A recent analysis revealed that the average tenure of CMOs slid to a 10-year low last year, declining from 43 months to 41 months. When you consider the dramatic forces that have been reshaping the corporate landscape and marketing’s role within the larger organization, the increased volatility in the CMO position comes as little surprise. These days, the framework for marketing success is still being driven heavily by a company’s media plan rather than in the context of overall customer health. That needs to change.
Many companies are accustomed to viewing performance by channel, by store or by product. But for consumer brands, the ultimate measure of marketing success is in fostering a better relationship with the customer. Are existing customers sticking around? Are new customers coming back for more? Are customers who once left willing to try again?
If you’re trying to gauge the current health of any given company, you still need to look at revenue, profitability and the rest of the typical CFO metrics. But if you want to understand how a company’s success will carry into the future, you also need to look at the health of that company’s customer relationships. Gauging this requires a new kind of scorecard.
Urgency on Top of Complexity
The need to reframe company success around customer relationships has only grown more urgent over the years, especially in today’s atmosphere of austerity and efficiency. Today’s brands are increasingly concentrating their energy and resources on top customers — the minority that account for the majority of revenues. Focusing resources appropriately requires fluency in sophisticated customer analytics that can identify a brand’s most valuable customers, while also helping marketers understand the right target acquisition costs based on projected lifetime value.
The challenge, of course, is that the customer journey is more complex than it ever has been — not to mention fluid. Today’s customer is omnichannel, mobile, and has begun to lean more heavily than ever on the availability of digital and online shopping options. The health of a company’s relationship with these individuals transcends the store, the channel and the product. CMOs and their teams must be able to capture this complexity in a way that accurately represents the whole as being greater than the sum of its parts.
The New Balance Sheet
For today’s B2C brands, nothing happens outside the context of the customer. Traditional corporate balance sheets can capture a snapshot of financial health in a given moment, but they do little to recognize the long-term value of customer-obsessed marketing organizations. To gauge true brand well-being, executives need a full balance sheet for customer health — a new framework for judging the success of marketing efforts in the context of the customer. Here’s what needs to be included:
The fundamentals. The customer health balance sheet looks beyond basic conversion metrics to understand the longer-term view of fostering strong customer relationships. Fundamental measures of this value are built around the following metrics:
- New customers acquired
- Cost per acquisition
- Repeat purchase rates
- Average interval between repeat purchases
- Average order volume
- Revenue per customer
- Percentage of buyer file that are one-time purchasers
- Retention costs
- Reactivation rate
Intervals. As with any balance sheet, the power of customer health metrics comes from tracking them over time and monitoring trends to make better decisions. Ideally, organizations would measure the above fundamentals on the following intervals:
- Rolling 1 month (particularly essential during periods of rapid change)
- Rolling 3 month (also essential during periods of rapid change)
- Rolling 12 month
- Compared to previous calendar years dating back 5 years
Cohort segmentation. To enable greater understanding and better decision-making, the balance sheet should also break down customer health according to the following:
- Full customer file
- Top decile of customers
- Inactive buyers
It is only by understanding the strength of a brand’s customer relationships that one can hope to understand the health of an organization beyond the current quarter’s financials. When viewed alongside the traditional financial balance sheet, the success of the marketing function becomes less a question of cost management and more one of incremental growth and retention. A balance sheet built around the metrics above is how CMOs should be evaluated — and moreover, the metrics by which the true health of a B2C enterprise should be assessed.
Brian Goldfarb is the Chief Marketing Officer at Amperity, a leading enterprise customer data platform. Prior to Amperity, Goldfarb was the CMO and SVP of Business Development at Chef Software, which was sold to Progress in October 2020. Previously, he was the CMO at Splunk from 2016 to 2019, leading that business through a major digital marketing transformation. Goldfarb has also served as SVP, Platform at Salesforce; Head of Marketing, Cloud Platform at Google, launching Google’s multi-billion-dollar cloud service provider; and in various product marketing and product management roles at Microsoft. Goldfarb holds an A.B. from Duke University in Computer Science and Economics.