Irrational Optimism and CMOs

The Chief Marketing Officer Council is out today with the results of its annual survey of marketing leaders.

I was struck by two figures:

- 81% of marketing leaders believe that share growth is likely and attainable this year.

- 10% of CMOs are worried about their jobs.

 

These figures suggest that marketing executives are an optimistic bunch.

On the market share front, CMOs are clearly being too confident. Share is a zero sum game; if one company goes up, another company goes down. I am quite certain that 81% of companies won’t build share this year.

CMOs are also too optimistic on the career front. Average CMO tenure is increasing but it is the rare CMO that lasts for a decade.

 

One could say this all doesn’t really matter. Optimism is a good thing, isn’t it? Who wants to work with a pessimist?

The problem is that irrational optimism can lead to bad decisions. A confident company might cut back marketing support, aggressively reduce costs or delay product improvements in order to boost profits. Why invest in the business when it is doing well?

Optimistic planning can also lead to bad strategic moves. When a company falls behind a plan, the management team will almost always take action to try to get to the target. Business leaders are rewarded for achieving goals, not missing them. Often this involves funding programs that have a big short-term impact, such as price discounts or sales force incentives, and cutting programs that are less effective in the short run, such as advertising, brand building or product improvements. This combination ultimately weakens the business.

Realistic planning is important.

The CMO study also noted that only two-thirds of CMOs are trusted members of the executive team. Irrational optimism won’t increase this figure.

One Response to “Irrational Optimism and CMOs”

  1. Uday Says:

    Reminds me of a study where 93% of Americans rated themselves as being better than the median driver.

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