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The March 2025 SpencerStuart CMO Tenure Study (https://www.spencerstuart.com/research-and-insight/cmo-tenure-study-2025-the-evolution-of-marketing-leadership) has some encouraging words for CMOs: tenure is up slightly vs the last study and there is evidence of increased acceptance of the role in the C suite. Key quote: “…more companies are shifting marketing to make it more overtly focused on delivering revenue.”
So for the aspiring or inspiring CMO, the idea of how to create and sustain advertising leverage: the incremental sales lift in a business created by advertising over a specific period of time, is as central as ever.
To illustrate, let’s consider an example drawn from our work with a major advertiser, measuring the incremental lift their advertising (covering all forms of marketing communication) delivers. The numbers are disguised to support confidentiality, but the ratios shown here are seen broadly across many brands we have worked with.
Key Numbers | Description | Comments |
$1.2 billion | Last full year sales before taxes |
|
29.8% | % of sales that are incremental; that is, driven by advertising. More specifically, the % by which sales would fall if ad spend were stopped. | For this brand, a number that has been stable for the 2-year period prior to this one. |
$357.6 million | Incremental sales in $ | This is the value created by all agency and client teams working on this brand over this period, given the marcom budget, below. |
$70 million | Budget for all forms of advertising and marketing communication for this one year period. | Excludes professional fees paid to the agencies; see below. |
$15 million | Approximate total of professional fees for all agencies active in this period. | All forms of compensation: hourly rates, SOW rates, some media placement commission. |
19% | % increase in incremental sales possible if all marketing activity were improved through better allocation in spend by channel, markets, and over time. | This number is derived by Back-Cast Optimization, a process of applying an optimization algorithm to maximize incremental sales by adjusting controllable activities. |
$67.9 million | $ increase in incremental sales if optimization were fully applied | Also can be considered a measure of the effect of the current mix of activities. The higher the upside identified in BCO, the less efficient current ad campaign designs are. |
Given all this, where can the CEO/CFO/CMO best look for ways to improve business results?
One route, only too common, is to ask Procurement to squeeze fees across the board. Operating on the $15 million of fees being paid, they might find 10-15% “savings”, resulting in a gain to the company on the order of $1.5-2.25 million. Not unsubstantial.
But on the other hand, optimization of spend as shown here is capable of generating over 4x those gains. Further, we need to recognize that Procurement efforts and Optimization efforts probably act against each other; cutting agency fees leads to disincentives and dysfunction that could undermine advertising’s effect.
What are the alternatives to cost-cutting?
Invest more in advertising….use the ROI curve (https://navigationme.com/2024/12/02/win-your-budget-battles-at-the-frontier) to ensure this move builds profits
Invest more in creative; when done well this will amplify the effect of all other work
Evolve the product or lean into new product development
Revisit pricing strategies
Rethink the customer experience to look for more ways to build value for customers and the brand alike
….all of which require the ongoing talent and leadership of the CMO.
Consider for this brand, this roster of agencies and client marketing teams took a budget of $70 million in working media and created $357.6 million in incremental sales…a healthy leverage ratio. Their value to the brand and the business is proven. And that should give this CMO the clout to be trusted to lead the brand to the next level.
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