How consumer goods CMOs are coping with complexity

We recently surveyed chief marketing officers and their key subordinates at 20 leading North American consumer goods makers whose collective sales represent roughly 50 percent of the US packaged food, personal and household care, nonalcoholic beverages, spirits, and tobacco categories. Among other topics, we asked them about their approaches to managing the changing media environment, brands and brand portfolios, and the relationship between corporate- and division-level marketers.¹

Most of the survey respondents say they are experimenting with new media such as Internet banner ads and paid search, product placements in video games, and cell phones. Further, a significant number of marketers say that their spending on nontraditional media has increased significantly over the past three years. Nonetheless, television is still the most widely used vehicle. Although marketers agree that the world is changing, many continue with the tried-and-true approaches because the available alternatives lack the scale to achieve marketers’ brand priorities fully, and because the absence of a widely accepted independent measure of digital media (such as Nielsen Media Ratings in traditional media) makes it challenging to measure spending effectiveness. These factors may explain why more than one-third of all respondents devote less than 10 percent of their marketing budgets to nontraditional media, and fully half of them spend only 10 to 20 percent (Exhibit 1).

In an environment where marketers are experimenting with new techniques, effectively delineating roles and responsibilities between the corporate- and division-level marketing functions is critical. We compared the organizational experiences of respondents in companies that have high-performing brand portfolios with the experiences of respondents in the other companies. (We defined high performers as divisions—units that have their own marketing initiatives and are held accountable for results—with portfolio sales growth of at least 1 percent in excess of category sales growth from 2002–05.)

We found that in companies whose brand portfolios perform strongly, corporate marketing tends to serve primarily as a center of excellence that disseminates information and best practices to line marketers. The other companies’ corporate-marketing organizations report spending more time providing marketing services (for instance, managing relationships with advertising agencies), as well as getting heavily involved with global brand and innovation management. In our experience, these tasks can sometimes be profitably performed closer to the front line (Exhibit 2).