Elevate

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October 5, 2015
Russ Klein

Marketing’s Power

If you want to know what the power of inspired marketing means for an enterprise, look no further than the September issue of the Journal of Marketing. In the study “Marketing Department Power and Firm Performance,” authors Hui Feng, Neil A. Morgan and Lopo L. Rego establish a definitive means for measuring the relative power of a marketing department within an enterprise, and then determine that marketing department power is a driver of superior firm performance.

Their work showed that marketing department power is positively related to firm-level ability to build long-run market-based assets (MBAs) and leverage those MBAs in the short run to deliver cash flows. They also found that these two capabilities fully mediate the effect of marketing department power on short-term return on assets, and even partially mediate its effect on total shareholder return.

The authors point out that department power is manifest inside an enterprise in three ways, with the first two being the most consequential:

1. Resource attraction: More powerful departments receive not only more and higher-quality resources, they also receive more promotions, higher pay raises and more.

2. Inter-functional coordination: This refers to the department’s ability to broker conflict resolution and thus enable the department in question to be more effective at coordinating and advancing activities across and through the enterprise.

3. The age-old “seat at the table” question: In their research, the authors found that departments with power are better able to direct top management teams’ attention to internal issues and external environment issues affecting the department’s ability to accomplish its tasks and achieve overall alignment between the top management team and the department.

Interestingly, but not surprisingly, marketing departments with power are also more attractive to potential new talent, as well as external partnerships.

Now perhaps it’s self-evident, but why would marketing departments with power so strongly correlate to superior firm performance? The authors cite another article from legendary marketing academic George Day, pointing out his findings that marketing departments have a unique external marketplace perspective focused primarily on customers. I suppose this is a good place for a “duh.” But as straightforward as Day’s assertion is to us, what’s significant here is that a massive, quantitative longitudinal study has finally settled the argument as to whether the marketing department is a vital organ to ensure a high-performance enterprise and superior business performance, or whether it’s a “nice to have” variable capability that can be the first place for bean counters to shrink or expand based on business performance.

This should no longer be a chicken-or-egg question of whether effective marketing is a predicate for firm performance or whether business is good enough to fund an effective marketing function. So while you, the marketer, know and believe in the power of what you do, these findings can be used internally to engage CEOs and talent managers in a discussion on how to build an organization for growth. Building a talented marketing team and empowering it to set the pace for the entire enterprise as a customer-centric company should be weighed with the same critical thinking as making a $20 million investment in a new factory.

The validation of what a powerful marketing department can do for a firm’s financial metrics should be incentive for every enterprise to re-evaluate the capabilities of their respective marketing teams, knowing now that such self-examination might prove integral in elevating the firm’s overall organizational performance. According to the authors, from a managerial perspective, senior managers should want powerful marketing departments because it contributes to short-term profitability and long-term shareholder value.

When you consider a new employer, don’t just gain an understanding of the corporate culture; gain an understanding into the sub-cultures and where the “power” is. You may be attracted to a big brand—a household name that you would think must be customer-centric—only to learn that operations, supply chain, sales, merchandising, design or finance rules the roost, especially when it comes to resource allocation or calls for groups outside of marketing to change. You may discover that everything runs through the department with power despite the public pledges to the customer. My experience is that it isn’t cultures that kill, it’s sub-cultures that become corrosive to the health of an organization. Sub-cultures can be playground bullies who are responsible for the “unwritten rules” of how things work inside the organization, and it’s incumbent upon a CEO and the leadership team to vanquish these elements.

 

This post was adapted from Russ Klein’s speech at the 2015 AMA Annual Conference, “Inspired Marketing,” which took place Sept. 27-29 in Austin, Texas. For more information, visit AMA.org/Annual.

Positively,

Russ Signature

 

 

 

Russ Klein, CEO

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