Most CEOs Don’t Know Much About Marketing.
The fact is that most chief executive officers know little about marketing, and much of what they think they know is wrong. Most—with certain notable exceptions—do not understand marketing because they have not had to understand it.
While there was a time years ago when virtually all manufacturers thought mainly about production, that time has long gone. Business theory in those days was simple: manufacture a quality product and find people to buy it. In that era, chief executives with production backgrounds tended to dominate.
During the 1980s and 1990s, when corporations’ futures appeared to depend on the proper manipulation of financial assets, organizations cast about for CEOs with financial proficiency. According to Business Week’s profile of 1,000 chief executives, the largest group, have finance in their backgrounds. Given their financial backgrounds, many CEOs naturally look for financial solutions to company predicaments. If all you have is a hammer, every problem looks like a nail. But to survive in this new century, corporate chiefs will have to understand marketing.
To learn what top executives know about marketing, we surveyed 1,003 executives of U.S. companies with annual sales of $500,000 or more using a more complex version of the Best Practices Test we hope you took on this website. To keep the test simple, we employed a team of marketing consultants to develop 50 statements a respondent could answer “definitely true,” “probably true,” “don’t know,” “probably false,” or “definitely false.” Half the items were correct—the right answer was “definitely true”; the other half were incorrect—the right answer was “definitely false.” The statements fell into seven functional areas: marketing strategy, advertising, market segmentation, pricing, distribution, new product/service development, and marketing research.
To score the answers and to produce totals that resemble standard intelligence quotient scores where 100 is average and 160 is genius, we gave a 160 to the CEO who answered “definitely true” when the statement was correct or who answered “definitely false” when the statement was wrong. We gave a 120 to partially correct answers, when the CEO answered “probably true” to a correct statement. We gave an 80 to don’t-know answers, a 40 to mostly incorrect answers, and a 0 to totally incorrect answers.
The executives seemed to take the test seriously. They did not answer definitely true or false indiscriminately or check “don’t know” promiscuously. On the other hand, when they thought they knew the answer, they gave it. Take the statement: “Most pricing decisions are undertaken without any serious, formal research.” Almost everyone thought they knew the answer and most were wrong. Only 14.6 percent gave the correct answer, “definitely true.” Less than 20 percent of all pricing decisions in America today are based on serious research.
Once we averaged the 50 scores, we had a CEO’s Marketing IQ, which could range from 0 (a CEO who got everything precisely wrong) to 160 (someone who knows as much about marketing as the people who wrote the questionnaire). If the average Intelligence Quotient in this country is 100, are American chief executives better than average in their Marketing IQs?
No. The average Marketing IQ of CEOs is 79. This is a sobering figure when you realize that someone who answered “don’t know” to every question could have obtained an 80. Marketing IQ scores did tend to rise with company size; people with greater marketing smarts are running bigger companies. Yet not one executive in our survey had a Marketing IQ above 120. No wonder most marketing programs are failures.