I’ve recently come in contact with a number of ex-blue-chip CPGers who lament the decline of the big companies. I was at a Forbes event talking with brand economist Edgar Baum, Founder and CEO of Avasta Incorporated, who provided insight on what he called "the CMO knowledge gap." Because I found his perspective so interesting, I share his thoughts below.
Kimberly Whitler: You indicated that you believe that there is a CMO knowledge gap. Can you explain?
Edgar Baum: There really is a gap in what people, including CEOs, CFOs and marketers, understand that CMOs can do to contribute to the bottom line. A lot has been written about what CMOs aren’t doing. But I think the problem is that many in the C-Suite aren’t aware of what is possible. Businesses are focused on six Sigma, cost accounting, and managerial accounting for financial attribution. This has forced CMOs to focus on measuring the outcome of their tactical activities at the expense of more business building strategies that have less, near-term financial outcomes. But you have to remember that all of those capabilities around measuring machinery and productivity took decades to develop. What we have been able to do with tangibles from a measurement perspective, we are now able to do with intangibles…especially with brand.
For example, it is possible to be able to predict which brand positioning will have the best financial outcomes and the most defensible positioning. Most CMOs (and consultants) aren’t aware that you can do that and how to do it. Current brand measures are like measuring how someone will react to a bouquet of flowers. You estimate it will be positive. That’s Goodwill on a balance sheet. But it is now possible to measure how the person feels about flowers overall; what types of flowers they like; how they like them delivered; how they prefer them presented; and how they might respond to those types of flowers and then understand the optimal combination. You now have a more informed and differentiated positioning. Most don’t know that it is possible to do this. They don’t know it because it isn’t taught in a standard manner externally by colleges/universities or within organizations.
Integrated marketing was really the basis for integrated financial marketing measurement. And this was used to provide a high degree of transparency in CPG. Unfortunately, that capability hasn’t migrated out of CPG. For those who have tried to apply CPG metrics to other industries that also has pitfalls. It has to be adapted to the industry and company.
Whitler: What is it that CPG was able to do?
Baum: I can give you an example from my own experience. I worked at P&G a decade and a half ago—at the height of AG Lafley’s tenure. It was a very good opportunity to experiment and the company had a willingness to go and say “hey we don’t understand this and let’s go learn about it.” We were able to isolate the relationship between changes in attributes communicated by marketing and changes in brand perception – a practice that did not exist industry wide beforehand. Additionally, we looked at how competitors were driving growth and we built a lot of analytical tools and capabilities to deconstruct and explain their performance relative to P&G. This allowed us to look at the market from a total category view instead of just the P&G brand vs one specific competitor brand at a time.
I have run into other folks who work there now and it seems the golden age of this analytic approach seems to have been lost. Fifteen years ago, we were challenged to move beyond metrics that worked in the golden age of TV to understand how to measure new data that was flowing into the organization. Now there is a hyper-focus on digital metrics which only measures a fraction of marketing’s efforts. This is a step backwards. Consequently, there is a lot of frustration among P&G alumni. The discipline and expertise they built at P&G isn’t being leveraged. They are trusted to be experts but they aren’t given the resources—especially time—to do the type of analysis that can benefit their current organizations.
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