Growth is the aspiration of nearly all companies. Shareholders look for it, CEOs hire for it and CMOs lead efforts to make it a financial reality. In a competitive marketplace, however, not all companies benefit from their growth initiatives. In the 27th Edition of The CMO Survey, 22% of companies reported negative growth, another 25% reported no growth, and only the remaining 53% reported positive growth. Those findings are deeply concerning in a market that favors transformation, speed and scale, and where digital savants and platform companies are experiencing soaring revenues and profitability at others’ expense.
Against this backdrop, what steps can marketers take to help their companies grow and thrive in the ultra-competitive digital marketplace?
Results from The CMO Survey point to two categories of activities that seem to make a difference: First, the strategies that marketing leaders design for growth and, second, the ways in which marketing leaders manage these growth initiatives internally.
How Marketing Leaders Design Strategic Growth Initiatives
1. Think Beyond Market Penetration
The bulk of companies’ growth strategy spending (55%) continues to be directed towards market penetration — selling more of existing products and services to existing customers. Market development (targeting new customers with existing offerings) is the third most prominent strategy in terms of growth spending (product/service development is a close second). However, market development has become a more significant priority across all sectors, increasing by almost 13% in the past six months. B2C-service companies increased their use of this strategy by 52% while B2C product companies increased by 28%. This growth strategy leverages investments in existing products and services to sell them to new customers, which is likely to have a positive impact on bottom lines.
2. Consider Organic Growth Alternatives
Some 72% of growth investments are directed toward organic growth activities. This strategy gives companies complete control, but also requires more resources. Partnerships, which are only used 12% of the time, may be worth a second look. Partnering with others that have the brand, customer or distribution resources companies lack may be a wise way to spread risk and gain access to valuable resources. At the same time, if a company has strong brands or other resources that can be licensed (an approach used only 4% of the time), this provides another way to grow revenues without making new investments.
3. Think Beyond the U.S.
Budgets and sales for domestic markets varied little from February 2021 and remain lower than pre-pandemic levels. Overall, companies are only spending 15% of their marketing budgets internationally. Larger companies, both in terms of revenue (25%) and number of employees (29%), allocate a greater share of their marketing budgets to target international markets. So do companies in education (34%), transportation (26%) and technology software platforms (23%). Notwithstanding this heterogeneity, we think more marketing leaders should consider opportunities to shift marketing spending abroad. Why? The CMO Survey has tracked international marketing spending and international sales over time and found that the two variables move tightly in sync. Although this trend does not prove causality per se, this positive correlation should cause marketing leaders to look deeper at their investment strategies.
4. Grow Market Share in China
Marketers generally agree that Western Europe is their largest current international market. However, when asked about their greatest future opportunity, all eyes are on China. The Chinese market is particularly appealing to B2C product companies, with 21% of companies within that sector identifying China as their biggest opportunity for the future. There are challenges that need to be navigated. However, evidence suggests that moving beyond Beijing, Shanghai and Hong Kong, respecting historical and cultural differences, and relying on local talent can help companies grow in this all-important market.
5. Grow Internet Sales
Across the different sectors, companies make less than 20% of sales, on average, through the internet. This number peaked during the height of the COVID-19 pandemic (19% as of February 2021) and remains significantly higher than pre-pandemic figures. As discussed in detail in previous research, companies can bolster their online strategies, and therefore online sales, by taking a variety of approaches. For example, companies can eliminate the need for human interaction (e.g., US Foods), create new business models (e.g., Stitch Fix and Adobe), simplify complex products for sale online (e.g., Carvana), and create an “always on” digital marketing organization (e.g., Amazon).
6. Reap More Benefits From Social and Mobile Marketing
Both mobile and social media spending have increased over the pandemic, but have dropped below the historic high measured in June 2020 by The CMO Survey. Marketers agree that mobile and social media spending will continue to increase at an even faster pace in the next five years — reaching 34% of marketing budgets for mobile and 24% for social. However, although mobile and social spending continues to increase, marketers still do not consider these methods as legitimate contributors to their companies’ performance. (They rate them an average of 3.3 and 4.0 on a scale of 7, respectively.) One important strategy is to gain a consumer’s trust and business in the digital world. To do so, marketing teams must think deeply about what their brand stands for and project messages that consistently align with that positioning. In addition, teams must develop content that appears organically on the platform(s) on which it is displayed.
7. Move Into Adjacent Business Areas
Only 44% of marketing leaders reported that they were able to leverage their companies’ core strengths by capturing adjacent digital opportunities. They are not alone. Consider Blockbuster CEO, John Antioco, who in early 2000 identified Netflix as a legitimate threat and attempted to convince stakeholders to invest heavily into a digital platform. He was unsuccessful and the company went bankrupt approximately five years later. Companies must make upfront capital investments and be willing to cannibalize their existing business to take risks on new business models, products, and services — something most executives are unwilling to do. Research shows they are wrong — a willingness to cannibalize is essential to growth in companies worldwide.
8. Improve Company Apps
Although smartphone ownership continues to reach new heights, only 25% of companies report deploying an app. Of those that do offer apps, the return on investment varies significantly. The majority of companies (56.2%) report that their apps generate less than 5% of total revenue. B2C service companies indicate the highest returns, with 50% of companies reporting moderate-to-high app revenue generation. Marketing leaders can improve the ease of use of a branded application to create a lock-in effect, promote brand loyalty and become a part of their consumers’ everyday lives.
How Marketing Leaders Manage Growth Initiatives Internally
1. Put Talent First
When asked to rank-order resources in terms of their importance for driving future organic revenue growth within their companies, the largest percentage of marketing leaders ranked “having the right talent” as the top priority. Talent appeared above “having the right technology,” “having the right data,” “having the right operating model” and “having all stakeholders aligned.” Therefore, marketing leaders must develop the talent they currently have and go above and beyond to acquire the best-in-class talent they still need. That’s a tall order in a marketplace where millions of jobs at blue-chip companies are going unfilled.
2. Build the Growth-Strategy Connection
Not all opportunities should be pursued by all companies. More than 70% of marketing leaders agreed that making a strong connection between growth opportunities and the company’s position and strategy is essential. This means marketers must consider how the products and services they offer, the markets they serve, and the partners they use propel their company towards its larger strategic goals. How does the new market serve the company’s position? What synergies does it create with existing markets? Likewise, how do new products and services complement or extend existing products to promote growth? Marketing leaders can help the rest of the C-suite consider how growth opportunities help it achieve or maintain a leading position in the long run.
3. Integrate Digital and Non-Digital Marketing Teams
Although digital spending is increasing, most companies still have a sizable non-digital aspect of their business that they cannot afford to operate independently if they are to grow effectively. Given the importance of brand consistency, marketing leaders agree that it is essential for digital and traditional marketing teams to work in tandem using an omnichannel approach. Macy’s Inc., for example, has been fighting to increase foot traffic in its retail stores nationwide (e.g., launching Macy’s Backstage). However, the department store’s strategic initiatives have not flowed through to their ecommerce platform or related social media. This disjointed customer experience has left customers frustrated and turning to competitors.
4. Work Closely With Finance
The corporate stereotype is that marketing is always going to ask for a larger budget and that finance will cut that budget. The truth is that growth requires that marketing and finance experts work together. Surprisingly, survey results indicated that this happens in only 35% of companies. In other research, we offer 10 tips for making a business case for the marketing budget that involves bridging some of the barriers that have tended to divide marketing and finance.
5. Learn From Other Industries
After being assigned to a particular company, product or brand, marketers can be tempted to put their blinders on and focus only on their own brand and that brand’s direct competitive set. However, there are massive benefits to taking a step back, examining other industries and considering opportunities to transfer ideas across contexts. As early as 1450, Johannes Gutenberg combined the power of a wine press with the flexibility of a coin punch to develop the printing press. More than 500 years later, the best companies still look for inspiration outside their industries. For example, other research reports that 3M developed a new approach for preventing infections post-surgery following research with a theatrical makeup specialist and that an escalator company borrowed a solution from the mining industry for designing escalators in shopping malls.
6. Run Experiments
When asked, “What investments did your company make to improve the performance of your digital marketing activities over the last year?” marketers reported different priorities. Only 46% reported investing in online experimentation and A/B testing compared to 77% investing in website optimization. However, one of the best ways to quickly learn about potential growth opportunities and forecast their success is to run experiments. Marketing leaders can accomplish this in the field by setting up mock websites, changing web page elements, and exposing consumers to new products, services or marketing campaigns in a laboratory setting to gauge their reactions.
7. Leverage Machine Learning for Growth
Companies currently use artificial intelligence or machine learning only 11.8% of the time. This is predicted to triple to 37.7% over the next three years, with 25.9% of companies investing in this space in the past 12 months. When initiating growth initiatives, marketing leaders can leverage their marketing technology stacks to identify opportunities for personalizing their customers’ experiences and extracting additional value from their campaigns.
In an economy that is truly “grow or go,” companies must acquire, train and maintain the best marketing talent. In addition, they must ensure that the marketing function is implementing the best and most innovative marketing strategies.
How will your company ensure it is on the right side of the growth imperative?
Christine Moorman is the T. Austin Finch, Sr. Professor of Business Administration at the Fuqua School of Business, Duke University. Christine is the Editor-in-Chief of the Journal of Marketing and founder of The CMO Survey, which is dedicated to improving the value of marketing in firms and in society.
Megan Ryan is a second-year MBA student at Duke University’s Fuqua School of Business, concentrating in Marketing and Strategy. Before Fuqua, Megan spent three years working in the greater Boston area as an analyst at Cornerstone Research, a leading financial and economic consulting firm.