Marketing accountability: The framework for board buy-in

Jon Busby: Welcome to another episode of the Tech Marketing Podcast. I'm joined here by Jonathan Knowles, founder, CEO. I think you do everything under Type 2 Consulting. So we were talking last night and you mentioned your career today and you started You were born in East Africa, was that right? And then ended up at the Bank of England, and now you're writing reports about the different types of marketing.

How did you start in the Bank of England and end up writing marketing consultancy reports?

Jonathan Knowles: How long have you got? Because that's a, it could be a very long answer, but the so I did begin in finance and really for the first 10 years of my career, I thought that numbers were all that mattered.

And so after six years at the Bank of England, I went and did an MBA. After an MBA, I went into a strategy consulting firm that was doing value based strategy. So once again, the numbers were everything that mattered. And then I did a project working for J& B, the whiskey in France. And I realized that I knew everything about the cost of producing a whiskey and marketing a whiskey.

And absolutely nothing about the value of a whiskey, as perceived by the consumers that were paying the price. Indeed. And that was the first time that I actually understood that marketing mattered. And much to the concern, and actually the ridicule of my, colleagues in strategy consulting, I decided to become a brand consultant and I had what I called my five years of fact free consulting.

Or rather we trusted our intuition. But I found that slightly unsatisfactory because I really wanted to do things. First of all, I wanted to know that what the advice I was giving was actually grounded. In an understanding of the business, and secondly, I wanted to be taken more seriously than I was as a band.

consultant. And that's when there were a few twists and turns along the way, but that's ultimately what led to the creation of type two consulting, deliberately to bring together strategy, marketing, and finance.

Jon Busby: That's fascinating. I've got to ask though, as a big fan of whiskey, as I'm sure we all are, what is the value behind whiskey?

Did you get to the, did you find an answer there?

Jonathan Knowles: Oh I, my first job with whiskey was to do with angel's share. Which is, 2% of when a whiskey is maturing, 2% evaporates and it's known as the Angel Share. And so the first thing we did was could we climate control the environment in which whiskey is matured to reduce the angel share?

I mean that there does that. So that's the cost side of the equation. But it was the consumer side of the equation, the customer side of it, really just brought me to it's pure Peter Drucker. What a customer buys is never a product. It's always a utility, what the product does for them.

So Lou Aversano today did a really good explanation of you've got to get away from product and start talking about customer outcome. In fact, Lynn Teo did. Yeah, it was a good theme of today that we've got to stop talking about what things are to the outcomes they enable.

Jon Busby: Yeah. And that's something we actually see a lot, especially in the channel space.

Where you might have multiple different businesses that deliver an outcome and how we're trying to move away from just looking at, let's say, an installer or a distributor or a, a hardware vendor and start looking at the solution that enables the customer. So it is, it's this is all coming together.

Let's talk about this report that you've been creating for the ANA. Tell But let's try and summarize the report in kind of one, how would you summarize it in one analogy, let's say?

Jonathan Knowles: It's about accountability. And how a finance person looks at accountability, because we think accountability just means give me a financial number.

And so the report is really designed to do three things. To demonstrate the marketers care about business impact. To demonstrate that they understand how the business makes money. So it's not just caring, it's actually competence. And then the third thing is showing that marketing is actually a set of processes.

And so the report really covered two main topics. The first was really about industry structure. So we looked at There seems to be a near infinite variety of business models, but when we broke it down, there were really five business models. Yeah, 150 sectors that we looked at condensed down to five business models.

And then we looked at the literature, which again, there was a huge diversity, but within that, hows. So you asked for an analogy I'll give you the golf analogy, which is this idea that. You've got a CEO who wants to win in the marketplace. So let's call that, let's get the ball into the hole.

That's the purpose of golf. You've got a CFO who's saying, oh yeah, but we, I want you to use as few strokes as possible. And you've got where does the marketer fit in? And the marketer fits in by saying, depending on the stroke we need to play it You know, we are going to choose a pitching wedge or we're going to use a driver, and maybe that's what we should do.

We should describe marketing as a set of clubs and use that analogy.

Jon Busby: The way, actually, I remember speaking to some of our previous podcast guests that were involved in the research. They, when they first explained, We were trying to achieve here. It just, every conversation I had from then on, I couldn't, I just couldn't get it out of my head.

This concept that we, as CFOs, you have a, You have generally agree to account gap principles, right? Principles that, when I take, say profit, everyone knows what that means. But as CMOs we tend to talk in completely different languages. So me, 10 different CMOs that wanna say 10 different things.

So what your research is really trying to do is say, let's condense it down to a set of six clubs. Six, six ways of doing business that we can then all agree on and use as a set of agreed accounting principles, is that right?

Jonathan Knowles: Yeah. I, ideally we would like to get to is the CMO operating manual.

Jon Busby: I really like that visualization of the CMO operating manual because I think that is something that's missing. Do you think it's? That differences in reporting structure have led to why the CMO tenure is only, what, 4. 2 years, dropping from 4. 6, I think, recently, or 4. 5. Do you think that's got something to do with it?

Jonathan Knowles: I think there's a measurement problem in that data, and I think Spencer Stewart will accept.

Jon Busby: A Type 2 problem, potentially. Or is it a Type 1 problem?

Jonathan Knowles: Actually, it's a Type 1 problem, but I like where you're going on that. You've got the situation where it's a, this is going to sound terrible, it's a bimodal distribution, but you've got a lot of CMOs who've been around a long time and you've got churn in another group, so the actual average between them is a little bit sensitive, but for every long tenure seeing CMO that recruits, That retires, maybe doesn't get, replaced, you've suddenly, the average comes down because now you've got somebody who's one year into the role and somebody who, so there's a, there is a bit of a measurement problem in that.

Jon Busby: I think the next thing that's going through my head is, yes, agree, there could be a measurement problem there. Although we like to use it as a, we all look for frameworks that we can oversimplify things so we can explain things to each other. But one thing that really struck me was. No, you your comment there around, you must understand how the business makes money.

Yes. Some of the people that were included in your research and other speakers at the event today, you've got Jeff Lowe, chief commercial officer, not CMO. You've we've got Deena, who is Chief Growth and Disruption Officer not CMO, is the end goal of a CMO no longer a CMO? Are we seeing an evolution in organizational structures and roles?

Are we finally seeing sales and marketing coming together?

Jonathan Knowles: To me, they're all CMO roles. And I think what we've, what we're moving towards is a much better understanding of the context of the CMO role. And if we want to change the CMO title, I'm fine. I'm fine with that. So in, in the research, we identified these six foundational models that if you're marketing a product.

You know the thing is the thing, and you are likely to have a chief product officer. . They're gonna be the cm, the CMO in the context of a product link business. Yeah, you might be. If you are you are doing an FMCG. You might call yourself the chief brand officer. You're still the CMO. You could then go to the, service led business and you might have the chief customer officer or the chief customer experience offer officer.

I see these all as flavours of CMO. And if we want to change our title to communicate more clearly what it is, the role that we're playing in the business. So disruption or commercial, I, if that's effective, I'm totally up for it. With it. But what I don't want to hear is, Oh, we're abolishing the CMO title. No, we're adapting the CMO title to the context.

Jon Busby: So based on that evolution, because actually I was thinking if you're a SaaS business, you might have a CRO, which in some ways encompasses CMO responsibilities. So you're six different types each one could actually have its own evolution or its own best.

Jonathan Knowles: The ANA took that out of the report. I said, this is the killer slide where we show the six models and we show the six titles and say, these are all CMOs and they, and for some reason it didn't make it into the final. Report, but it absolutely makes the point that if you're product led, you're going to be, have a chief product officer.

If you're brand led, you may have a chief brand officer. If you're customer experience led, you may have a chief experience officer.

Jon Busby: I'm intrigued. As a, so as a marketing agency, we're a professional, we're probably in the professional services. What would be our version of a CMO? Is it a CMO?

Jonathan Knowles: well, the three other models are account based marketing, which is typically where you've got very close a relation. You've got a relatively consolidated set of customers. So you're going to be marketing at the account level. Yeah. So that there you would probably have a chief customer officer because.

That's what you're marketing to. You're measuring customers. If you're doing something more like a SaaS model where you've got a one to many model and you're doing customer cohort marketing, you probably might have a Chief Commercial Officer, Chief Revenue Officer and if you're doing performance marketing, there you might have, again, you might have a CRO.

Jon Busby: I I like this concept of different titles for different types of business. It feels to me much, much cleaner. But I take abstracting away from pure titles for a moment. Cause I always say in our organization, don't let your title define your influence, right? Shouldn't matter that way.

Let your influence define, don't let something restrict you from going and making change. So we shouldn't really be restricted by titles either.

I think the biggest thing for me is this recognition of business outcomes, of understanding how the business makes money and then aligning marketing's goals alongside it. So if you were to give, going back to the CMO title, if you were to give a CMO one piece of advice, what would you tell them they need to do today?

Jonathan Knowles: I would say that they need to make that connection to business outcomes. Absolutely. Crystal clear. And the sequence goes, net present value is a function of growth, profit, and risk.

There are two marketing growth levers, more customers and higher customer lifetime value. When you go to profitability, there's pricing power. And there's cost efficiencies around alignment and media efficiencies and so on. And when you go to risk, there's the alpha and the beta component of risk.

There's earning stability, and there's that unexpected surprises when you use creativity to produce outcomes that people were not expecting and not forecasting. And if I would love the CMOs to adopt a scorecard when they report to their management committees or to their boards. They're talking under each of those six headings and saying, this is what we're doing.

Jon Busby: I'm glad you raised those different levers because I think the There's two things that stand out for me there. Although we could dive into each one and I could probably spend two hours going through it, but you referenced it, Bob referenced it this morning, the, of those six, I think the creativity is the one that could drive the biggest impact on growth.

Am I understanding that correctly?

Jonathan Knowles: I think creativity is part of All of them, to be honest. And but people default to thinking that of creative creativity is having to be. Swing for the fences, disruptive type of creativity. There's a creativity of constantly refreshing your brand in a way that almost nobody notices except they notice when it seems to be dated.

I, a huge fan of what Cadbury's have done. And I know this is a B2C example but the glass and a half in everyone. Just the way that, first of all, that they make that connection between something that is intrinsically true about their product, and they've taken it from product attribute to consumer meaning, and the idea that they're going to earn generosity, and then they have these executions, and they keep going.

And it constantly refreshes the meaning of the brand.

Jon Busby: I don't know if you probably have read it. Why one of our creative directors referred me to how to sell a gorilla. As a, which I think was written by ex-Ogilvy, I think it's ex-Ogilvy will be who that, that came up with the campaign behind cabarets. And that's one of those example, creative campaigns that on every metric.

You would have said no, but on every metric after they've made it, it's completely blown it out of the water. Like, how do you bottle, literally talking about a glass and a half, like, how do you bottle something like Cadbury's marketing and then apply that to B2B?

Jonathan Knowles: I think Xerox today was an interesting study because I wonder whether they've been radical enough.

Because Cadbury was, if we pick the Cadbury analogy, and I don't really know enough about it to go, but let me give you my uninformed. Take Cadbury much loved, Quaker history, part of English heritage, but it become like wallpaper. It, people loved it to be around, but it wasn't giving people a reason to buy.

So you needed to jolt people to think differently about Cadbury. So you have the drumming gorilla and people go. Literally, what the hell it's a career and there's something so surreal about the whole thing that it goes I never thought of Cadbury that way and then they go into what I think is that the campaign with legs It's going to be it's going to be like priceless for MasterCard They will just be able to keep it because the idea will never go the idea of generosity will never get Too old.

And so I worry that where the Xerox have been radical enough, because we all think we know who Xerox are and Xerox did need to change people's perception of before they moved into the, we make work, which yeah, once you've, once you're associating Xerox with all of the, office efficiency, not just office copier and automation and all of that backend infrastructure to running a business, but I didn't think… my sense is that Xerox isn't quite there yet.

Jon Busby: Yeah, we, as B2B marketers, we often say we need to be bolder and braver, and I think maybe they do need to push that more.

Jonathan Knowles: If your problem is that people think they know you and what they know is not who you are now.

Jon Busby: But it comes into actually one of the things we were discussing yesterday, which is, you mentioned how you need to almost reinvent the brand and Cadbury's did that with the Griller by getting people to step back and think. You're shifting someone from thinking fast to thinking slow, from your type, from your system one to system two, and we were discussing this with the Burger King example yesterday.

So there is a very careful balance that you need to do, make to get someone to make, to rethink your brand.

Jonathan Knowles: I think the goal is never to fall into that level of irrelevance. And that's the, that's the tragedy of brands when they become wallpaper and people are happy for having to have them around, but they're no longer seen as particularly relevant.

And that's the, and that's the problem of underinvestment. That's like a piece of machinery that you haven't invested, you haven't maintained it, and now you're wondering why it's rusty. And it doesn't look good and it doesn't work and you're going if brands are assets, that means that we need to be investing continuously.

And I sometimes I use this argument of what's the depreciation period on a brand. So if your brand's worth a hundred million dollars and you've, you think that it's life lifespan is 10 years. You should be spending at least 10 million. Yeah, just to maintain it. This isn't that. Yeah, so putting it within capital budgeting terms.

So the goal is if you were spending the money on continual maintenance, you wouldn't need to do the kind of disruptive. Advertising that would be purely for the upstarts because they knew their need to disrupt the incumbents.

Jon Busby: But you think there's a danger to CMOs coming in and feeling that they have to do that disruptive element because they feel I have to make a mark, like I'm here, so I'm going to reinvent the brand.

Jonathan Knowles: Yes. Yeah. So I think that's the worst piece of advice you could. Yeah. Yeah. And because you're changing, if there wasn't a problem with customer perception. Then you're just confusing them by coming up with a new creative execution that isn't consistent with what they already know.

So, that's why, step one of marketing is diagnosis. It's not, whether I feel there's a problem, it's whether my target. Customer has the perception of my brand, then you go to strategy, if they don't have the perception, then what's my strategy for changing it? Then you go to tactics, then you go to measurement.

Jon Busby: Many just jump straight to the end and try and reinvent something just because they feel they need to be disruptive.

Jonathan Knowles: Yes, because we've taken this, everything is changing, and the answer is, the tactics and the tools are changing, yes, the purpose is not changing.

Jon Busby: Jonathan, this has been a fascinating discussion.

Jonathan Knowles: We went a bit meta at times.

Jon Busby: Yeah, we did. We've only really touched on the report very briefly. What would you like to tell our listeners about this wonderful report? What's their next action?

Jonathan Knowles: Just that it's a work in progress. So it's, it is actually framed around five questions to get you thinking about, okay, If the problem is that CFOs and our finance colleagues look at us and go, there's all of this unexplained variation in what you do and what you do.

And I look at our competitors and they're doing something differently. How do we address that? And the answer in the report is, first of all, think about your business model and think about how your business changes, makes money and how does that change? What kind of things marketing should be doing?

And then these six models of marketing, which blend, and it's typically not just one of them to the point you're making earlier, but which blend of these six is likely to be the most effective. And then if you say that's why our marketing doesn't look like their marketing, because they don't have the same problem as we do and they don't have the same assets and the attributes that we do.

So we're playing to our strengths by the strategy that we're adopting. That's where I would love to get people. Towards because that will really close this gap between marketing and finance and make businesses better and make because marketers care about customer value and societal value will actually make businesses better.

Jon Busby: I think for me as an agency, for us as an agency together, like it, it gives us a common language we can use that maybe allows us to answer some of those questions to say, to be honest, every agency has had some, someone come to them and say, we want to be more like Apple. And it's you're not that kind of business.

And this is the reason why. So I think it gives us a framework to, to apply there.

So Jonathan, it's been a real pleasure having you on the Tech Marketing Podcast today.

Thank you very much for joining me.

Jonathan Knowles: It's a pleasure being here, Jon. Thank you.