Tuesday, December 16, 2008

CMO Council Study Shines Light On New Business Challenges For 2009

By John Gaffney, Senior Analyst

Every now and then a statistic enters the marketing lexicon and it seems to come up everywhere. Example: The average tenure of a CMO is 24 months. I guarantee you that no other tenure for any other executive position was so well-known and so often quoted. Get ready for another number to achieve power point overload: 47.3% of all marketers don’t know they’re customer retention rates, profitability or lifetime value.

It is a bit stunning and possibly worth every bit of attention it gets. I highly recommend the CMO Council report titled “Routes To Revenue” this data comes from because the whole picture vacillates between an indictment of executive information ignorance, and a hopeful future for customer data. But the customer stat is not my personal fave. For me the finding that 47.9% marketing executives surveyed will test and launch new products aimed at specific customer segments, is a positive sign of recovery. Couple that with the 41% that plan to focus on demand generation and I think we’re looking at priority one for 2009: New business.

Now, I still have my “organic growth rules” T-shirt. I’m not suggesting that any company ignore getting more from current customers, and doing it by segmenting those customers. But new business is very clearly what is on the front burner. New business depends on demand generation and engaging new prospects. I’d hate to think that just 41% of marketing executives get that. But if that’s the case, those companies are well-positioned to control their own destiny.

I think the renewed focus on demand gen and lead gen is actually driven by a few factors outside of common sense. First, mergers and acquisitions are a tough path to growth when credit markets are tight. So they have fallen down the chart to 10%, according to the CMO Council. Second, “cranking up the marketing budget” is not the brave growth strategy it once was. That’s because the marketing budget has become a loose collection of awareness tactics, cute gimmicks, and TV ads that have debatable ROI. Demand Gen and Lead Gen have the most definable ROI.

Now back to that number, the 47.3% ignorance rate. I can understand how companies are a bit mystified about customer lifetime value. I’m pretty confident that any customer at any company retains has lost some value. Trying to predict customer value right now is a bit like calling the over-under for the Super Bowl. We don’t even know who’s playing yet. But retention rates, churn, profitability and other data are simply not up for “don’t know” status.

The best offense a company can play is finding new business. We certainly have developed the tools to automate the leads, track them, and score them. It might even extend the tenure of CMO’s beyond…….Oh, sorry.

1 comment:

Steven Woods said...

It's a great statistic, and more than a little frightening. I suspect that the awareness of and focus on customer retention will jump significantly in the coming year with the combination of the recession decreasing new business, and social media increasing awareness of negative impressions of a company or offering.

At the same time, many things, from computing infrastructure and software, to car and movie rentals are shifting from one-time to service-based business models. In those business models, retention rates are king so it definitely gets the focus it deserves.