As a result of the Sarbanes-Oxley Act, Boards of Directors in both public and private companies doubled down on their focus on financial concerns.
To fulfill their responsibility to mitigate risk to shareholders’ and investors’ assets, they hired more members with financial audit and risk expertise to help ensure SOX compliance.
While there is not a Customer-Centricity Act, there might as well be. Customer-centricity has been mandated by customers.
Accordingly, it’s time to add a customer-centric, marketing-experienced, board member (Customer-Centric/MEBM), with recognized expertise in maximizing the upside of all growth strategies. And to avoid the flip side of not doing so - competitive risk.
5 Reasons Why You Need to be Customer-Centricity Compliant
A high maturity level of customer-centricity enables more cost-effective initiatives related to recruiting, retaining, and growing the value of more customers; and creating relationships to build trust, loyalty, and advocacy. This, in turn, results in both top and bottom-line benefits, including:
- Higher revenue growth, 5.7 times more than laggards [i]
- Faster growth, CAGR for customer experience leaders grew 17% compared to laggards at 3% [ii]
- Increased profitability, 60% [iii]
- Higher brand equity which moves in tandem with customer equity (LTV) [iv]
- Increased shareholder value [v]
Customer-centricity, in and of itself, is not a growth strategy. It is the must-have culture to achieve sustainable, profitable growth in any strategy: market penetration, market expansion, product development, diversification, new partnerships, and even mergers and acquisitions.
The ROI of adding a Customer-Centric/MEBM is high. Per the Research Gate survey report – Darden School of Management’s “When and How Board Members with Marketing Experience Facilitate Firm Growth” its analysis of 64,086 board member biographies found that a company’s annual revenue increased by 6.7% if the board included at least one marketer and that not having one put companies at a competitive disadvantage.
Per the Ivey Business Journal article, “Marketing Governance: Oversight Overlooked: “Marketing has built fortunes and depleted others, so it does behoove directors to provide close scrutiny of and governance to the firm’s marketing function and initiatives. A review of the Management Information Circulars issued by publicly traded companies suggests few directors have had hands-on marketing roles and fewer participate in board committees focused on marketing. Given this lack of experience and attention, boards have difficulty providing effective governance of the marketing function.”
Only a growth-oriented Customer-Centric/MEBM can fill this experience gap with oversight, insight, and foresight. The competitive-level customer-centricity goalpost is always moving. This is why it is crucial to quickly take action.
No other board member has their finger on the pulse of the customer or can better understand customer expectations and how to meet them by guiding your business to a holistic approach to customer-centricity in both your organization and your ecosystem.
It’s not too late to achieve your objectives. Per, a study by California Management Review Berkely “What is Customer-Centricity, and Why Does It Matter?” in 2021, only about 9% of companies operated in a truly customer-centric manner.
And not all boards have a Customer-Centric/MEBM yet.
How Exactly Do Marketing-Experienced Board Members Accelerate Growth?
Per the American Marketing Association’s Journal of Marketing report: When and How Board Members with Marketing Experience Facilitate Firm Growth, marketing-experienced board members (MEBMs), their initialism, facilitate growth by:
- helping firms prioritize growth as a strategic objective, and
- contributing their expertise to improve the effectiveness of revenue growth strategies
Adding a MEBM to your board positively impacts the bottom line. A study of 64,086 board member biographies (from Standard & Poor’s 1,500 firms between 2007 and 2012), found that a firm’s annual revenues can be expected to increase by nearly 6 percentage points when at least one marketer is on the board.
In addition, the combination of strategy selection, planning, and execution oversight is the key value add of a highly-qualified, Customer-Centric/MEBM. There are many more areas, within BOD responsibilities, in which their participation improves results., starting with these as priorities:
- Establishing Vision, Mission, and Purpose
- Creating and Monitoring a Long-term Strategic Plan
- Providing Proper Financial Oversight
- Ensuring the Organization has Adequate Resources
- Preventing and Mitigating Operational Risk
- Hiring, Monitoring, and Evaluating the Chief Executive
Establishing Vision, Mission, and Purpose. Marketing should already be a key player at the corporate level in this area. To stay ahead of customer expectations and competitor moves, while continuing to meet revenue and profitability objectives, the company vision, mission, and purpose may need to be modified for new market conditions. A Customer-Centric/MEBM, steeped in customer-centricity for decades, has the foresight to identify the best new growth opportunities, and advise on the creation, change management, and communication of, a revised customer experience vision statement that aligns with company values to inform and direct behaviors and habits throughout the organization, to embed them in your company’s DNA.
Creating and Monitoring a Long-term Strategic Plan. Driving long-term strategy is the top priority of the board. Boards set goals and objectives to guide how to meet the organization’s goals and needs. A Customer-Centric/MEBM provides oversight and insight related to the selection of potential segment expansion, and acquisition, candidates.
They are uniquely qualified to assess the business risk of a marketing strategy and whether the plan creates or destroys shareholder value. They are also practiced in how to avoid strategy misalignment with vision/mission/purpose and customer-centric planning. Misalignment leads to conflicting priorities, resources, and poor execution.
Boards monitor progress on the goals based on reports received from management. A Customer-Centric/MEBM knows how to connect activities to expected outcomes and provide advice on which metrics are needed to monitor strategy implementation. They can ask the tough questions, and challenge assumptions embedded in marketing team reporting to identify and provide insight into how to adjust strategy to overcome shortfalls.
Providing Proper Financial Oversight. A Customer-Centric/MEBM with P&L experience is uniquely qualified to assess the business risk of the marketing strategy and whether the plan creates or destroys shareholder value.
Their upstream marketing qualifications also enable them to evaluate proposed major marketing initiatives and ensure marketing investments contribute to, add value, and positively impact the business. A Customer-Centric/MEBM provides oversight for critical non-financial measures such as brand preference, take rate, customer retention and churn, customer experience, innovation, and market share.
Ensuring the Organization has Adequate Resources. A Customer-Centric/MEBD is best qualified to provide guidance on the anticipated impact of whether the proposed marketing budget will enable the company to fulfill its mission and achieve revenue and ROI goals. They are also skilled in assessing and identifying gaps in marketing technology, marketing performance management, the level of maturity of operational excellence maturity, and team member skills.
Preventing and Mitigating Operational Risk. Financial risk is multi-faceted. A Customer-Centric/MEBM can provide foresight and assessment of revenue growth risks, including market, operational, acquisition, ecosystem, customer-centricity, and brand risks. They have insight into which risks are good risks. They can provide auditing of the marketing function, and oversight for scenario planning and competitive benchmarking.
Hiring, Monitoring, and Evaluating the Chief Executive. By applying their expertise, a Customer-Centric/MEBD can provide valuable input to performing a SWOT as input to crafting the hiring criteria and drilling down on the customer-centric vision and experience of potential candidates during the interview process.
The Best Hiring Criteria for a Customer-Centric/MEBM
Hiring an independent director for this role is very important. They are impartial and objective; are an avenue to conflict resolution; bring fresh ideas, best-practices, and highly-developed skills to meet growth challenges with future-forward strategies; can mentor executives and board members; and provide access to their networks.
To realize the maximum top and bottom-line benefits of adding a Customer-Centric/MEBM, here are some key candidate must-haves:
- Deep customer-centricity experience. This requires experience in driving customer-centricity into every business function and process - not just marketing, sales and customer support. It must be part of the DNA of the business
- Experience driving customer-centricity wide, i.e., within your ecosystem, not just your business.
- Cross-industry, cross-company size, and multiple capital structure experience to bring customer-centricity best practices to bear. This is not a role for Johnny-come-latelies to customer-centricity. Look for someone with 10+ years of experience.
- Proof of growing multiple companies via customer-centricity
- Recognized as a thought leader able to foresee new opportunities and potential risks
- Knowledge transfer, change management and excellent communication skills
- Change management experience
The bottom line: Stakeholder and shareholder value cannot be maximized without a CC/MEBM. This information stems from my board and customer-centric marketing experience. If you'd like more information on this topic, please email me at laurap@visionedgemarketing.com with the subject line "BOD."
[i] Forbes. “How to Prove the ROI of Customer Experience”
[ii] Forrester. “Customer Experience Drives Revenue”
[iii] Forbes. “How to Prove the ROI of Customer Experience”
[iv] Harvard Business Review. “Customer-Centered Brand Management”
[v] Directors Club. “A Short Paper on the Connection Between Customer Experience and Shareholder Value”
Laura Patterson is president and co-founder of VisionEdge Marketing, Inc., a recognized leader in enabling organizations to leverage data and analytics to facilitate marketing accountability.
Laura’s newest book, Marketing Metrics in Action: Creating a Performance-Driven Marketing Organization (Racom: www.racombooks.com ), is a useful primer for improving marketing measurement and performance. Visit: www.visionedgemarketing.com
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