Marketing Math Blog

Can Procurement Add Value by Focusing Solely on Cost?

By Marketing Procurement No Comments

improved agency performanceWhen it comes to Marketing Services sourcing, the short answer is no. Driving costs down is an important element of strategic sourcing but not at the expense of brand building, customer acquisition and revenue growth.

Procurement professionals must take a broader view of their role in the marketing services supply chain if they are to optimize their enterprise value in this important area. Yes, there are a plethora of opportunities for improving an advertiser’s cost basis, streamlining vendor networks and enhancing their agency stewardship controls through the application of sound procurement practices. However, these efforts must be complemented by pragmatic processes designed to leverage an organization’s marketing resource investment in driving the demand side of the business. For example, contracts which provide the organization with the requisite legal, financial and intellectual property controls, creative remuneration systems which incent extraordinary effort, vendor performance monitoring systems which provide transparent reporting on a near real-time basis and the use of an analytics based vendor network benchmarking program to gather intelligence on time and material costs at a task level across the supplier network to inform future resource allocation decisions.

Further, as advertising agencies look to evolve their own procurement efforts, advertiser organizations can realize significant value by providing assistance to their partners in collaborating to determine how strategic sourcing can drive cost efficiencies across the strata of 3rd party vendors that represent an important element of an advertisers marketing supply chain. Remember that while an advertisers marketing services vendor network might number a few to a few dozen agency partners, those agencies represent the advertisers interest to thousands of 3rd party vendors ranging from illustration studios to talent agencies to production houses to media properties. By focusing efforts in these areas Procurement will realize their near-term cost reduction targets and build a system for driving marketing performance for many years to come.

As the old Chinese proverb goes; “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” Interested in reading more on this topic? Check out the article by David Rae on the Procurement Leaders Blog

The Time is Right for Procurement & Marketing

By Marketing Procurement, Uncategorized No Comments

time is right for marketing procurementToo often brands change advertising agencies like politicians change their stance on key issues. Debating the efficacy of this dynamic is a topic for another time. The issue which I would like to address is how Procurement can assist their Marketing peers in mitigating the risks associated with the revolving door approach being employed by many organizations when it comes to their marketing services vendor network.

Building brands is expensive to be sure and there is no guarantee that if a company invests the marketing funds necessary to launch and sustain a portfolio of brands that its efforts will yield the desired results. However, successfully building brands can create tremendous asset value for an organization which in turn can deliver superior returns to its shareholders year-in and year-out. Given the size of the budgets involved and the relatively thin margin between success and failure, it behooves an organization to optimize each and every marketing dollar invested.

To this end, the Marketing Team is perfectly capable of assessing the competitive landscape, positioning the organization’s brands for competitive success and determining the appropriate strategies for driving sales and market share. Proficiency in these areas will drive sound resource allocations decisions with regard to target penetration, market support, media selection and messaging. Marketing should “own” these areas and should be held accountable for the impact of their decisions and the resulting return on marketing investment.

So, where does the role of Strategic Sourcing come into play? In assisting Marketing with the procurement, stewardship and evaluation of its agencies, thus leveraging their processes, tools and expertise to aid marketing in the following areas;

  • Managing the vendor selection process
  • Development of agency remuneration programs
  • Best practice contract development/ negotiations
  • Improved reporting and transparency
  • Ongoing monitoring of agency performance
  • Independent auditing of agency contract compliance and performance
  • Securing and providing performance and relationship feedback to all stakeholders

With Marketing focused on the demand generation side of the ledger and Strategic Sourcing on procurement best practices, the organization stands to benefit both in terms of in-market performance and in maintaining the appropriate controls, transparency and benchmarking data that can drive marketing vendor sourcing and performance management.

The old days of decades old agency relationships are not as prevalent as they once were. Therefore, advertisers must confront the impact of the growth in the number of marketing services vendors and the frequency with which this roster of agencies changes. With change comes opportunity to be sure. But change also increases the risk quotient. With Procurement and Marketing working together the opportunity to effectively manage the risks associated with these changes; improve vendor network performance and the organization’s return-on-marketing investment increases exponentially. Interested in learning more? Check out the article by Paul Broeren, Managing Partner of Quadrivium BV on how to enhance to effectively involve procurement in the marketing services procurement process at Procurement Leaders.

 

Do Agency Brands Still Matter?

By Advertising Agencies, Marketing Agencies No Comments

agency brandsTimes have changed. In 1984 the average client agency relationship lasted 7.2 years. Ironically, while that may seem like a short duration, by 1997 it had declined to 5.3 years. Where do you believe it is today? Gone are the days when the advertising agency relationship was so esteemed that advertiser CEO’s were often on point for managing what was viewed as an invaluable resource. Advertising agencies once measured the span of their client involvement in decades and prided themselves on the longevity of those relationships. Unfortunately, transience has supplanted stability as the law of the land.

CEOs are seldom involved with the organization’s agency network, the Marketing function has lost some of its luster within the executive suite and according to a 2010 Spencer Stuart study, CMO’s turnover every 28 months on average. On the agency side, as holding companies greatly expanded their collection of traditional agency brands and specialty shops many with overlapping and often indistinct resource offerings the cache of the individual agency nameplates began to diminish. Add to this the trend that has emerged in numerous high profile agency reviews of the holding company offering to assemble a team of subject matter experts from across its network to serve up a “Best in Class” solution to the prospective client. While this approach certainly has appeal, on paper, aggregating professionals from companies with different cultures, philosophies, perspectives and processes has seldom proved to be the elixir advertisers and agencies alike have sought. Remember Enfatico?

Agency brands should matter, perhaps more so in today’s environment than at any time in the past. Whether they do or don’t is not what is at issue. The asset value of a strong agency brand to its diverse stakeholders can be significant. It starts with instilling a sense of belonging with the agency’s associates, which in turn leads to a feeling of pride and a passion for the work which they do, which drives employee satisfaction and reduces turnover.  Enhancing agency employee tenure is an important component in acculturating associates into the agency’s philosophy and belief systems, driving familiarity with advertising planning and development processes and creating a level of comfort and confidence among the client facing representatives with the agency’s solutions offering.  Stability and consistency in this area can greatly enhance the agency’s ability to achieve in-market success for client brands, which can transcend the environment of change and emphasis on short-term results that often permeates client-side organizations. Importantly, strong brands attract buyers.

Brands attract buyers based upon a known set of attributes which help to shape buyer expectations of what they’re getting, minimizing unexpected surprises and reducing buyer remorse. Clients that are satisfied with the agencies that their organization has bought into will invest the requisite time, energy and resources into those relationships, thus heightening the odds of success.

In the end, success, however each party in the client-agency relationship defines it is the key to rejuvenating individual agency brands and helping to stabilize a somewhat unsettled marketplace. As David Ogilvy once said; “The pursuit of excellence is less profitable than the pursuit of bigness, but it can be more satisfying.” I would contend that once excellence is achieved, profits will follow. One needs to look no further than average agency direct margins today vis-à-vis ten, fifteen or thirty years ago to prove that point.

Assignment Briefing Process: A Three Step Approach

By Advertising Agencies, Creative Services No Comments

assignment briefing processIt should be clear that advertisers’ “own” brand strategy and are therefore responsible for the assignment briefing process. With multiple agencies making up an advertisers marketing services vendor network, how can you have it any other way? Coordinating efforts across this collection of specialist agencies to achieve innovative, impactful, integrated marketing campaigns that deliver on the organization’s goals is the responsibility of the Marketing Team, which is ultimately accountable for generating a return on marketing investment.

There was an intriguing piece written in Advertising Age recently by Casey Jones of Jones & Bonevac on the assignment briefing process that identified results from a recently fielded survey by his firm. The survey found that 54% of agencies surveyed said that “fewer than 40% of the client briefs provided gave a clear indication of what the client expected from the agency.” And of that number; “… 30% said only 1% – 10% of briefs provide clear performance expectations.” This is an issue which creates pitfalls ranging from wasted time and money to ineffective marketing outputs and client/agency discord.

The remedy to this problem requires three relatively straight forward steps. The first is the easiest… develop an assignment brief template containing the requisite information fields necessary to be completed by the Marketing representatives responsible for the brief development. This would include information such as brand value propositions, key competitive differentiators, target audience insights, market/ competitive overview, historical brand performance data and quantifiable objectives for the project. Secondly, formalize an internal review and approval process which includes key stakeholders and senior Marketing management to provide an opportunity for both strategic input and discussion surrounding assignment “success” criteria and how the attainment of those criteria align with the organization’s objectives. Thirdly, construct a concise assignment briefing meeting format that the organization follows to present the approved brief to their agency partners, engage in dialogue with the agency representatives and clarify each agencies roles, responsibilities and deliverables.

Professionals within both the client and agency organizations are intelligent, motivated and desirous of a successful campaign outcome, thus formalizing a framework for the assignment brief can immediately improve the efficacy and efficiency of the entire creative development process. Why? A tighter assignment briefing process results in better creative briefs and stronger creative outputs.

 

Keys to Successful Client/ Agency Negotiations

By Marketing Procurement No Comments

Too much has been made about the participation of Strategic Sourcing personnel in the marketing services procurement process and whether or not it has had a negative effect on agency compensation levels. While it would be nice to be able to identify some overarching force or entity to blame for an organization’s or an industry’s ills, strategic sourcing is not the culprit, nor is pointing a finger in their direction a productive response. The notion that advertisers view certain aspects of an agency’s offering to be “commodity like” (i.e. media buying, production) and therefore able to be bid and sourced on the basis of the lowest available price is largely overblown.

Agencies themselves are responsible for this issue going back to the start of the “unbundling” process as key service offerings were spun out as separate profit centers in the hope that they could optimize their resources in a particular area by expanding utilization of those services to a broader client base. By definition, a commodity is a good or service that is viewed as interchangeable with another because it has lost its qualitative differentiation. Offering commodity like services, while they may be priced at lower rates, doesn’t necessarily mean they lead lower to lower margins.

Agencies are the masters of competitive differentiation. That is what they do for their clients. It is why Tide brand laundry detergent commands a higher retail price than Purex. Agencies can boost rates and margins by effectively positioning their service offering for competitive advantage while demonstrating the efficacy of their approach. Give advertisers credit for being able to discern both qualitative and quantitative differences in one vendors offering versus another’s beyond price. The three keys to successful negotiations between marketing services firms and their clients;

1) Preparation

2) Transparency

3) Respect.

Preparation for a successful negotiation involves diligence in assessing why the buyer is in the market for your services in the first place, what the key purchase drivers are and what pain points might they be seeking to eliminate. With a tacit understanding of these issues, a seller can begin to lay the process of educating the buyer on how their offering addresses these items in an efficient and effective manner, yielding maximum benefit for the buyer. When it comes to establishing a rate for your organization’s services, providing transparency into your service methodology, delivery processes, resource offering and cost structure is a pre-requisite for establishing sound dialogue on both the caliber of your service offering and the rates that you seek. Treating all parties in the negotiation and the process itself with respect is essential. Be mindful of the client’s time, help them to understand your organization’s offering, how it differs from those of your competitors and where it fits within the context of the industry. Share normative data to support your assertions and in the process position your organization as a knowledgeable, confident and valuable resource. If the advertiser doesn’t approach the marketing services acquisition process with a comparable level of respect, which is usually apparent at the RFP stage, than you have a conscious decision to make about whether you participate and if you do, how you will shape the pursuit approach to be taken by your organization.

Employing these “three keys” can result in a more meaningful negotiation process, more wins for your firm, higher margins and a clearer set of expectations on deliverables, staffing, rates and reconciliation of the effort between you and your client. Interested in learning more? In the following Advertising Age article by Sandy Sbarra, VP of Scotwork he shares his view on the keys to successful marketer/ agency negotiationsRead More

 

4A’s Conference Debate Not Healthy

By Advertising Agencies, Marketing Procurement No Comments

Intriguing article in Advertising Age on the musings, or should I say public rants, of some agency executives coming out of the 4A’s conference. Are the views voiced by this select group of executives indicative of others in the industry?  If so, this year’s 4A’s conference is likely to have a negative impact on client (and employee) perceptions of the industry.

If select agency leaders aren’t proud of their shop’s work product or staff talent levels or feel that the agency holding company model stifles creativity then they should address these issues in a constructive manner. Blaming clients for their woes and publicly slurring advertiser procurement professionals is certainly not going to address their internal housekeeping issues Read More.

Is the Notion of Uncoupling Production from Creative Really That Foreign?

By Creative Services, Production Services No Comments

There is an interesting approach in the creative services procurement area that has been gaining traction among large, multi-national advertisers… the “unbundling” of creative and production services. As part of this unbundling process, advertisers turn to a production specialist, rather than their creative agencies as a resource for generating creative outputs.

At first glance, this seemed an unusual move fraught with agency management challenges and the risk of sub-standard creative outputs tied to the uncoupling process. However, upon further reflection, the approach is not dissimilar to the process employed today. The chief difference is that the advertiser serves on point in sourcing and managing the production resource rather than the agency. Aside from the obvious improvement in agency fee transparency tied to the segregation of services, the benefits are certainly intriguing.

With the advent of technology enhancements in the area of digital brand asset management systems, a production resource that can provide support across multiple regions and generate outputs for a myriad of media touch points could improve the effectiveness and efficiency of the advertiser’s creative development process. How? Effectiveness can be enhanced by the ability to manage brand expressions on a consistent basis, around the globe and across media. From an efficiency perspective the centralized control afforded by a brand asset management system and a client sourced production resource will improve the level of repurposing of creative assets, thus reducing the need to recreate the wheel time and time again across an advertiser’s creative agency network.

Finally, in a market where response time is a highly prized commodity, this approach will help advertisers carve time out of the creative development cycle. Interested.in an agency professional’s take on this approach? Check out the following blog by Steve Puttock, Managing Director of Schwak London Read More.

An Example of “Why” Advertisers Should Audit Their Agencies

By Advertising Agencies, Contract Compliance Auditing No Comments

Let me start by saying that I am not casting doubt on Ogilvy’s position regarding the recent allegations brought by an employee in Federal Court that they overbilled their IBM client by several million dollars between 2006 and 2011.

The question to be asked is; “Does the client know whether or not they were overbilled?” If they have not conducted an independent contract compliance audit and fee reconciliation of their agency during the time period in question, they may have to wait until the conclusion of the court case to find out the answer.

Net, net… all advertisers should conduct periodic audits of their marketing services partners to achieve the requisite levels of transparency to be able to answer questions such as this.  Right to audit clauses in client-agency agreements are negotiated as a legal and financial safeguard to provide unequivocal feedback on performance and contract compliance questions. Have you conducted an audit of your agency recently?  Read More.

An Advertisers Right to Audit

By Contract Compliance Auditing, Right to Audit Clauses No Comments

Virtually all client-agency agreements contain a “Right to Audit” clause, yet few advertisers are committed to conducting contract compliance or performance audits. Which raises an interesting question; “Why negotiate this clause into an agreement if the organization doesn’t intend to conduct an audit?”

Auditing a supplier’s compliance or performance is good practice, not a negative reflection on the supplier or the strength of the relationship with the client. Auditing in a post Sarbanes-Oxley world is a corporate governance best practice, part of an organization’s fiduciary responsibility to its shareholders. Further, the marketing budget often represents a major portion of the organization’s selling, general and administrative expense. Auditing enhances transparency, improves processes and controls and insures that the legal and financial safeguards established by the advertiser in the contract are being adhered to. Further, audits provide substantive benchmarks on performance that form the basis for a mutual commitment to “continued improvement.”

So if the process is a positive one, the question remains; “Why do so few advertisers audit their marketing suppliers?” Unfortunately, U.S. based client-side marketing professionals and the agencies that make up their marketing vendor network don’t always take the view of audits as a positive, albeit necessary process to properly steward a firm’s marketing investment. The premise is simple, “trust but verify.”  The winners when a client conducts regular, audits of their vendor network are the groups that fear it the most… marketing and their agency partners. Ironically, even in the context of a dissolution of a vendor relationship, client organizations often forgo their right (if not responsibility) to conduct an audit. Exit audits can yield valuable insights, yield process improvements, insure that all billing and fees have been properly reconciled and that all intellectual property rights and assets have been properly transitioned.

The following quote from an anonymous source may best sum up the premise behind an audit; “In God we trust, all others we virus scan.” An effective audit process does not single out a particular supplier and pursue them in a vindictive manner. Rather, it determines a schedule, methodology and defines an approach that encompasses all members of an organizations marketing vendor network in a fair, even-handed manner.

Understanding the Current State in Client/ Agency Relations

By Advertising Agencies, Marketing Agency Network, Marketing Procurement No Comments

The attached article by Avi Dan in Ad Age offers a succinct and accurate summation of the current state of affairs regarding client/ agency relations and the role of procurement.

Once agency leaders and client side marketing individuals take an honest, introspective look at the situation they will be in a much better position to re-establish their position as valued strategic partners. Linking client marketing investment to successful outcomes and building C-suite awareness of marketing’s contributions to the organization’s goals will go a long way in improving confidence in the marketing services supplier network.

This improved confidence, combined with the ability to establish a causal impact of an agency’s contributions on the client’s return on marketing investment will serve as necessary building blocks in distinguishing the agency and optimizing compensation … Read More.