Marketing Math Blog

Sep 02
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Do Advertisers Value Supplier Stability?

By Contract Compliance Auditing No Comments

marketing agency networkImagine if you will a scenario in which a newly hired Chief Marketing Officer (CM)) asks the Chief Procurement Officer (CPO) for their Team’s assistance in conducting a review to replace the organization’s lead advertising agency.  The response of that CPO will provide a litmus test for the extent to which that organization values supplier stability within their marketing agency network and how they view the role of procurement.

Potential CPO responses might include;

  1. “No problem. We stand ready to assist you in any way possible and are confident that we can also utilize the review process to revisit the agency compensation methodology being utilized to generate a reduction in agency fees.”
  1. “What is the basis for your request? Do you have relevant first-hand experience with this agency at a prior company that raises some concern? Based upon your review of the most recent annual evaluations have you observed shortcomings, which you believe cannot be adequately addressed as a result of direct dialog with the agency? Have you had time to adequately assess the risk: reward equation related to a change in agency-of-record for our organization? ”

Which response would you expect from an organization that views its advertising agencies as vendors, not strategic partners and that has tasked its procurement team with aggressive annual cost savings targets?  While the answer is self-evident, the question regarding procurement’s role in fostering supplier stability is much more complex… particularly as it relates to indirect procurement in general and marketing specifically.  

Collaboration between the marketing and procurement functions and the challenge of fostering a productive working relationship between a function focused on demand generation and one primarily measured on expense reduction has been thoroughly debated over the course of the last decade.  “Marketing is different” has been a common refrain from marketers seeking to limit procurement’s involvement within their agency and third-party vendor networks. 

Thus it was with great interest that I read the results of a recent survey conducted by The Hackett Group which focused on “How World-Class Procurement Organizations Outperform.” Of note, the survey found that top procurement organizations employed a handful of strategies, which distinguished them from their peers:

  • Being a trusted advisor to the business
  • Driving suppliers to innovate
  • Providing analytics-backed insights
  • Protecting the business from risk
  • Agile staffing

Respondents employing the aforementioned strategies were able to forge stronger relationships with their internal clients and with their suppliers. This in turn allowed them to proactively understand the needs of the business unit, as opposed to simply “facilitating the buying process” and to work collaboratively with each stakeholder group to both “reduce costs” and “create customized and unique breakthrough solutions.” 

Intuitively, it would seem as though this approach would go a long way in establishing a performance-oriented, stable marketing agency network that operates efficiently in support of an advertiser’s business objectives.  At the very least, the approach employed by “world-class” procurement organizations in the Hackett Group study could serve as a compelling basis for dialog between marketing and procurement.  A dialog focused not solely on cost reductions but on the goal of improving an advertiser’s return on marketing investment.  As the old adage goes; “Teamwork divides the tasks and multiplies the success.”

 

 

 

 

 

Sep 02
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Agent and Seller. Can an Ad Agency Serve Both Roles?

By Advertising Agencies, Client Agency Relationship Management, Digital Trading Desk No Comments

digital trading deskThe answer to this question may seem fairly obvious and can be answered most succinctly with another question;

“How can an ad agency fulfill its fiduciary duty to an advertiser when they are not primarily focused on the advertiser’s best interests?”

In the context of digital media, agency trading desk operations are functioning both as media sellers and buying agent.  Perhaps even more vexing is the mode of revenue generation which agency trading desks employ… media arbitrage.  Simply put, agency trading desks purchase digital media inventory at one price and re-sell that inventory to their base of advertisers at a higher price, pocketing the difference.  The higher the spread between the media cost and the rate at which it is sold, the greater the margin of profit which the agency can derive from their trading desk operation. 

This dynamic would suggest that an agency’s profit motives could overshadow their obligation to provide reliable independent counsel to their clients and to secure the highest quality media inventory at the best possible rate for those advertisers.

Further skewing transparency concerns over this practice are the non-disclosure agreements which most trading desks ask their clients to sign.  These agreements greatly limit advertiser insight into the true cost of the media, data analytics and technology costs and as importantly the percentage gain being realized by their agency partners. In the words of the noted twentieth century essayist, Erich Heller:

“Be careful how you interpret the world: It is like that.”

From our perspective, the trading desk operation model currently being employed by agencies is not serving advertisers best interests.  Forgetting cost transparency, how can it when there are real questions regarding the quality of the inventory being sold to an advertiser; “

  • Was this truly the best audience for my brand’s message or was it simply the best inventory which the agency owned?
  • Was it even the best inventory which the agency owned or was that sold to another of their clients with a comparable target audience?”

No one is challenging the potential benefits of deploying technology which matches available inventory to an advertiser’s target audience within the timeframe and environment that has been identified as optimal for delivering that advertiser’s message.  The concept of leveraging advertiser data, sophisticated analytical tools and engagement models to further enhance the targeting process in a real-time automated bidding process makes a great deal of sense. 

The question to be asked is simply one of “Who” should be driving the bus.  Perhaps that is why larger advertisers have begun to assess the potential for transitioning this activity in-house.  In those instances where advertisers assume control of that portion of their digital media buying currently being handled by an agency trading desk it is logical to consider whether or not there is any role for the agency to play on a pre-bid or post-buy analysis basis.

Concerns over advertisers migrating programmatic operations in-house was at least partially responsible for WPP’s decision to re-evaluate its trading model and to consider a more “flexible” approach.  In an interview with Ad Age, Rob Norman, Chief Digital Officer for WPP stated that; “Agencies need to retain their place in the value chain as new channels emerge. If we don’t do that, there’s the temptation for clients to take more of those [buys] in-house…”  Interestingly, WPP is apparently not re-assessing their role as a media re-seller given Mr. Norman’s suggestion that their moves are in part driven by a desire “for clients to test Xaxis inventory in the open market against other inventory sources.” 

To the extent that a greater number of advertisers would prefer a truly independent agency partner, WPP’s consideration of a more “flexible” approach may fall short of the market’s expectations.  On the other hand, agency holding companies that look to leverage the investment which they have made in the technology, analytical processes and operational support required to deploy and maintain a trading desk could find an accepting market for monetizing that experience and those resources… without being involved in media arbitrage.

 

 

Aug 04
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Do Advertisers Value Their Agencies?

By Advertisers, Advertising Agencies, Client Agency Relationship Management No Comments

client - agency relationshipsThis question came to mind when reading the results of a recent survey conducted by the Institute of Advertising Practitioners in Ireland (IAPI) dealing with the state of the advertising industry.  One of the survey respondents expressed an opinion that clients were “much more aggressive and much less loyal.” Further, the representative from a creative agency stated that clients were “aggressive on cost and expectation and less committed to supporting their agency in their efforts to deliver excellence.” 

Subjectively speaking, many of us involved in the advertising space would likely answer this question with an unqualified “no, not as much as they once did.” 

The reasons for holding such an opinion may be many and varied, but the evidence manifests itself in the fact that client/ agency relationships simply are not as enduring as they once were.  There have been a number of studies conducted over the last half-dozen years which have pegged the average relationship length in the 3 – 5 year range.  If advertisers truly valued their agencies surely this would manifest it in longer, more productive relationships.  Wouldn’t it? 

Once full-service ad agencies “unbundled” this set the stage for advertisers to expand their agency rosters to address their “specialized” marketing needs.   In turn, this created bench strength and ultimately allowed advertisers to more readily re-allocate brand assignments across their stable of agencies, which certainly accounts for some percentage of client/ agency change.  Over time, the notion of transitioning work from one network partner to another became more acceptable and perhaps led advertisers to view going outside of their current agency rosters as less of an issue. 

Change costs.  Whether measured in terms of the time required to effectively transition an agency or the opportunity costs tied to a “new” agency’s learning curve on the business.  This in turn creates risks with regard to an advertiser’s demand generation and market share accretion efforts.  Yet in spite of the cost of change, advertisers continue to change out agencies at an alarming rate.  

One cannot place blame for this trend solely on advertisers.  The actions and behaviors which precipitate the termination of a client/ agency relationship both parties have a shared responsibility.  Similarly, clients and agencies each hold the keys to extending both the length and productivity of their relationship.  It begins with a simple, but powerful concept… mutual respect.  After all “respect” is an important proof point of the extent to which one organization values the contributions and support of another. 

Advertisers can take the lead in this area with a series of simple, yet meaningful processes which will demonstrate the extent to which they value their agency partners:  

  • First and foremost, advertisers can and should align agency compensation with desired agency outputs, measured both in terms of detailed statement of work outputs and the resource commitment required by the agency to deliver on those expectations.  
  • Minimizing project reworks and the number of start / stops in the planning and execution phases of creative and or media development will go a long way to demonstrate the regard in which advertisers hold their agency partners.
  • Look for opportunities to improve the briefing process.  Advertisers who can effectively and succinctly prepare their agency partners at the start of a project provide a huge morale boost for their agencies and greatly enhance the odds of producing great work.
  • Reinforce the fact that as a client, you value the input of your agency partners.  Encourage candid, two-way communication among all stakeholders involved in the Client/ Agency relationship.  To be effective, this concept must extend beyond the annual 360° performance review process.
  • Encourage full transparency when it comes to agency reporting and financial management.  Supplement this with periodic (i.e. quarterly) business reviews so that both sides have a clear understanding of where everything stands, both as it relates to budgets/ project completion as well as with the relationship itself. 
  • Consider rewarding successes with incentive programs tied to the efficacy of the agency’s marketing efforts, using brand relevant milestones as the guideposts (i.e. awareness, sales, market share).

As Henry Ford once said: “Coming together is a beginning.  Keeping together is progress.  Working together is success.” 

Taking these proven steps will go a long way toward demonstrating the extent to which advertisers value their agencies, as well as the respect which they have for the art of crafting and delivering effective marketing communications.  In the end, they can also represent an important building block in extending the length and productivity of their agency relationships. 

Jul 20
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Why Working Media is Still a Relevant Ratio

By Advertisers, Marketing Procurement, Working Media No Comments

In the decades since full-service agencies unbundled and the 15% agency commission fell by the wayside, advertisers have sought ways to assess the efficiency of their overall advertising investment.

One of the more reliable measures of efficiency had been the ratio of working media to non-working media. Working media being defined as the percentage of an advertiser’s budget spent on distributing their message to the intended audience (media pass-through costs). Conventional wisdom held that non-working media expenses (i.e. production, studio charges, agency fees, etc.…) should fall between 15% and 20% of an advertiser’s total spend.

The media landscape evolved to include digital, social and mobile channels, which have garnered a greater percentage of media spend, leading many industry pundits to suggest that focusing on working media ratios as a measure of efficiency is irrelevant. Why? Partly because of the increased focus on content creation, analytics and the expansion of an advertiser’s roster to include a host of specialty agencies. All of which have served to fuel non-working media costs.

Stop. While applying a 15% to 20% benchmark may no longer be appropriate, that doesn’t nullify the need to assess the efficiency of advertiser spending.

One must remember that there have also been developments within the industry to increase efficiencies and offset the justification for a rise in non-working media as a percent of total spend. Digital media asset management systems, production centers of excellence, offshoring and programmatic buying are but a handful of items which have leveraged technology to wring costs out of the system.

Advertisers have no choice but to establish goals and benchmarks for monitoring the efficiency of their overall advertising investment. No one is suggesting that this be done at the expense of creating brand relevant, distinctive, effective content. Quite the opposite, trimming unproductive non-working media expense is a necessary means of boosting that effectiveness. Perhaps this is why major advertisers such as Unilever and PepsiCo publicly share their goals and performance as it relates to the non-working media ratio.

The fact is that advertisers’ agency rosters and third-party vendor networks have expanded dramatically. This in turn has created additional layers and redundancies across many of their agency network partners, which can serve to fuel non-working media expense. A few short years ago the World Federation of Advertisers (WFA) conducted research, which found that a majority of advertisers surveyed felt that their agencies had added layers of costs when it came to one important aspect of their advertising spend… media buying.

So why shouldn’t advertisers monitor non-working media spend in addition to the analytics utilized to assess effectiveness? In the end, eliminating waste is part of a marketing organization’s fiduciary responsibility to their enterprise.

The good news is that advertisers can establish their own internal guideposts for monitoring working media ratios. It is relatively easy to look back on expenditures by category to provide a historical perspective to calculate this particular measure of efficiency. Importantly, this will also allow advertisers to establish firm goals to assist them with their resource allocation decisions.

 

Jun 25
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Are Advertisers Willing to Forgo Effectiveness for Efficiency?

By Advertisers, Digital Media, Marketing, Marketing Budgets, Media No Comments

digital marketing spendIt was with great interest that I read Advertising Age’s article on 2013’s record setting ad spending levels for the “Top 100” advertisers.

Ironically, it wasn’t the total spending level of $108.6 billion, the 4.6% ad spend growth projection for 2014 or the fact that Ad Age’s leading national advertisers “accounted for about two-fifths (42.2%) of all U.S. measured-media spending in 2013” that intrigued me.  What caught my attention was the commentary from senior ad agency executives to various Wall Street analysts about the reasons behind their company’s higher share of spending in the digital media space.

The article quoted a handful of CEOs and CFOs touting their firm’s move to lessen their reliance on traditional media by increasing ad spending on digital media with the goal of realizing greater efficiencies.  Interestingly, there was no reference to improving the effectiveness of their advertising investment.  To be fair, perhaps they believe that spending more of their ad budget dollars in this low-growth environment (ad spending growth is outpacing company revenue growth) on digital will be more effective.

It makes you wonder about the extent to which the leading national advertisers have refined their attribution modeling to reflect the impact of an exposure to their messaging on a cross-platform basis.  Have they solved for the question on everyone’s mind regarding how various delivery channels such as television, print, OOH, online display and particularly owned media, impact consumer awareness, intent and purchasing behavior?  You would think so.  How else, could advertisers justify upping the share of spend on digital to nearly 25% in aggregate on an industry-wide basis?

In the proverbial “good ol’ days” budget allocation decisions were based largely on results attained as opposed to such a heavy emphasis on “what” something cost.  One had to balance effectiveness and efficiency if an advertiser was going to maximize their return-on-marketing-investment (ROMI).

No one argues the inherent benefits associated with digital media today when it comes to dynamic messaging, behavioral targeting and selecting relevant media inventory that is aligned with audience media consumption actions on a real-time basis.  Additionally, most industry participants realize that digital will become a much more viable media forum from an advertising perspective as time goes by.

The challenge with digital media for advertisers is primarily one of confidence.  Confidence in knowing that a high percentage of a dollar directed to a publisher website actually makes it to that site, that its messages have an opportunity to be seen and that the responses being generated to its ads are from target audience members and not bots and that participants in the social sphere are receptive to advertiser interaction.  Absent solid cross-platform audience measurement tools, transparency into the various links in the digital media chain and the ability to accurately gauge response, it may be a risky proposition to spend two out of every five budgeted ad dollars on digital media.

That said, it is clear that the digital “train” has left the proverbial station.  The good news is that advertisers, agencies and publishers are working with their respective industry associations to address some of the issues which need to be dealt with in the context of digital media.  However, history would suggest that an industry wide mandate or set of solutions could be some time coming.

So, what can an individual advertiser do to enhance their control over the digital portion of their ad spend in the near-term?

Perhaps the best place to start is to engage their agency partners in candid conversations to map out the risks and uncertainties in and around digital delivery with the goal of identifying various means to mitigate those risks.  Tighter controls, improved performance monitoring, more timely and thorough campaign post-buy analysis and more rigorous financial stewardship processes between advertisers and their agencies and third-party vendors can certainly play a role in this area.

Industry practitioners certainly understand the role of experimentation and the need to stay abreast of change within the media landscape.  As such, the potential benefits of digital media in all of its forms, merits attention.  However, when a media channel accounts for 40%+ of industry ad spend it is clear that we’ve moved beyond the “experimentation” stage.

It is right to applaud the pioneering spirit which advertisers have exhibited in so rapidly evolving their media mix to integrate digital into the fold.  Given that total digital media spending was $19.9 billion in 2009 (source: Jupiter Research) and in five short years later eMarketer is forecasting that 2014 global digital media spending will eclipse $137.5 billion, it is clear that advertisers are blazing new trails.

Merriam-Webster defines the term pioneer as; “a person who helps create or develop new ideas, methods, etc.”  The marketing definition of pioneer, however, has often been described as: “a person with an arrow in their back.”  The moral of the story?  Proceed with caution and a complete understanding of the risks/rewards inherent with aggressively moving into what is still an emerging media… at least from a performance validation perspective.

Interested in learning more about safeguarding your digital media investment?  Contact Cliff Campeau, Principal at Advertising Audit & Risk Management, LLC at ccampeau@aarmusa.com for a complimentary consultation on the topic.

 

Jun 12
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The Missing Voice on C7

By Advertisers, Media No Comments

national TV upfront

By Matthew Reiss, Senior Vice President, Client Services – Advantage Media Inc.

The decibel level within the industry regarding a move from a C3 to C7 standard for buying and selling national TV is now at a fever pitch. The addition of time shifted viewership from 3 days after broadcast to now include an additional 4 days is at the heart of this debate. 

Recent articles proudly proclaim that agencies, such as Group M, and broadcast networks, such as CBS, FOX and NBC have already consummated some deals on the C7 metric, limited at the moment to Prime entertainment programming inventory. 

What’s missing is the voice of the advertiser 

So far, we’re only hearing about what’s best for others. No where do we hear about what’s best for the one paying the bills. So what’s at stake here? Though there are significant differences in the amount of time shifted viewership during these additional 4 days, on average it represents about 3% additional viewings.  

Up to this time, paying based on C3 means that the advertiser may be getting a 3% bump in viewership. Not huge, but good to have. By shifting to a C7 metric, these viewers will now be counted against your guaranteed delivery. In short, advertisers will begin to pay for viewers that up till now you’ve been getting as “added value”.  

What’s in it for the networks is pretty straight forward  

Even though such time shifted viewing has been delivering this added value since the invention of the VCR, they now want to be paid for it. But what it really delivers to them are additional rating points against their guaranteed deals without having to add any more commercial inventory.  

What’s in it for the agencies is also pretty straight forward  

By moving to the larger C7 audiences, they can show clients that they lowered CPMs by about 3%, at a time when network Prime CPMs continue to grow much faster than most advertiser’s budgets.  

There’s even something in this for Nielsen  

By selling multiple streams of data from its overall database, Nielsen should expect a bump in its revenue.

But what’s missing is what’s in it for advertisers 

In the view of Advantage Media, there’s not much in this for advertisers. Yes, in the first year CPMs will look lower, though this of course, is a shell game, since advertisers have had the benefit of these viewers all along. In year 2 and beyond, advertisers can expect to see the same steady year over year CPM increases, so no benefit there.  

For our retail clients, this move is even more unfriendly. Paying for viewers who see your commercials after a “limited time offer” has expired will be money wasted. As you may know, Advantage Media already directs agencies to obtain compensation for commercial units that air “out of flight.”  

Also, focusing on C7 (which someday could be pushed to C14 or beyond) takes the industry’s eye off those advances that could truly benefit the advertiser. Such areas include true commercial audience measurement, rather than the current C3 “average” of all commercials. Or how about pursuing expansion in the ratings sample to improve accuracy and discrimination within the data?  

It’s being said that the move to C7 is inevitable. But is it? We believe it’s not if advertisers take exception to it or at least minimally extract a significant “true” benefit from the change.  

Advantage Media strongly recommends that advertisers raise their voice on this issue before the networks and your agencies move to this new metric, especially if your involvement or agreement has not been sought.  

With deals being “discussed” based on C7 if not being seriously negotiated, all advertisers should contact their agencies on this issue now before the deal gets done. You’ll be glad you did!

Interested in learning more about the impact of a potential shift to C7?  Contact Matthew Reiss, SVP, Client Services for Advantage Media Inc. at (303) 763-8192 or via email at mfreiss@advantagemediainc.com.

 

Jun 02
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What Will Come of Digital Agencies?

By Digital Asset Management, Digital Media, Digital Trading Desk No Comments

digital mediaWith the continued growth of digital media as a delivery mechanism for content and a forum for communications between brands and consumers and among consumers isn’t it time the question was asked; “Is there a need for ad agencies specializing in digital?”

 According to Gartner, digital marketing represented an average of 28.5% of global marketing budgets in 2013. As digital has become more an more pervasive virtually every marketing services firm and advertising agency has developed a full compliment of resources and proficiencies for transacting business in a digital world. This dynamic has led to a great deal of overlap on many advertisers’ agency rosters, with multiple firms providing similar services and introduces challenges with regard to coordinating efforts from a multi-channel media delivery, tracking and performance optimization perspective.

 In our agency contract compliance auditing practice it is commonplace to find that multiple agency partners are purchasing digital media, producing digital creative and contracting with ad serving partners to distribute ads on behalf of a given advertiser. Additionally, it is seldom that we find that these activities are coordinated to leverage that advertiser’s full-investment with a given publisher or third party ad-server or to minimize creative development expenses, where digital asset sharing could have resulted in an “adaptation” rather than a customized creative exploration.

 Similarly, agency holding companies must also be evaluating these redundancies in resources and personnel and questioning the need to maintain separate agency brands focused specifically on digital. Eliminating duplicative software licenses, technology platforms and administrative services within their agency network and re-allocating their digital personnel with the goal of boosting utilization could yield significant savings. Realizing the potential for improved operating efficiencies, agencies have already begun to concentrate digital media placement resources within their network trading desk operations and digital production capabilities within agency network centers of excellence. So, in a sense, the move away from separate stand-alone digital agencies has already begun.

 In order to assess their opportunities in this area, rather than simply allow their holding company partners to transition them to a solution of the holding company’s choice, advertisers should begin assessing service delivery models that work best for their operations. Digital asset management, big data and the advent of demand side platform technology create a multitude of options for advertisers both in aligning themselves with the right strategic partners and or in transitioning certain digital advertising functions in-house.

 The question to be asked is: “Do advertisers have the requisite information in terms of agency delivery costs to accurately assess alternatives or build a business case for internalizing select digital activities?” In most instances the direct answer is “No.” Near-term, advertisers would be best served to begin assessing digital media and production workflows, evaluating time-on-task for each facet of the digital creation and delivery chain and benchmarking the rates currently being paid across their agency network for specific functions. This will allow advertisers to engage with their procurement teams and agency partners in meaningful dialog to begin charting solutions in this area with the goal of allowing advertisers to fully optimize their digital investments in a more secure, transparent manner.

 As with so many technology driven process changes, there will be no “industry standard.” Rather, savvy advertisers will work with their agency partners to shape digital delivery models, which are right for their brands and their business based upon the knowledge and resources available today. In the end, both agencies and advertisers have an opportunity to forge stronger relationships, realize efficiencies and be in a position to better leverage the monies being invested by advertisers in the digital arena. In the words of the great American author, Mark Twain:

 “The secret of getting ahead is getting started.”

Interested in learning more about a strategic supplier management for your marketing services agency network? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management, LLC for a complimentary consultation on the topic at ccampeau@aarmusa.com.

 

 

May 21
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Money Must Grow on Trees

By Digital Media, Marketing Accountability No Comments

digital mediaIronically, shortly on the heals of the Association of National Advertiser’s (ANA)  “Agency Financial Management” conference where the ANA presented survey results suggesting that for every dollar spent on digital advertising, only fifty-five cents made it through to the publisher comes the following announcement from PwC and the Internet Advertising Bureau; 

“Internet advertising revenues hit $42.8 billion in FY 2013, up 17% from $36.6 billion in 2012.  Internet ads brought in 7% more than broadcast TV ads.” 

Confused?  Wait.  Given the rise in programmatic buying within the digital marketplace (up 43.4% according to eMarketer), consider the following finding from another recent ANA survey conducted with Forrester; 

Of the client-side marketers surveyed for the study on the topic of programmatic buying, “29% said they’ve heard the term, but don’t have a clear understanding of it” and 12% said they were “completely unaware of programmatic buying.” 

In light of the lack of transparency, limited marketer understanding of this space and no uniform measurement standards, the continued double-digit growth of digital media certainly seems an oddity.  In fact, it is difficult to come up with a sound rationale to support the share of advertising spend represented by digital at this stage of the media’s development.  The term “potential” comes to mind, but the lofty spend levels for digital are more likely being driven by marketers’ fear of “being left at the station.”  Unchecked, this trend poses serious reputational and financial consequences for marketers.  In the words of M.W. Harrison; 

“The waste of money cures itself, for soon there is no more to waste.” 

That said if the desire to spend heavily on digital media is burning a hole in marketers’ proverbial pockets, perhaps it makes sense to focus on improving the transparency and controls surrounding the financial stewardship of an advertisers investment in digital.  

A good place to start from an accountability enhancement perspective is with a sound master services agreement between the client organization and its digital agency partners (which likely includes most of an advertiser’s agency network).  The integration of contract language and reporting requirements governing the agency’s use of affiliate organizations such as trading desks and offshore digital production hubs, agency staffing, media delivery verification and I.P. infringement indemnification should be viewed as integral controls in an age of patent trolls and media arbitrage.  Unfortunately, in our agency contract compliance practice, it is not atypical to find that legacy agreements or lapsed agreements are in place, creating an element of risk and uncertainty. 

Additionally, advertisers may want to consider the use of independent contract compliance and performance monitoring consultant that can work with their marketing teams to provide training and insights along while improving the transparency surrounding the organization’s digital media spend.  Without some layer of financial protection and performance vouching, it is difficult to categorize the money being allocated to digital advertising as anything more than discretionary spending.

 

 

 

May 09
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Publicis & Omnicom Call Off Merger Talks

By Advertising Agencies No Comments

publicis omnicom dealOne year after announcing their plans to merge, Publicis and Omnicom have ended talks and called off the event.  According to an article in Deal Book by David Gelles, relations between the two giants were chilled and the firms had simply not progressed through the most basic phases of the due diligence phase of the deal, failing to even get to the stage where they shared copies of client contracts with one another.  Thus ends what would have been one of the industry’s largest deals and probably its most complex … Read More

May 07
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Is Legacy Thinking Impeding Your Progress?

By Advertising Agencies, Digital Trading Desk, Marketing Accountability, Marketing Agencies, Programmatic Buying, Trading Desk No Comments

ana agency financial management conferenceEmerging media, rapidly expanding technologies, a changing tax and regulatory environment, talent shortages and a global paradigm shift where marketing is being “outsourced” to the end user. These were just some of the topics addressed by Marketers and Agencies alike at the ANA’s annual “Agency Financial Management” conference in Naples, Florida in early May.

While there may be significant issues to be faced in the near future, the marketing industry remains a significant component of the global economy whose rate of growth outstrips that of most developed countries GDP growth.  That said there are changes required of the industry’s stakeholders to better prepare their organizations’ to successfully navigate a complex landscape fraught with both risks and opportunity.

This dynamic will require a fresh approach by clients and agencies alike along with a willingness to shed the bonds of legacy thinking, which has retarded industry progress on a number of key fronts in recent years.

One of the themes to emerge from the conference is that marketing is difficult, expensive and challenging.  When combined with talent, resource and education restraints being faced by many marketing organizations there is a belief that marketers are leaving dollars on the table.  Contributing factors range from digital media value erosion to a lack of transparency into certain aspects of the supply chain such as trading desks to the absence of industry governance on the issue of cross platform audience delivery measurement.

Underlying these challenges is the fact that client-side marketers, procurement professionals and marketing service agencies are still working on evolving their relationships and gaining better alignment on how best to optimize the advertisers’ return on marketing investment (ROMI).  Central to the success of this collaborative effort is the need to build trust and mutual respect among these stakeholders.

Interestingly, marketers expressed a strong, almost universal need for the introduction of uniform controls, competitive fee structures, tighter statements of work and the use of agency performance incentives to assist in positively driving change.  One aspect of boosting ROMI is the elimination of “waste.”  Based upon our experience in the area of agency financial management consulting, we have found that an excellent starting point for marketers in this area is to clarify the roles and responsibilities of their agency partners, minimizing redundancies and identifying those agencies that are considered strategic partners versus those that provide project-based support.  This provides a solid starting point for determining  “where” to begin in terms of initiating change and inviting those select partners to be part of the process.

On the “good news” front it was clear from the results of a recent survey conducted by the ANA and presented at the conference, that the trend toward an increased level of collaboration between marketing, finance and procurement is taking seed.  Further, as evidenced by findings from a separate survey conducted by the 4A’s, the agency community has clearly begun to accept procurement’s role in the agency sourcing and contract negotiation process.

There is one area however, which has the potential to seriously disrupt marketers’ efforts to optimize their ROMI… transparency, or more specifically, the lack of transparency that permeates the industry.  This was reflected in the results of survey data from the ANA, WFA, ISBA and ACA where “transparency” was identified by advertisers as one of, if not their top concern.  The lack of clarity and in some instances, honesty surrounding issues such as data integrity, audience delivery, trading desks, reporting and financial reconciliations creates financial risks for advertisers and undermines attempts to improve trust levels between clients, agencies and media sellers.  As Mike Thyen, Director of Global Procurement for emerging markets at Eli Lilly and Company so aptly stated:

“Where there is mystery, there’s margin.”

Examples of the potential for financial leakage related to a lack of transparency included the results from the aforementioned WFA study, cited by ANA President and CEO Bob Liodice, which found that for every dollar invested by advertisers in digital media, only fifty-five cents on the dollar flowed through to the publisher.  Inherent in this single example is the lack of transparency surrounding programmatic media buying, agency trading desks and the lack of auditable outcomes in terms of audience delivery, media rates paid and trading desk margins.

Changing times require firms to evolve and innovate in order to remain relevant with their customers and to improve their operations.  When it comes to marketing, the rate and rapidity of technology driven change is such that viewing today’s opportunities through an “old school” prism is certain to create risks and limit marketers’ ability to fully leverage their investment.   Keeping an open mind, forging strong relationships between marketing and procurement, implementing controls and reporting to enhance transparency and investing in one’s agency partnerships represent key actions to be considered to successfully face the changes which are underway.