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Digital marketing and the mind of the CMO

by David Schatsky, Vikram Mahidhar
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    05 November 2013

    Digital marketing and the mind of the CMO

    06 November 2013
    • David Schatsky United States
    • Vikram Mahidhar
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    The rising importance of digital media, marketing, and commerce is elevating the importance of the chief marketing officer as strategist, innovator, and buyer of advisory services and technology.

    As adoption of digital media and devices surges, companies are investing billions of dollars in digital marketing. The rising importance of digital media, marketing, and commerce is elevating the importance of the chief marketing officer (CMO) as strategist, innovator, and buyer of advisory services and technology.

    Marketing spending has followed customers to digital channels

    Growing adoption of digital devices and media is forcing businesses to update their marketing strategies. US adults now spend more time each day with digital media than watching conventional television.1 By 2014, there will be more mobile devices in the world than people.2 These trends have intensified the battle for people’s fragmented attention as businesses try to reach, engage, sell to, and serve customers across offline and digital channels. This battle is driving strong growth in spending on digital marketing.

    Digital marketing is the set of systems and processes that businesses use to interact with customers over digital channels such as the web or mobile devices, and to measure, manage, and optimize those interactions. Digital marketing activities include creative design; content creation and management; marketing automation; customer and campaign analytics; e-commerce; and web, search, email, social, and mobile marketing.

    The funds committed by big consumer goods companies to digital marketing suggest the importance of digital channels today. For example, Unilever increased its digital advertising spending by 40 percent last year, allocating about 35 percent of its US budget to digital.3,4 P&G spends a third of its US advertising budget on digital media.5 A significant share of this spending is on paid media, and some spending is on services related to marketing and advertising activities and subscription-based technology services. Overall, digital marketing spending now represents more than 2 percent of company revenues and is expected to increase by 9 percent this year, while IT spending, at 3 percent of revenues, is flat. 6

    Digital marketing is transforming the role of the CMO

    The growing importance of digital channels is making the role of the CMO more strategic; the greater measurability of those channels is making the CMO more accountable. This has enabled CMOs to make a more compelling case for their strategies, tactics, and budgets to the rest of the C-suite—one of the reasons that the average tenure of CMOs has doubled since 2006. 7

    CMOs have become increasingly important buyers of technology, often in partnership with the CIO, and their need for strategy- and operations-oriented services grows. The high-stakes issues and challenges they increasingly face include:

    • Shaping strategy: Digital marketing is already a central pillar of strategy in sectors ranging from e-commerce to media and entertainment to consumer products. In a growing number of sectors, strategy is becoming inseparable from digital marketing strategy.
    • Revamping operations: Rapidly evolving digital tools and practices require operational agility and new governance models.
    • Mastering analytics and performance accountability: The proliferation of new channels, marketing techniques, and analytical methods centered on big data create new expectations for analytics expertise and performance measurement.
    • Redesigning organizations: The shift to digital is blurring the line between marketing and sales. Marketing organizations are increasingly carrying revenue responsibilities, affecting reporting lines and incentive systems.
    • Building technology infrastructure: A CMO’s success rests on a high-quality, adaptive technology infrastructure.

    CMOs value partners who understand the new challenges they face and who bring a broad perspective and comprehensive, interdisciplinary solutions.

    Investment is flowing into digital marketing technologies

    To meet growing demand for digital marketing solutions such as campaign management, social media monitoring, and customer segmentation and analytics tools, enterprise software vendors have invested over $20 billion to acquire digital marketing technology companies such as Eloqua (acquired by Oracle for more than $800 million), ExactTarget (acquired by Salesforce for $2.5 billion) and Neolane (acquired by Adobe for $600 million). Meanwhile, the pipeline of new digital marketing technologies continues to flow, propelled by venture capital investment of more than $1 billion in 150 startups since 2012.8

    Serving the digital CMO

    To keep pace with the technology- and data-intensive role of the digital CMO, marketing and advertising agencies have been enhancing their technology capabilities by acquiring or partnering with IT consultancies. IT consultancies and strategy firms have been buying digital agencies and marketing technology firms. Publicis and Omnicom, two large marketing and advertising groups, recently announced their intent to merge to better provide digital marketing services and compete more effectively with digital giants such as Google.9 And CMOs and CIOs are working ever more closely together to ensure that marketing strategy and technology strategy are in alignment. In an extreme example of this, one company recently took the step of appointing its CIO as its new CMO.10

    The digital strategist

    As the line between strategy and digital strategy continues to fade, corporate strategists need to have a keen understanding of the impact digital channels and analytics on all business functions, not just the marketing function. They should expect to work closely with CMOs and CIOs. And they should know that data-rich digital channels make it easier than ever to measure the effectiveness of strategic choices.

    Credits

    Written by: David Schatsky, Vikram Mahidhar

    Cover image by: Santiago Uceda

    Endnotes
      1. Cotton Delo, “U.S. adults now spending more time on digital devices than watching TV: Digital devices now get more than five hours per day, according to eMarketer,” AdAge, August 1, 2013, http://adage.com/article/digital/americans-spend-time-digital-devices-tv/243414/, accessed November 1, 2013. View in article
      2. “The story of two techs: Smartphone & tablet adoption & usage,” visual.ly, May 22, 2013,  http://visual.ly/story-two-techs-smartphone-tablet-adoption-usage, accessed November 1, 2013. View in article
      3. Jack Neff, “Unilever ad spending hits new heights, but agency fees on downward trend: Good news for marketer not necessarily good news for agencies,” AdvertisingAge, January 23, 2013, http://adage.com/article/news/unilever-ad-spending-hits-heights/239348/, accessed November 1, 2013. View in article
      4. Ibid. View in article
      5. “P&G shifts marketing dollars to online, mobile: World’s largest advertiser says as much as 35% of ad budget going to digital media,” The Wall Street Journal, http://online.wsj.com/article/SB1000142412 7887323681904578641993173406444.html, accessed November 4, 2013. View in article
      6. Key findings from U.S. Digital Marketing Spending Survey, 2013 (Gartner) View in article
      7. Daniel Kehrer, “Why CMO job security is rising,” Forbes, July 30, 2013,  http://www.forbes.com/sites/ forbesinsights/2013/07/30/ why-cmo-job-security-is-rising-3/, accessed November 1, 2013. View in article
      8. Deloitte Investment Intelligence sensing app View in article
      9. Mark Sweney, “Digital age is driving force behind Publicis-Omnicom merger: Rise of digital giants—from Google and Microsoft to Facebook and Twitter—has undermined traditional ad agency model,” The Guardian, July 29,2013, http://www.theguardian.com/media/2013/ jul/29/publicis-omnicom-merger-digital-age, accessed November 1, 2013. View in article
      10. Pete Swabey, “Ali Hine, former IT chief of the spread-betting specialist, took on the CMO mantle to inject technology into marketing,” InformationAge, July 8, 2013, http://www.information-age.com/it-management/skills-training-and-leadership/123457184/cio-turned-cmo-leads-data-driven-marketing-at-ig, accessed November 1, 2013. View in article
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    Topics in this article

    Executive Transitions , Signals for Strategists , Big Data , Mobile , Analytics , Marketing , Strategy

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    David Schatsky

    David Schatsky

    Managing Director | Deloitte LLP

    David analyzes emerging technology and business trends for Deloitte’s leaders and clients. His recent published works include Signals for Strategists: Sensing Emerging Trends in Business and Technology (Rosetta Books 2015), “Demystifying artificial intelligence: What business leaders need to know about cognitive technologies,” and “Cognitive technologies: The real opportunities for business” (Deloitte Insights 2014-15). Before joining Deloitte, David led two research and advisory firms.

    • dschatsky@deloitte.com

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