Volume 59: The clueless CMO.

1. 73% of CMOs clueless about what drives growth.

tl;dr: Become a top quartile marketer just by knowing the basics.

Gartner CMO reports make for great reading, mostly because CMO priorities seem to swing so much from one year to the next. But as I read through a recent report, a wildly unflattering statistic caught my eye: 73% of CMOs anticipate growth to come from within their existing customer base. Now, at first glance, this might seem somewhat logical but please bear with me because it’s also in direct conflict with a significant body of empirical research on this subject.

There are things I take issue with when looking at the work of the Australian Marketing Scientists, and Prof Byron Sharp in particular, but the empirical work they’ve done on growth is excellent and well worth citing in this instance.

The crib notes version goes as follows: Investing your marketing dollars in people who will probably buy from you anyway is vastly less likely to result in growth than investments aimed at adding new customers and encouraging occasional customers to buy from you more often.

And that’s about it. And 73% of CMOs don’t get it. This means 27% of CMOs out there will be top quartile marketers not because they’re brilliant but just because they know the basics of what moves the needle.

If you don’t believe me, let’s look at some examples. First up, Amazon. To understand their growth, you have to look at two things. First, that they are the world’s largest single advertiser. Second, Prime. Why are they such a big advertiser? Simple, because they realize that growth comes from adding new customers, and even a huge brand like Amazon has more new customers to add. Then Prime kicks in. Prime isn’t really about keeping loyal buyers loyal; it’s about overcoming the mailing cost barrier that prevents occasional buyers from buying more regularly. The result, a two-pronged assault on growth. First, increase the number of buyers coming into the top of the funnel, second turn occasional buyers into regular buyers.

The second example is Adidas. Here, we have a unique perspective because they told us the mistakes they’d made. Put simply, they invested too heavily in loyalty schemes and digital re-marketing to existing customers, which didn’t drive growth. It just reduced profitability as they found themselves discounting more often. By contrast, their econometric analysis showed that 60% of all Adidas customers were new to the brand and that brand marketing had an outsize impact on sales across all channels, including digital. In other words, targeted digital ads and CRM focused on existing buyers drove down growth and profitability, while broad-reach brand campaigns did the opposite.

Finally, we have the salutary tale of Wells Fargo. Their account fraud scandal is pretty well known by now, but most people probably don’t realize that a mistaken idea of growth lay at the heart of the whole sordid mess. For probably 15 years, the executive leadership team at Wells Fargo touted on earnings calls that their growth strategy was predicated upon efficiently cross-selling more products to existing customers. Almost certainly, they found this strategy wasn’t working, but rather than change the growth strategy to one that would work, they instead created a level of unsustainable pressure on the business to add more accounts to existing customers who didn’t want or need them. And we all know what happened after that.

Now, do I really believe that 73% of CMOs are clueless about growth? No, not really. But I think the idea that you can grow among existing customers is vastly easier to sell-in to organizations that know little about how marketing works, especially CFOs who cut the checks, because it appears to be logical and measurable and efficient even when it doesn’t actually work. So, yeah. Personalized digital whatever and loyalty are all the rage right now. But actual growth comes from increasing your reach, becoming more familiar to more people, and rigorously growing the top of the funnel. But it’ll be a long slog ahead. According to McKinsey, less than a fifth of marketers even understand how their brand campaigns are doing.

2. Until the punishment hurts, nothing will change.

tl;dr: McKinsey receives the lightest of slaps on the wrist.

Speaking of McKinsey, a couple of weeks ago, they agreed to pay a $600m fine without accepting any blame for their role in exploding America's opioid crisis. I’ve written before about such actions threatening their brand reputation and how they’ve come to reflect the ‘banality of evil’ in modern society. So, while a $600m might seem like a lot, let’s put it into perspective.

McKinsey reportedly earns around $10bn in total revenue per year. Relatively speaking, this means their punishment for “turbocharging” the sale of opioids, which likely killed tens of thousands of people, was just 6% of revenue. A sum they’re now allowed to offset against taxes as a cost of doing business.

This is the equivalent of taking a street heroin dealer earning $100k per year and fining them $6,000 without requiring jail time or a criminal record and then allowing them to write off the cost of the fine against their personal taxes. Sound ridiculous? That’s because it is. Yet that’s exactly what’s happening here.

When the punishment for a corporation breaking the law becomes trifling, it rapidly shifts from a deterrent to an acceptable cost of doing business. Rather than something to avoid at all costs, systemic illegality becomes just another datapoint to be dropped into your risk management calculations.

This won’t change until one of two things happens. First, the CEO of whatever corporation has broken the law gets dragged out of their house in handcuffs and an orange jumpsuit. Or the fines become so big they risk the viability of the company. Had McKinsey faced a fine of $5bn for their role in the opioid crisis or had their managing partner been at risk of jail time, I can 100% guarantee this would not have happened.

However, it did happen. And they got away with it. And they will again. The only question now is whether pressure campaigns and reputational damage will have any bearing on future behavior. Let’s see.

3. Best practice and the banality of average.

tl;dr: Best practices are the enemy of great brands.

Best practice is the gift that keeps on giving for the consulting world. Over the years, billions, perhaps trillions of dollars have been spent on the subject, not because it’s perfectly suited to delivering client impact but because it’s perfectly suited to the delivery of consulting fees at scale. Best practice being the closest thing any consulting firm will get to mass production. Basically, you take something that one or two companies have done, package it up with some statistics proving its efficacy, and then re-sell it to as many companies as you can find that are willing to buy it.

So, what’s wrong with best practice, you might ask? After all, it’s about being the best, right? No, far from it. In reality, following best practice rarely has anything to do with being the best at anything, quite the opposite. In my experience, the people most desirous of best practices are those least interested in being the best at anything. Instead, they’re generally scared of something they don’t really understand and are looking for the anonymous comfort blanket of average that comes with following others.

This is why large consulting firms spend so much time exploiting client FOMO as a marketing strategy. They know that there’s a much bigger market for average than there is for being great, and that average is perfectly acceptable as long as it comes wrapped in the guise of being responsible. And what’s more rigorous and responsible than following practices “proven” to work?

The problem is that best practice becomes a major problem when applied to things that directly impact your ability to differentiate and stand out distinctively from the competition. In these areas, best practices don’t even get you to average; they commodify you and reduce the reasons anyone would buy from you. After all, why should someone buy from you if what you’re offering and how you’re offering it is no better than what a market leader already started doing months or years ago?

Of course, this is a very long-winded way of me getting to the point, which is to say that in the fields of branding and go-to-market strategy, I absolutely despise the small thinking of misapplied best practices.

My job, and the job of anyone serious about this space, should be to make our clients unique and different and distinctive because that’s what it takes to make them the best. And that is why the only best practice that really matters is having clients do things in ways that separate them from the competition rather than fitting in with what others are doing. By definition, this means rejecting the banality of average and figuring out how to do things better, differently, and more distinctively.

I’m not completely naive. I know that actively rejecting best practices isn’t an approach that’s going to fly for most, but that’s exactly why it’s so important. Truly great brands don’t follow best practices. They create them. It’s this leadership that sets them apart. So if you’re a brand that truly wants to lead and be great, please realize that the single best practice for being a great brand is to reject best practice in the first place.