Why Don't Most Large Advertisers Treat Marketing As A Core Competency?

As Peter Drucker taught us, marketing is the distinguishing, unique function of a business. But how come so many advertisers don’t seem to make marketing a core competency?

Here’s what Peter Drucker wrote in his 1954 classic, “The Practice of Management: “Because the purpose of business is to create a customer, the business enterprise has two -- and only two -- basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Is this how most large advertisers operate today? I’m not so sure they do. Here are a few indicators that demonstrate that they don’t:

Many of marketing’s core activities are outsourced. Marketers in the U.S. spend many hundreds of billions of dollars on advertising and promotion. Most of the creative, operational and strategic development and activation efforts for that work are outsourced. I’m not saying that the work is done poorly, but how can a company make a core competency out of things that they outsource to others? They can’t. For these activities, all that they develop competency in is in outsourcing and managing their parties.



Many CMOs don’t report to the CEO. While I don’t have a ready statistic for this, I know from practice that at large enterprises, it is more likely that the chief marketing officer reports to the president or COO, not the CEO. If the chief executive doesn’t directly manage the top marketer, it’s hard to argue that the company makes marketing a top priority.

Most marketing enterprises procure marketing services and advertising products on a cost basis. Anyone that doesn’t know that this is true doesn’t truly work in our business. Companies that buy media and media services with the same cost-driven protocols – and people – as they buy toilet paper and diesel fuel aren’t really thinking about the value of customer creation, and making it a core competency. They’re just making it cost-accountable.

Marketing folks aren’t paid as well as other executives. Look at publicly available information, or ask peers or friends in the business. There aren’t very many consumer business enterprises that pay their CMOs and marketing teams as much as they pay their COOs or heads of sales, or CFOs, CIOs or CTOs. How you pay is how you value something.

Turnover. CMOs are fired quickly when things don’t go well. Many companies view them as quite interchangeable.

Not so for other top executives. Their performance and value is frequently viewed on longer-term horizons. They are seen as long-term investments. Why?

So many consumer companies today try to make their manufacturing, distribution or financial engineering as their true core competencies. Making more widgets faster and cheaper might work for a while, but it will never be as durable and as leverageable as great marketing and a great brand. As Scott Cook, the founder of Intuit, has preached for years, it’s much better for companies to fall in love with their customers’ problems than their products.

What do you think? Do most advertisers truly treat marketing as a core competency at their companies?

3 comments about "Why Don't Most Large Advertisers Treat Marketing As A Core Competency?".
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  1. Ed Papazian from Media Dynamics Inc, May 19, 2016 at 6:28 p.m.

    All very true, Dave,and if you think that the marketing end of the equation is not as well integrated as it should be, consider the media function within the marketing function. Here, the problem is even more acute. Not only is almost everything outsourced, but many marketing directors have such a low opinion of the media function that they give it only cursory attention, on the assumption that it's just a boring, by-the-numbers exercise. Yet many of their decisions about brand sales, new product launches, the effectiveness of ad campaigns, etc. are also based largely on numbers.

    People who have not seen this lack of interest as well as integration for themselves wonder why so many marketers are so slow to at least investigate new media---like digital--or to allocate funds to test alternative media mixes, media weight effects, and other options. The reason is simple. They don't see such matters as vital and, worse, they are almost totally ignorant of the possible benefits of new approaches. And, yes, like everything else that is outsourced, the bean counters make sure that the marketer pays as little as possible for the services rendered. As the old addage says: "you get what you pay for".

  2. Tom Cunniff from Tom Cunniff, May 20, 2016 at 2:17 p.m.

    For most of the past century, marketing has been mostly a communications function: "tell people what we are making and why it's worth buying".

    In this century, marketing is moving toward being a data function: "how can we best anticipate and serve people's needs?"

    The farther we look to the past, the less it makes sense to integrate marketing as a core competency. What you needed most then were Storytellers (strategy and creative people etc), Craftsmen (film directors, journalists, etc), and Dealmakers (media buyers, talent agencies, etc) Few of these talents would fit neatly into a manufacturing environment and few would be needed on a full-time basis.

    The farther we look to the future, the more it makes sense to integrate marketing as a core competency. What will be needed most will be Predictors (data scientists and strategy people, etc) Translators (people who can explain what the data feedback means to the product people), and Dealmakers (most deals will be automated, but those that are not will need a human touch).  All of these talents can fit neatly into a manufacturing environment, all will be needed on a full-time basis, and all can perform better by being inside the organization than outside it.

    External Storytellers, Craftsmen, and Dealmakers will still be needed, but will find themselves less and less in demand than in the past as power shifts from paid to owned and earned -- and as AI continues to encroach on their functions.

    All of this will take decades to unfold, but IMO you can already see the outlines of the past fading and the oulines of the future coming into view.

  3. Paula Lynn from Who Else Unlimited, June 12, 2016 at 11:31 a.m.

    Kudos upon kudos to you, Dave. Being in sales all of those years, there was no marketing except for a titled individual who published the calendar with a November 31. The word was hardly ever uttered and any program was devised/approved by the sales/accounting department (or me, just to brag-over and out now). And marketing must rely on more than numbers, called data, that from I gather just from MediaPosts, is not reliable.

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