The CMO Role - A passé?

Marketing, like most of the other domains has gone through a major overhaul over the past few decades. In the 1970s, the focus of a Brand Manager would have been to identify broad market segments to target via the brand, decide on the 4 Ps, and plan the communication strategy accordingly. The success of the brand would have been measured by the overall Revenue & Profitability (Top-line & Bottom-Line) that the brand would generate for the company. Fast forward 50 years, and the ecosystem looks totally different. For almost all the successful entities across the globe, the focus has seen a tectonic shift from maximizing the Brand's Market Share in the short-term to maximizing Customer Lifetime Value (CLV), and creating brands that serve long-term customer relationships.

For those who are new to the domain of Marketing, CLV in layman terms can be defined as the total profit that a customer generates for a brand in course of its lifetime of association with it. For instance, consider a customer of Brand A who makes 3 transactions of ?100, ?200 and ?300 in due course of its association with the brand. Let's assume the CAC (Customer Acquisition Cost) for Brand A to be ?150. Now looking purely at the first transaction, the brand appears to be at a loss of ?50, since the acquisition cost is more than the value of the first transaction (?150 - ?100). However, if you account for the subsequent transactions, then the net profitability of the customer towards the brand is positive (?100 + ?200 + ?300 - ?150 = ?450). Thus, ?450 is the CLV for Brand A. The success of any entity depends majorly on enhancing this key metric of CLV for the brand, since it is an indicative of how profitable a customer can be for the brand.

To emphasize on the importance of customer-driven approach lately, let me take the examples of some of the renowned brands across the globe. Tesco, a famous UK-based offline retail chain uses loyalty cards to track customer purchase behavior. This has enabled them to use analytics to serve customers in a much more proactive manner. For instance, shoppers who purchase Diapers for the first time receive coupons for Beer by courier. This is because Tesco's data analysis revealed that the new fathers tend to buy more beer, as they did not have enough time to spend in the pubs. Let me take another example of the credit-card giant, American Express. The firm uses data analysis and algorithms to predict the customer's 'next best product' according to their changing demographic details. The first-purchase of an upper-class airline ticket from a Gold Card might act as a trigger to upgrade to a Platinum Card. Based on life-events like purchase of a new home, AmEx offers special membership rewards on purchases from merchants in its network in the home-furnishings retail category.

The above use cases bring me to a very fundamental question. Does the role of a Chief Marketing Officer (CMO) in its traditional sense still hold the test of time? Or is it time to re-invent the role in a more state-of-the-art form? With the substantial change in emphasis from market-driven to product-driven to finally customer-driven approach, it is time that we look at a new type of leadership role called the Chief Customer Officer (CCO). Let us look at how this role of a customer-oriented leader will be different from the traditional role of a market-oriented (lately product-oriented) leader.

CMO v/s CCO

1. Profitability - While a traditional CMO focuses on Product Profitability, the new-age CCO focuses more on Customer Profitability. A product that is unprofitable in the short-term but strengthens customer relationships will typically foster much larger rewards for the brand in the future.
2. Measure of success - While the orthodox approach of the CMO tends to make him/her focus more on the Current Sales, the CCO tends to focus more on the Customer Lifetime Value. A company with good Current Sales but poor prospects might be on the decline, but the CLV is the correct indicator of a company's long-term health, something which both the investors and shareholders hold in high regard.
3. Equity - While the conventional CMO tries to maximize the Brand Equity (the premium a customer pays for an item just because of the brand-tag associated with it), the modern CCO tries to maximize the Customer Equity (the sum total of lifetime values of the customers). Whereas an enhanced brand equity is the means to an end, the customer equity focuses not only on getting the right set of customers on-board, but also retaining them by provision of a relevant value proposition at the right time in a proper manner.
4. Share - While the customary CMO pays more attention to the Market Share (the total share of Market with respect to Sales Value or Volume controlled by an entity), the novel approach of a CCO is more inclined towards the Customer Equity Share (total share of customers in the market owned by the entity). Whereas Market Share offers a snapshot of the company's competitive sales position at the moment, Customer Equity Share is a measure of the firm's long-term competitiveness with respect to profitability.

How quick will be the change?

Now, with the understanding that the DNA of the Marketing Leadership role needs to move from a product-oriented approach to a customer-driven approach, the question is that how quick will this be realized and accepted by the firms worldwide. To begin with, there are over 300 CCOs across the globe today, with renowned brands like Samsung, Sun Microsystems, Chrysler, etc. having the position in place. But more often than not, the CCO is trying to make a conventional organization more customer-centric. It is a poorly defined role, and hence the CCO has the shortest tenure today across all C-suite executives.

To be effective, the CCO role should be given its due credit, and must be a powerful operational position, with reporting to the CEO. In the words of UCal Berkeley professor Morten Hansen, Customer Managers will be the most effective when they're T-shaped, combining deep knowledge of particular customers or segments with broad knowledge of firm and its products. To enhance the impact of the role, the following 4 functions should be reporting directly to the CCO -

• CRM - Typically managed by the IT group, the CRM is the ultimate tool for gauging customer needs and behaviors. It makes little sense for the very data required to analyse the customer needs and behavior to be collected and processed outside the customer department.
• Market Research - The scope of Market Research has to shift from providing product-oriented inputs to providing customer purchase behavior, product usage and lifestyle inputs, based on which the product and its features can be fine-tuned to make it a much more powerful and contextual offering.
• Product (or R&D in orthodox sectors) - If the Product is more about clever engineering than customer needs, Sales can suffer. While engineers like to pack lots of features into products, the customers can suffer from feature fatigue, which shall hurt further sales. To ensure that the product decision reflect real-world needs, customer need to be brought into the product design process.
• Customer Service - Finally, the service channels form the best feedback looping mechanism for the firm to gain invaluable consumer insights. For the firm to make the best use of these inputs and inculcate the needful twists and tweaks to the product, this function has to align closely with the Customer Department.

Like any organizational transformation, making a product-focused company consumer-centric will be a daunting task. The IT group would want to hang onto CRM, the Product team will fight hard to maintain its autonomy, and most importantly, the traditional Marketing executives will fight hard to keep their jobs. The change requires overcoming established interests, and hence it won't happen organically. But however challenging, the shift is inevitable. Since very soon, this will be the only competitive way to serve customers.

Note: Inputs taken from HBR's 10MR

About the author: The author of the article is the CMO of Finnovation Tech Solutions Pvt. Ltd., the parent company of the brands KrazyBee (India's Largest Student Credit Platform) and KreditBee (India's Fastest Growing Salary Advance & Short-term Personal Loan Platform for Young Professionals). He is a full-stack Marketing & Sales professional, handling various functions ranging from Digital Marketing, Offline Marketing, Field Sales Management, Tele-Sales (Inside Sales) Management, Customer Support and Business Development over the last 2.5 years for the entity.