How to Help Your CMO Boost Global Growth

Chief marketing officers have fallen out of fashion in recent years. Some researchers claim they don’t add value, and many companies, including Johnson & Johnson, Uber, and Hyatt, have scaled back or even eliminated the position. A new study finds that, on the contrary, CMOs have a crucial role to play in multinational companies. They can be instrumental in helping those businesses grow globally—but only under certain conditions. “Every multinational enterprise faces two major challenges: a rise in nationalism and a saturation in domestic markets,” says V. Kumar, a professor at St. John’s University and the lead author of the study. Unlike other C-suite officers, he explains, CMOs have expertise on the front lines of the business—and that firsthand customer experience is vital to international growth. And because their responsibilities are broad and include both strategic and tactical decisions, they are what the study calls meta integrators of knowledge. The research team began by interviewing 41 CMOs at multinational firms to understand the self-reported challenges they face. One of the most common complaints was a lack of authority and managerial discretion. The researchers then compiled data on 297 multinational firms from 2007 to 2016, assessing the level of internationalization of each firm for each year by looking at the number of continents in which the firm operated, along with the ratio of foreign sales to total sales. Their analysis showed that giving the CMO leeway in certain areas did indeed determine the degree to which a company’s global expansion plans were successful. Three forms of managerial discretion in particular enabled marketing chiefs to grow their firms’ international presence. First, successful CMOs were given strategic discretion, measured by comparing the CMOs’ tenure at their firms with that of the other top managers. These marketing chiefs had the power to develop global customer and supplier relationships and set go-to-market strategies, such as whether the firm would take a “waterfall” approach, in which new products are introduced to various markets sequentially (first Spain, then Mexico, then Colombia), or a “sprinkler” approach, in which a product is launched in multiple markets at once. Second, successful CMOs were granted operational discretion, measured by the number of business segments they were involved in. For example, they could decide how the firm would communicate with customers (whether through digital or traditional channels, in personalized or mass messages, and so on). They also had discretion over whether to offer promotional discounts, start a loyalty program, and set up licensing agreements with foreign partners or run international operations from headquarters. “We Can’t Just Copy the Plays We Run in the U.S.” As CMO of UPS, Kevin Warren is responsible for all U.S. and international marketing. He recently spoke with HBR about the role of the chief marketing officer. Edited excerpts follow. Lynsey Weatherspoon/Redux Is internationalization harder and more important than ever before? Yes. At UPS, we have three strategic growth imperatives. The first is our health care logistics business. The second is the small and medium-size business segment. The third is international. We have our highest margins in the third—our global business model is “asset light,” without many of the structural costs we have in the U.S.—but international business is a lot newer and smaller. Much of my role is to make sure that resources, time, digital investments, and talent are allocated appropriately in international. We can’t just copy the plays we run in the U.S. We have to be attuned to the different cultures, business models, economies, and languages. So we draw on programs we’ve developed in the U.S., where we have scale and expertise, and work with marketing colleagues on the ground internationally for local execution and customization. In some cases they might need a very different approach, and we support them to go their own way. Describe an instance where marketing played an important role internationally. For years we’ve been losing share in the SMB market. We realized we needed to learn how those businesses want to work—not just do what we’ve always done. We found that they want to operate in an integrated fashion, with demand generation, checkout, delivery and fulfillment, and returns all in one integrated format—not à la carte, as was traditional. So we’ve established partnerships with 16 companies to date, including Amazon, Shopify, eBay, and Facebook, and that has been enormously successful in growing our small business segment in the United States. As you get outside the U.S., it’s a lot of small and micro businesses. So we went global with those partnerships. There was some skepticism early on, because it was so different, but the effort quickly scaled up and became profitable, and the skepticism turned to enthusiasm. Does your experience align with the study’s findings about the managerial discretion CMOs need to succeed? Yes. I sit on the executive leadership team. I have responsibility for revenue forecasting and pricing for our SMB and e-commerce strategies. I’ve got product management responsibility. More than 5,000 franchise stores report to me. So I have operational and commercial responsibility in addition to traditional marketing. When I came to UPS, three years ago, marketing was seen as a discretionary expense. We worked hard to change the approach to what we did—to think about outcomes rather than outputs, to show the ROI and shareholder value we would hold ourselves accountable for. What about others in the C-suite—is it important that they have international experience? It is helpful to have not just experience but sensitivity. We’re fortunate in that Scott Price, who runs our international business, previously ran that for DHL in Europe and Asia. He spent a lot of time living in those regions, so his sensitivities are real-life ones. One of the biggest things we have to avoid is the idea that the United States is the center of the universe and everything else is second fiddle. Being sensitive to that is really important. Third, successful CMOs had financial discretion, measured by dividing a given period’s marketing budget by the previous period’s sales. They could decide how much to invest in various activities and what budgetary trade-offs to make—for example, how to allocate funds between traditional and digital marketing (a decision sometimes made by the chief financial officer). The three types of discretion affected internationalization efforts in different ways. Both strategic and financial discretion helped CMOs boost sales in existing foreign markets: A 1% increase in strategic discretion correlated with a 13% increase in the ratio of foreign sales to total sales, while a 25% increase in financial discretion correlated with a whopping 77% increase. Operational discretion helped CMOs grow the number of foreign markets in which their companies operated: A 43% increase in operational discretion correlated with an 8% increase in continents entered. “Most multinationals want both more sales and more markets, so increasing all three forms of discretion is advisable,” Kumar says. “It may seem paradoxical, but for companies that are dissatisfied with the CMO, the answer might very well be to give him or her more power.” Many companies are going in the opposite direction, however, restricting marketing chiefs’ power by holding them to quarterly marketing metrics such as customer acquisition and retention. Owing in part to this constraint, turnover in the top marketing job is notoriously high. In a previous study, Kumar and colleagues found that the average tenure of CMOs is only about two years, whereas other C-suite executives typically remain on the job for at least five years. “Two years is not enough time to oversee an international expansion,” Kumar says. “Yet that is one of the main ways the CMO can drive value to the firm.” The high turnover, he adds, is the reason many frustrated companies have eliminated the position. (See “ Why CMOs Never Last ,” HBR, July–August 2017.) Does all this mean that CMOs should have free rein? Not exactly. The researchers found that after a point, additional discretion yielded diminishing returns—and that the firms with the strongest international growth linked CMO compensation to shareholder value, which incentivized disciplined growth. “You need to give CMOs power, but you should ensure that they don’t misuse it by taking unnecessary risks,” Kumar explains, adding that incentives should be tied to stock market returns rather than to softer metrics such as gains in awareness and market penetration. The most-internationalized firms had another characteristic in common: a C-suite with global experience. “The CMO may be inclined to enter every market in the hope that at least one will take off, so you need other senior executives who can ask the right questions and keep any overenthusiasm from the CMO in check,” Kumar says. One marketing chief told the researchers how his globally savvy colleagues helped him course-correct. “Members of the top management team were able to push back not on his plan for further expansion but on which country to target next,” Kumar explains. “They knew from experience which kind of sequence works best.” Regarding the claims that CMOs don’t add value, the researchers believe that they reflect a lack of understanding about the need to carefully manage those in the top marketing spot. “It’s not a question of whether you have a CMO,” Kumar says. “It’s whether your CMO has the discretion—and the support and oversight—to succeed.” About the research: “ Chief Marketing Officers’ Discretion and Firms’ Internationalization: An Empirical Investigation ,” by V. Kumar et al. (Journal of International Business Studies, 2021)

How to Help Your CMO Boost Global Growth

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