A growing number of marketing leaders now believe that driving business growth is the raison d’etre of the marketing function. Recent research shows that the pressures on marketers to deliver on revenue growth have become intense.
A 2021 global survey of marketing leaders by the CMO Council found that marketers are now responsible for 44% of company revenue on average, up from just over 10% in the early 2000’s. In this study, nine out of ten of the survey respondents said they are expected to grow revenue this year, and 63% said they and their marketing teams are under very high or extreme pressure to deliver on revenue targets.
Unfortunately, recent research also indicates that most marketers have not moved beyond marketing communication tactics in their efforts to drive growth.
In the February 2020 edition of The CMO Survey, for example, more than eight out of ten of the survey respondents said marketing plays the leading role in their organization in marketing communication activities such as brand building, digital marketing, advertising and social media. But fewer than four out of ten of the respondents reported that marketing leads many other activities – such as market selection and market entry strategies – that have a major impact on revenue growth.
The Need for Market Expertise
Marketing communications are obviously a critical aspect of marketing’s job, but marketing communications alone aren’t sufficient to maximize revenue growth. To identify and effectively exploit all available growth opportunities, marketing leaders also need to develop a deep level of market expertise.
Market expertise can be defined as a thorough understanding of the economic and competitive characteristics of the entire market in which a company operates, including those segments of the market the company isn’t currently targeting. Therefore, market expertise requires a deep understanding of the attributes, needs and buying behaviors of all the potential buyers in the market, including existing customers, targeted prospects and other non-customers.
Developing market expertise is always important, but it becomes critical when a company needs to identify and tap into new or previously unrecognized growth opportunities in order to achieve its revenue growth objectives. The reality is, identifying new growth opportunities is far less likely to occur when marketing and other business leaders fail to take an expansive view of their market.
A Lesson from Jack Welch
An anecdote about Jack Welch illustrates this point. When Welch became CEO of General Electric in 1981, one of his first strategic objectives was that every GE business unit would become the #1 or #2 player in its market. Welch’s strategic mantra became, “#1, #2, fix, close or sell.”
For several years, this strategy worked well, but over time, it began to have unintended consequences. In the 1990’s, some younger GE executives started to question Welch’s strategy, saying it was costing the company substantial growth. They argued that some business unit leaders were defining their markets narrowly so that they could justifiably claim the #1 or #2 position. Because of the narrow market definition, growth opportunities were being missed.
In response to these concerns, Welch refined his strategy and started requiring all business unit leaders to redefine their markets so that they had no more than a 10% market share. This forced business unit leaders to identify potential revenue growth opportunities that had previously been unrecognized or ignored.
Always Be Looking Beyond the Core
Understandably, marketers spend most of their time and energy creating and developing programs that are designed to increase revenue from their core market(s) – current customer types, current products/product configurations, current geographies, etc.
Some companies have a vibrant core market that provides plenty of growth opportunities, but many companies operate in markets where growth is harder to come by. In addition, most markets evolve from a “growth stage” to a “mature stage,” so even if a company’s core market is producing healthy growth today, that can easily change.
When the revenue growth produced by a company’s core market(s) slows, company leaders will likely start to think about some kind of business expansion. Expansions that take a company “beyond the core” are strategic business moves that require thorough evaluation.
In my view, marketing should take the lead in evaluating market expansion opportunities. Marketing leaders have (or should have) the skills needed to analyze the growth potential and risks presented by new markets or market segments. In fact, I contend that marketing leaders should always be evaluating potential expansion moves so that they are always ready to provide other senior company leaders a range of strategic options for increasing growth.