The Chief Marketing Officer Matters!

Abstract

The Chief Marketing Officer Matters!Marketing academics and practitioners alike remain unconvinced about the chief marketing officer's (CMO's) performance implications. Whereas some studies propose that firms benefit financially from having a CMO in the C-suite, other studies conclude that the CMO has little or no effect on firm performance. Accordingly, there have been strong calls for additional academic research regarding the CMO's performance implications. In response to these calls, the authors employ model specifications with varying identifying assumptions (i.e., rich data models, unobserved effects models, instrumental variable models, and panel internal instruments models) and use data from up to 155 publicly traded firms over a 12-year period (2000-2011) to find that firms can indeed expect to benefit financially from having a CMO at the strategy table. Specifically, their findings suggest that the performance (measured in terms of Tobin's q) of the sample firms that employ a CMO is, on average, approximately 15% greater than that of the sample firms that do not employ a CMO. This result is robust to the type of model specification used. Marketing academics and practitioners should find the results intriguing given the existing uncertainty surrounding the CMO's performance implications. The study also contributes to the methodology literature by collating diverse empirical model specifications that can be used to model causal effects with observational data into a coherent and comprehensive framework.

The copycat CMO: firms’ imitative behavior as an explanation for CMO presence

“…The second, larger group of studies uses CMO-related constructs to explain firm outcome variables. Some of these studies examine the relationship between CMO presence and various measures of firm performance (Boyd et al 2010;Germann et al 2015;Nath and Mahajan 2008;Nath and Mahajan 2011), while others link CMO characteristics (e.g., education) to firm-related outcomes (Homburg et al 2014;Wang et al 2015;Wang et al 2016), examine how CMO compensation is related to firm performance (Bansal et al 2016;Kim et al 2016), or consider the influence of CMO presence on marketingrelated decisions (Boyd and Brown 2012;Mintz and Currim 2013). In the small third group of CMO-related studies in the marketing literature, which examines the CMO's situation, Nath and Mahajan (2011) find that several contingencies impact the CMO's influence in the TMT, Engelen et al (2013) identify social capital as one of the drivers of CMO influence, and Nath and Mahajan (2017) identify drivers of CMO turnover.…”

“…While some practitioners see the CMO as a key to success (Gilliatt and Cuming 1986;Hyde et al 2004), others see the position as Bdead^ (Turpin 2012). Two recent surveys show that the CMO position is under considerable pressure (Hoda 2015;Moorman 2015), and the academic literature has long offered a mixed account of CMOs' performance consequences (Germann et al 2015;Nath and Mahajan 2008). The imitation-behavior perspective posits that one way in which firms react to ambiguity concerning a practice's performance impact is to model themselves on their industry peers (Abrahamson 1991).…”

“…The academic literature has not been clear either, which Boyd et al (2010) illustrate by referring to the CMO as an Benigmatic creature^(p. 1147). Only recently do Germann et al (2015) find that CMO presence robustly and positively impacts firm performance. This kind of uncertainty is likely to lead to imitative behavior as a failsafe.…”

Do managers know what their customers think and why?

“…Peter Drucker (1954) The recent literature in strategic marketing has centered on marketing's influence in the firm (e.g., Clark, Key, Hodis, and Rajaratnam 2014;Feng, Morgan, and Rego 2015;Germann, Ebbes, and Grewal 2015;Homburg, Vomberg, Enke, and Grimm 2015). The core of this discussion views strategic marketing as a field of study encompassing a focus on organizational,…”

Effect of analysts’ earnings pressure on marketing spending and stock market performance

“…Consequently, one main question is how the accountability of marketing spending can be established in a firm. Scholars have suggested that there is a gap in communication at the highest management levels, and have suggested staffing solutions, i.e., appointing a Chief Marketing Officer (CMO) to the top management team, who can communicate marketing's accountability to CEOs and CFOs (Germann et al, 2015). However, Moorman (2013) reports that demonstrating marketing's value remains a challenge, even for CMOs.…”