with the CFO. And one piece of evidence that we have about that is we asked how often our senior marketing leaders asked by the CEO or the CFO to participate in board meetings or earnings calls, which are really the gold kind of standard, if you will, but that that very top level activity that publicly held companies engaged in and we were pleasantly surprised by the fact that those average participation rates were pretty high. So on a 7 point scale, they were 4.9 for board meetings, which is, you know, if 7 is all of the time and one is not at all, this is about, you know, more than half of the time. And then for earnings calls, slightly less than that at 3.6.
Rochelle Reiter: [00:06:07] Yeah, that’s great. In your experience, how can market leaders truly illustrate and capture marketing results and impact?
Christine Moorman: [00:06:14] For one of the themes of this current survey was looking at marketers’ relationships with their CFOs. We know that this is a challenging relationship because CFOs want those financial results and often marketing investments are things that occur over the long run. So what is it that marketers should do in order to improve that relationship and to improve the degree to which they can demonstrate their impact within the organization. So we asked a bunch of questions within the survey about this, and one of the things that we documented was that marketers do feel pressure to prove the impact of marketing. Fifty-nine percent of marketing leaders report increased pressure from CEOs. Forty-five percent report increased pressure from CFOs. So this pressure is real. So what is it that marketers should do? One is to build a business case based on the alignment with the company’s priorities and strategies. It’s important to be able to basically point to how this marketing spend affects the, you know, the direction that the company is going and the strategies that it that it has in place. The other is to build a business partnership with the CFO. When we asked marketers to report basically to what degree they have an integrated marketing team in which marketing and finance experts work together, only 35% agreed with that statement. And so it’s important to work very closely to have those one on one meetings with the CFO to build that business case for the CFO, and also to measure regularly the impact of marketing on brand and customer metrics. That’s not something we want the CFO having to imagine will happen. We want to be able to show that, yes, there is an impact on whatever KPI is relevant for the business. We do collect a lot of information about metrics. And this most recent survey and what was sort of disappointing to me was that marketers report that they don’t measure some aspects of marketing impact that I thought they would do much more regularly. For example, only 3.3% of marketers report measuring brand equity consistently. Same thing with measuring customer lifetime value. These are things that aren’t being measured very consistently and so those are both factors that we can really connect to the bottom line. Strong brands do build bottom line impact, same thing with customer lifetime value. It does have a bottom line impact, so I think it’s important to be able to show that. And finally, there’s many other results in the survey around running experiments and this would. This connects back to the idea of the digital opportunities. So when we asked marketers to their digital investments, only 46% said that they had invested in online experimentation and AB testing. And that seems too low because one of the beautiful things about digital is that you can run experiments almost all the time.
Rochelle Reiter: [00:09:17] Absolutely.
Christine Moorman: [00:09:18] Yeah. Even if you’re just delaying something that some customers might get, maybe they don’t get it immediately. Maybe they get it later so that you can start to see their the impact. So I would say creating a lot more experimentation. This is really the only way to then get a baseline against which you can say, Well, here’s the lift in terms of customer satisfaction. Here’s the list in terms of digital engagement, here’s the list in terms of retention rate or whatever outcome you want to connect it to. But if you don’t have that baseline, it’s very, very difficult. And marketers tend to report great frustration with the ability to connect marketing spend to outcomes. And so this is something that experimentation can help with quite a lot.
Rochelle Reiter: [00:10:03] Yeah, absolutely. What are some of the standout trends you’ve seen in digital marketing?
Christine Moorman: [00:10:08] We asked companies about where they were on the digital marketing transformation, which most companies are undertaking during these last few years, and most companies were still at the nascent stage. Sixty percent were either nascent, meaning they’re still taking early steps to design and visualize their transformations or an emerging state, meaning they’re building non-integrated digital elements. Now, only 27% reported themselves in a more integrated set of activities, meaning they’re integrating things across the company, and only 11% were fully institutionalized or established with their digital activities. You know, we still have a far way to go in terms of what marketers and what the rest of the organization needs to do in creating that digital transformation. So when we asked, for example, what types of investments companies were making to improve the performance of their digital marketing activities, the dominant response was the optimization of. Company website, which. That seems sort of table stakes to me.
Rochelle Reiter: [00:11:17] Right? Yes.
Christine Moorman: [00:11:18] There were other activities that were also rated highly, but not as high around digital media and search. And MarTech systems and platforms and also data analytics. Those also rated high but not as high as the website. So I think what we’d like to see over the next year, some of these more critical activities that really are the key to making digital effective within organizations around analytics and these systems and platforms to get those in place and see the ratings for investments on those even higher.
Rochelle Reiter : [00:11:52] Yeah, for sure. Diversity, equity and inclusion was added into this year’s CMO Survey. Were there any notable changes between February and August reports?
Christine Moorman: [00:12:02] So what we observed is that companies spent about 10.6, 11% more on DE&I in the last year, B-to-C companies spent 18% more and larger companies spent more as well, but the average was about 10.6%. You might ask, well what are they spending on? In the February survey, the first time we asked these questions and this was sort of right after, you know, the very difficult summer with George Floyd and all of the protests and everything. Most of the activities that companies were engaged in were what I would call external activities. Communications brand saying the right things to the world about what their company was doing. What we saw shift in this last survey was larger investments in kind of behind the scenes activities like segmentation, targeting product and service design. So those levels kicked up to a much higher level of investment in the last survey, which I think is good because they’re going sort of to the heart of marketing as opposed to just focusing on an external facing.
Rochelle Reiter: [00:13:06] Right.
Christine Moorman: [00:13:06] We asked two telling questions, which I think show that marketers and companies overall have a far distance to travel on this. To what extent do you have an inclusive approach to marketing decision making, which basically means that when you make a decision, do you stop and think about the many questions before making that decision? You know, the average on a 7 point scale where again, one is not at all and 7 is very highly, it was only 3.5. So we’re definitely below average on that. Same thing when we asked, how much is your company changing its marketing strategy to reach a more diverse set of customers? The average was also 3.4, and there were a lot of companies 20-30% on both of those measures that were that rated themselves as ones, meaning they’re not doing anything at all. We had put a couple of questions into because we sort of anticipated there would be some bottlenecks that companies were still not making as much progress. So we asked what are the biggest barriers to doing DE&I within your company? Issues related to your marketing strategy? And there were two things that really stood out. The first was the difficulty of assessing the value of those DE&I related opportunities. Marketers reported that being able to show basically the bottom line impact or the degree to which this would convert into something that you could say would be of value to the company. Sixty nine percent of them agreed with that statement. The other is another 69, said they had difficulty envisioning what those DE&I related opportunities would look like. So really seeing where they could make investments, like what could they actually do to improve their marketing strategies in this area? Sure, companies need some support on both of those showing the impact, but also figuring out what to do.
Rochelle Reiter: [00:14:57] Right sounds like an opportunity for a consulting firm, for sure.
Christine Moorman: [00:15:00] Absolutely.
Rochelle Reiter : [00:15:02] So how have you seen marketing budgets shift this year and what are companies focusing on in 2022?
Christine Moorman: [00:15:08] So there’s a lot of numbers in response to this question, and I would say that anybody who wants to dig deeper should look at the reports at cmosurvey.org. And we also break out all of these numbers that I’m going to share with you by sector. So if you’re in banking or if you’re in telecom or if you’re in health care, you can find the numbers for your sector there, which I think is really useful. But just to offer a few numbers that I think might be most helpful to your listeners. We found that marketing spending overall grew by 5% last year and is expected to grow by 13% over the next year.
Rochelle Reiter: [00:15:47] Wow.
Christine Moorman: [00:15:47] Digital marketing grew by almost 16% last year and is expected to grow by 15% next year. And that pattern of digital marketing growing at a much faster rate within that overall marketing budget spend category we’ve seen for a long time now. So it shouldn’t be surprising that 58% of all marketing spending is now directed towards digital activities. So that’s something that people could benchmark against. They could benchmark against these spend numbers as well. We don’t have actually dollar values because no one’s going to tell us their dollar value spend. So we ask a lot about the percent change. But one number that we can I can share with you that a lot of marketers find useful, which is the marketing expenses as a percent of firm revenues. So this kind of levels things out because larger companies will have bigger marketing budgets. We report that 8%, 8.6% of marketing expenses as a percent of firm revenues in the last survey and 12% of overall budgets. So marketing expenses as a percent of overall budgets were 12%, so whichever one you find most meaningful for a new company. Those are two that you could point too. There are a lot of other spend numbers in the survey. For example, social media spending is currently at 15% of marketing budgets. It’s expected to rise to 19% next year and 20% over the next five years. Just one other final number that’s kind of interesting. I’m going to try to investigate this is that we saw for the very first time in a decade, which is one of the benefits of running the survey over time, that traditional advertising spending, you know, like on radio, TV, et cetera, print rose was positive for the first time in a decade.
Rochelle Reiter: [00:17:38] Wow.
Christine Moorman: [00:17:38] We’ve had negative growth over this last decade, but it finally rose up. It’s expected to grow 1.4% over the next year, so I’m not sure exactly why. Maybe your listeners have their own theory, but my guess is that digital is getting crowded and people are looking for creative ways to sort of break through. And yeah, going back to traditional might be one of the ways to do that.
Rochelle Reiter: [00:18:03] Mm hmm. Yeah. Well, thank you so much for being with us today, and thank you for taking a stand for marketing leadership. I think it’s amazing what you’ve done since 2008 and doing the surveys and making it available to everyone for free. That’s just fantastic. So I really appreciate you joining us on The 19 and sharing such impactful insights. Christine, it was awesome!
Christine Moorman: [00:18:27] Thank you very much, Rochelle. It was my pleasure.
Rochelle Reiter : [00:18:34] Thank you for listening to The 19: Entrepreneur Edition with Christine Moorman. To view the full CMO Report and or participate in the survey visit cmosurvey.org. Find additional insights on our blog at orangelabelmarketing.com. If you have thoughts on this topic, send us an email. You can send questions, comments and more to email@example.com.
Rochelle Reiter: [00:19:04] A special thank you goes out to our contributors, Studio Manager Kelsey Phillips, Micah Panzich, who edits our show, and Ashley Ruiz, Content Writer. Be sure to subscribe to The 19 on iTunes and Google Play, and, if you like what you heard today, leave us a review!