Complexity and Transformation in North America's CMO Landscape

1. Insights from the Global Chief Marketing Officer Study ~ A North America Perspective Nanci Knight IBM Academic Initiative Relationship Manager | West Regionemail: nknight@us.ibm.com

2. The 2011 Global CMO Study is part of our C-suite Study series encompassing interviews with more than 15,000 C-suite executives ’04-’05 ’06-’07 ’08-’09 ’10-’11 CEO CIO CFO CHRO CSCO CMO

3. In this largest sample of face-to-face CMO interviews, we spoke with more than 1,700 CMOs worldwide, 300 in North America The study represents organizations in 64 countries and 19 industries Sectors Regions 3% Public 16% Communications 17% North America 21% Industrial 44% Growth markets 36% Distribution 24% Financial Services 35% Europe 4% Japan North America Rest of the World 10% BU CMOs 8% BU CMOs 14% Country CMOs 33% Global CMOs 46% Country CMOs 11% Regional CMOs 65% Global CMOs 14% Regional CMOs Growth Markets include Latin America, Central and Eastern Europe, Middle East and Africa and Asia Pacific (excluding Japan); n=1734 North America sample size n = 300, Rest of World n = 1333

4. Globalization has brought the world to everyone’s backyard Everyone is a broadcaster, publisher and a critic: there is nowhere to hide Transparency is the new price of entry North America CMOs: swimming, treading water or drowning? In this digital era... CMOs have to... • Do more than ever, inside and outside the organization • Be more accountable for return on investment (ROI) • Use tools and technologies that their children understand better than they do And...CMOs have just two to three years to make their mark And...more data, more sources, more devices, less clarity “The role went from marketing, to marketing and client experience, to marketing and client experience and channel. And now I am also doing technology prioritization and all of our service model structure. It really has turned into a revenue officer role, versus a marketing officer role.” Banking EVP & CMO USA

5. “None of the changes in Marketing today are evolutionary, they are all revolutionary and transformational.” Insurance SVP of Marketing, USA “Really good marketing has always been about creating a brand promise and delivering on it. It is just that with today's tools and technology, more people are watching.” Industrial Products SVP Marketing, USA “I'd like to get less data and more information.” Telco VP, Canada “I think the biggest marketing challenge will be the analysis and diffusion of data. I firmly believe CMOs and marketers need to become ‘analytic athletes’ to do their jobs.” Maureen Schumacher, Southeast Regional Director, Google “Traditionally, corporate culture and character have been managed by HR, but it can't remain there in a digital environment. The world of separate internal and external messages is gone, and internal actions, memos and decisions can impact your brand just as much as an advertising campaign.” Financial Markets EVP, Head of Global Marketing, USA

6. The key areas of under-preparedness are the same areas CMOs identify as most critical to enabling the marketing agenda 4 1 9 13 12 2 Social media 3 Growth of channel and device choices 4 Shifting consumer demographics 3 2 7 Marketing Priority Matrix 1 Data explosion Under-preparedness Percent of CMOs reporting under preparedness 70 5 Financial constraints 6 Decreasing brand loyalty 60 5 7 Growth market opportunities 6 8 ROI accountability 10 8 11 9 Customer collaboration and influence 50 10 Privacy considerations 11 Global outsourcing 12 Regulatory considerations Factors impacting marketingPercent of CMOs selecting as “Top five factors” 40 13 Corporate transparency Mean 0 20 40 60 Source: Q7 Which of the following market factors will have the most impact on your marketing organization over the next 3 to 5 years? n1=1733; Q8 How prepared are you to manage the impact of the top 5 market factors that will have the most impact on your marketing organization over the next 3 to 5 years? n2=149 to 1141 (n2 = number of respondents who selected the factor as important in Q7) 6

7. 84% 79% Expect high/very high level of complexity over 5 years Expect high/very high level of complexity over 5 years 35% 48% Feel prepared for expected complexity Feel prepared for expected complexity Being a CMO in North America is 1.6 times more complex than the global average Expected level of complexity and preparedness to handle Percent of North America CMOs responding North America Global 31% 49% complexitygap complexitygap 1.6x more complex • Simultaneous investment in traditional and emerging capabilities • Marketing and technology alignment more challenging • Managing the skills mix KeyDrivers Source: Q4 How much complexity will your organization have to master over the next 3 to 5 years compared to today? n=1709; Q6 How prepared do you feel for the expected complexity ahead? n=1712

8. North America CMOs are simultaneously investing in emerging and foundational capabilities; well beyond the global averages Plans to increase the use of technology Percent of CMOs selecting technologies 3% 9% 11% 2% North America Global Emerging Capabilities Foundational Capabilities 87% 87% 87% 82% 82% 81% 80% 77% 75% 75% 73% 73% 72% 70% 68% 67% 66% 63% 61% 56% PredictiveAnalytics MobileApps SocialMedia CollaborationTools TabletApps ScorecardsDashboards ContentMgmt. Singleview of customer CustomerAnalytics CampaignMgmt. Source: Q22 Do you plan to decrease or increase the use of the following technologies over the next 3 to 5 years? n=259 to 264

9. Within North America, CMO alignment with their technology organizations varies with the geographic scope of their role After cost, the top barriers preventing technology adoption North America Lack of IT integration with rest of company Lack of marketing and IT alignment 10% BU CMOs 1.6x 2.1x 14% Country CMOs 11% Regional CMOs 65% Global CMOs “The biggest issue is prioritization and funding. IT funds most technology projects but if the technology is only marketing specific then it may need to be funded by Marketing.” Insurance Marketing VP, Canada Source: Q23 What are the top 5 barriers to using technology? n=268

10. North America CMOs have a strong desire to drive the required changes in order to activate their corporate character North America Top 5 initiatives driven by transparency Percent of CMOs selecting initiatives Global 50% Enhance engagement withcustomers and citizens 75% 80% Manage brand reputation withinand beyond the company 74% 78% Expand data collection, analysis and insights capabilities 67% 72% 72% 64% Strengthen collaboration across the enterprise Orchestrate a single view of the brand 64% 61% Pink – out performing organizations, Blue - underperformers. Source: Q9 To what extent does transparency create a need for you to: n=293 to 297

11. Globally, to deal with the broad level of under-preparedness, CMOs signaled three key domains of improvement Deliver value to empowered customers Capture value, measure results Foster lasting connections “Marketing must become more adept at managing the magnitude of change now taking place. Otherwise, it will be like going into battle with a Swiss Army knife.” Financial Services Vice President, Marketing, USA

12. North America CMOs have a unique opportunity to lead by addressing under-preparedness and closing the complexity gap Addressing Under-preparedness • Requires a balance of external customer feedback and experience based insights to drive decisions • Utilizes customer analytics is a way to get better prepared • Engages with customers as a critical driver to better articulate corporate character Closing the Complexity Gap • Rethinking the skill mix as the primary driver to close gap supported next by investment in technology and integrating insights • Investing simultaneously in both emerging tools and technologies and traditional campaign management, scorecards and dashboards

13. Rethinking the skills mix, not technology alone, will help North America CMOs address the challenges 77% of North American CMOs put the “Data Explosion”at the top in terms of under-preparedness.Here is how they plan to be better prepared as compared to Global CMOs: Global CMOs: North America Regional CMOs: 73% Invest intechnology Rethinkskill mix 69% Invest intechnology Integrate insights 65% Integrate insights Understand analytics Understand analytics 64% Rethink skill mix 52% Collaborate with peers Collaborate with peers Validate ROI 49% Validate ROI 28% Address privacy Address privacy Source: Q8 How prepared are you to manage the impact of the top 5 market factors that will have the most impact on your marketing organization over the next 3 to 5 years? n=149 to 1141; Q20 To what extent will the opportunity to collect unprecedented amounts of data require you to change? n=1629 to 1673

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18. IBM Academic Initiative ~ Relationship Managers North East 2 Rick McKean 914-766-1741 rmckean@us.ibm.com North Central 2 Mary Lyons 312-529-3841mwlyons@us.ibm.com North Central 1Valinda Kennedy 630-747-8807vscarbro@us.ibm.com Central Jerry Haan 317-249-9544jehaan@us.ibm.com ME WA MT VT NH ND NY MA OR MN WI West Nanci Knight 707-529-9603nknight@us.ibm.com CT ID SD MI WY PA North East 1Bob Bry 617-693-3939robert_bry@us.ibm.com NJ IA IL OH MD DC NE IN WV NV VA UT MO CO KS KY NC CA TN OK SC AZ AR GA NM AL MS Mid-Atlantic Penelope Gardner 720- 396-4902penelope@us.ibm.com TX LA South Central/East Dennis Bly 512-286-9181dbly@us.ibm.com FL

19. Through these in-depth discussions, we are better able to understand the evolving role and function of the CMO in the C-suite Scope Approach Analysis • Sample consists of private sector CMOs (97%) and public sector leaders (3%) • Representative sample across 64 nations and 19 industries • Private sector organizations with revenue more than US$500 million in mature markets and more than US$250 million in growth markets; public sector organizations with more than 1,000 employees • Face-to-face one hour interviews with 1,734 CMOs • Facilitated using structured questionnaire • Wide coverage: from highly profiled organizations (48 of the 100 top Interbrand organizations) to lower profile local organizations • Statistical analysis of 35 questions and the related 236 discrete factors • In-depth analysis based on self-reported performance characteristics for differences between “outperformers” and “underperformers” • Comprehensive review and analysis of more than 10,000 interview quotes Marketing in the Digital Era • Deliver value to empowered customers • Foster lasting connections • Capture value, measure results Note: Outperformers and underperformers were identified by answers to questions about their organization’s competitive position. Those who selected “significantly outperform industry peers” were identified as outperformers; those who selected “somewhat or significantly underperform industry peers” were grouped as underperformers.