Wednesday, August 05, 2009

When does marketing get a seat on the Board?

I’ve often been asked this question. Mostly, of course, by Indian IT services marketers. We eye with envy the elevated status of our FMCG marketing brethren. Things are changing now, with most marketing heads directly reporting to the CEO (unlike the past where they reported to Sales or Finance).

Here are my views of when marketing becomes important enough to get a spot on the Board:

1. When supply outstrips demand.
When the stuff is selling itself, ie demand is greater than supply, marketing isn’t important. What is important is the supply chain and managing delivery in order to fulfill client demand. The role of sales and marketing is ensuring that clients know of your existence and collecting the orders.

2. When the original innovation that the company was founded on starts to age
Peter Drucker famously said that marketing and innovation are the only to functions of the company, with all else being costs. In this case marketing is defined as understanding what the customer wants, and innovation is fulfilling that need. Most companies are founded to fulfill a newly identified need. So for the first few years the CEO/Founder is effectively in charge of marketing (and there’s no space for any other marketer on the board!). Plus the original product/service idea is the key differentiator for the firm. It is only when the need is either outdated or satisfied to saturation that the company needs to identify fresh markets and marketing comes to the fore.

3. When there are at least 3 credible choices for customers.
As the market gets more crowded, marketing’s role shifts from just awareness and communication to differentiation and product management. That’s when it gets closer to the heart of the business.

If you look at the FMCG industry you will see that all of the above conditions hold true. What do you think of my hypothesis? More practioner views are welcome!


Kiruba said...
This comment has been removed by the author.
Kiruba said...

Apple Inc., is yet another good example for the last two.

Paul Zagoridis said...

I also saw your tweet.

Marketing gets a seat on the board during any fast growth phase, and during a turnaround.

The founder may be the CMO but that still means marketing has a seat.

I'm with you and Peter Drucker "the business enterprise has two - and only two - basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs"

So when does marketing not get a seat on the board? Just before the firm enters decline.

rajagopal sukumar said...

Insightful and thought provoking post. I can think of atleast 1 more parameter - how much effort is required by the company to make a sale?

To take your FMCG example, these are companies where the products are sold through channels and not directly by salespeople. In this kind of companies, marketing becomes crucial because it is only those companies that manage to create a sticky brand in the minds of the buyers will make the sale at the point of purchase.

Whereas, in IT services companies like yours or mine, the sales cycles are long, the sale is accomplished by an experienced sales team which works with the customer to sell the service. In these kinds of companies, marketing's role is more in getting the company to the buyer's table, but the actual sale is in the hands of the salespeople. [ i am using salespeople in the general. of course, we know that we have experienced consultants on the front end to make the sale].

If you agree with this parameter, it seems that it is going to be very difficult for marketing to get on the board of B2B companies which typically have long sales cycles.

Hope that helps.

Prats said...

Reached your blog through twitter, nice post....

My take on this-

Marketing in Indian IT services is a lot less into product management. Invariably the offering of a IT service company is so customized and complex that the Product Management is almost ignored (as in not enough attention bestowed on it, as it should).

For marketing in any organization the baby is always the product and until the marketing takes ownership of it, it would not get its due place in the structure.

Jessie Paul said...

Paul: Wonder if it's causal - the company goes into decline BECAUSE marketing doesn't have a seat at the strategy table!

Sukumar: If we are talking of very customized solutions then, yes, the front-end person is basically marketing & innovation rolled into one. But if we are talking standardized offerings, then marketing should pull the customer in. Also, as social media makes it ever easier for customers to connect with producers, the need for the mid-layer to explain or craft solutions might reduce.

Preetham V V said...

Additionally, for FMCG (as in probable commodity play), Marketing (CMO) shall secure a seat on the board when the innovation in marketing by itself becomes a significant portion of the product enabling "Experience Economy" for the company.

Doug Moore said...

Most of my experience has been B2B, so I can only comment on that arena.

The function of marketing is very broad; which, for this argument, is a huge detriment. If marketing was seen as “Product Management with P&L responsibility”, and all other marketing functions were responsible to the Product Managers, you would have a better argument for attaining that “seat”.

But I have never seen that scenario.

prateek said...

nice blog...

I think marketing also comes in handy when your core products start getting disgruntled by media, comes under the eye of the activists or when your brand is under fire. This doesnt mean your product is outdated..
we can recall the pepsi, coca cola, cadbury debacle..
these are the times when marketing takes the front seat.

Anonymous said...

Some may feel squeamish about eating it, but rabbit has a fan base that grows as cooks discover how easy they are to raise — and how good the meat tastes.