More Data Brings More Risk: CMOs Must Embrace 'Risk Marketing'

Five Strategies for Successful Risk Marketers

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The most important skill for a CMO today is risk marketing. Risk marketing is the application of proven risk-management practices in marketing, and is predicated on the understanding of the risk of action -- and the risk of inaction. This calibration of risk and reward is now a real-time practice given the sophistication of social, search and CRM data. These data sets serve as canaries in the coal mine for understanding the interconnectivity of risks.

The average tenure of a CMO has nearly doubled over the last 10 years, signaling that CMOs are improving how they're managing complex risk. In the era of social media, seemingly unrelated events in supply-chain management, cyber security and corporate governance directly impact sales, purchase consideration and investor relations -- traditional domains of the CMO.

This new complexity is illustrated through recent crises at Sony, Target, and the NFL. Issues such as cyber security quickly dominate the marketing agenda through the impact of declining brand reputation or falling sales. Every business issue potentially becomes a marketing issue today, especially when the tenets of risk management are not followed.

Every enterprise faces increased risks -- many arising from the escalation of both man-made and natural disasters. However, two specific culprits conspire to dramatically elevate risk in marketing. First, social media amplifies every brand interaction from the outside. In the era of social media, public reactions are entrenched even before basic due diligence is completed. Second, internal compliance in response to complex governmental regulations alters brand interactions from the inside. It's always easier for an enterprise to say "no" than to say "yes" to any new idea.

The emergence of risk marketing coincides with the golden era of marketing, where platforms like Instagram and Twitter allow brands to engage in a relationship with the individual rather than engaging in the mass market. Here are five strategies for successful risk marketers:

1. Embed risk assessment as a core marketing practice. The goal of a risk assessment is to identify risks, and in the process, more precisely identify opportunities. Risk and reward are two halves of the same process. Understanding the risk of action -- and the risk of inaction -- almost always results in a more proactive organizational stance toward marketing, because marketing is more visible across all of the enterprise planning.

2. Embrace compliance. Executed correctly, organizational creativity is in part a byproduct of compliance. Great compliance actually offers a shortcut to great creative, because executions are developed more solidly in the context of preset parameters and more transparent reporting. Creativity is driven by the need to solve non-trivial business problems, not by blank sheets of paper or requests for Facebook campaigns.

3. Borrow the risk management playbook in marketing. Trillions of dollars have been spent managing global risks of every stripe. In addition to standard risk assessments, many of the well-established tenets of risk management apply to risk marketing. Tactics like setting up accreditation programs for the marketing team; adapting surveillance techniques to evaluate the effectiveness of creative and media; or running penetration tests such as hacking simulations to gauge the responsiveness of the marketing department can all help to manage risk. Educating the organization about marketing in the way that compliance educates the organization about governance is also extremely important. For example, companies like Nestle are deploying strategies to educate their teams on how best to comply and apply digital learnings.

4. De-silo problem solving. As more and more business decisions impact the performance of marketing, then the purview of today's CMOs should expand commensurately. CMOs must fight to manage cross-functional teams beyond the marketing enterprise to solve larger business problems. Success in marketing increasingly depends on information technology, merchandising and manufacturing. Risk marketing requires the deconstruction of the marketing enterprise to remove silos between functions such as advertising and social media.

5. Approach data as a creative exercise. CMOs with the skills to interpret data are at a premium. However, the actual "answer" to insights from data is invariably a creative exercise. As marketers quantitatively understand consumer intent -- where consumers are in their purchase decision -- they realize that one version of content is inadequate to serve the needs of diverse consumer segments. Data then demands the real-time versioning of creative, and the placement of creative content in more potential touchpoints. Brands like Pottery Barn are using their understanding of purchase intent to execute creative campaigns in social. CMOs now boast a broader palette of creative choices, largely through social media, in which campaigns are no longer constrained within a single medium.

The world will only become riskier: globalization, technology, climate change, extremism and good old-fashioned competition. Welcome to the age of risk marketing.

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