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Why Don't Large Advertisers Treat Marketing As A Core Competency?

Dave Morgan
Dave Morgan  |  Executive Chairman
Published: May. 19, 2016

Originally posted on MediaPost

As Peter Drucker taught us, marketing is the distinguishing, unique function of a business. But how come so many advertisers don’t seem to make marketing a core competency?

Here’s what Peter Drucker wrote in his 1954 classic, “The Practice of Management: “Because the purpose of business is to create a customer, the business enterprise has two -- and only two -- basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Is this how most large advertisers operate today? I’m not so sure they do. Here are a few indicators that demonstrate that they don’t:

Many of marketing’s core activities are outsourced. Marketers in the U.S. spend many hundreds of billions of dollars on advertising and promotion. Most of the creative, operational and strategic development and activation efforts for that work are outsourced. I’m not saying that the work is done poorly, but how can a company make a core competency out of things that they outsource to others? They can’t. For these activities, all that they develop competency in is in outsourcing and managing their parties.

Many CMOs don’t report to the CEO. While I don’t have a ready statistic for this, I know from practice that at large enterprises, it is more likely that the chief marketing officer reports to the president or COO, not the CEO. If the chief executive doesn’t directly manage the top marketer, it’s hard to argue that the company makes marketing a top priority.

Most marketing enterprises procure marketing services and advertising products on a cost basis. Anyone that doesn’t know that this is true doesn’t truly work in our business. Companies that buy media and media services with the same cost-driven protocols – and people – as they buy toilet paper and diesel fuel aren’t really thinking about the value of customer creation, and making it a core competency. They’re just making it cost-accountable.

Marketing folks aren’t paid as well as other executives. Look at publicly available information, or ask peers or friends in the business. There aren’t very many consumer business enterprises that pay their CMOs and marketing teams as much as they pay their COOs or heads of sales, or CFOs, CIOs or CTOs. How you pay is how you value something.

Turnover. CMOs are fired quickly when things don’t go well. Many companies view them as quite interchangeable.

Not so for other top executives. Their performance and value is frequently viewed on longer-term horizons. They are seen as long-term investments. Why?

So many consumer companies today try to make their manufacturing, distribution or financial engineering as their true core competencies. Making more widgets faster and cheaper might work for a while, but it will never be as durable and as leverageable as great marketing and a great brand. As Scott Cook, the founder of Intuit, has preached for years, it’s much better for companies to fall in love with their customers’ problems than their products.

What do you think? Do most advertisers truly treat marketing as a core competency at their companies?