Marketing Math Blog

Survey Reinforces Need for Independent Auditing

By Advertising Agency Audits, Contract Compliance Auditing, Internal Audit No Comments

calculator and cashIt is widely understood that a coordinated audit program, leveraging the resources of Internal Audit and the strategic use of 3rd party auditors is a smart business practice and represents good corporate governance.  The audit process results in improved transparency and solid control testing, both important elements when attempting to ensure that an organization is securing maximum value for the money spent while incurring the least amount of risk.

Adding fuel to the “pro” audit argument is a global study of 550 accounts payable departments conducted by software provider Basware. The eye-opening results certainly reinforce the need for organizations to periodically review procurement and AP processes and controls and to monitor the performance of both the organization’s own AP department and that of its vendor network.  Perhaps most alarming, the Basware study found that just 40% of invoices generated were based upon purchase orders and where a valid P.O. did exist, many financial departments had trouble reconciling against them.  Further, among the survey respondents, which processed on average 93,000 invoices per year, 7% contained errors.  These errors led delays in paying suppliers among 35% of the respondents and delays in being paid among 24% of the respondents.

In spite of the fact that many vendor agreements contain AP guidelines and even spell out accounts payable criteria related to prompt pay discounts, late fee avoidance, days payable targets, fiscal period reconciliation parameters, etc… too often performance in this area goes unchecked. A parting thought, inspired by the words of Sir Edward Coke, the noted seventeenth-century English jurist;  “Precaution is better than cure.”  Read More.

Marketers Reassessing Use of Digital Agencies

By Advertisers, Advertising Agencies, Digital Media No Comments

online mediaInvestments in digital marketing have grown significantly over the last several years.  In addition, there have been unprecedented improvements in technology platforms and applications to support the effective and efficient distribution of messaging via digital channels, fuel an expansion in data analytics and targeting capabilities, speed the deployment of web-based tools to enhance B2B and B2C marketing efforts, etc… As a result of these trends and CMOs desire to drive value within their marketing vendor networks, they are evaluating the potential to shore up their internal resources and capabilities in preparation for transitioning portions of their digital activities to in-house teams.

And why not?  Client organizations drive strategy, manage integrated go-to-market strategies, own the databases that fuel targeting and resource allocation decision making and are highly sensitized to their businesses needs and opportunities.  CMOs clearly sense that they have the potential to streamline their marketing vendor networks, drive costs down and build their in-house competencies as a means of delivering enterprise value and in-market success.

This does not signal the end for digital agencies. Quite the contrary, many digital agencies recognize the economic and market forces driving these decisions and are working hand in hand with their clients to facilitate the transition of select tasks to in-house environments, assisting in the sourcing and training of client personnel and helping to redefine their roles in the digital value chain … Read More.

Time for Marketers to “Take Charge” of Their Agency Networks

By Marketing Agency Network No Comments

time for marketers to take controlGreat article.  In particular, the recommendations for laying the foundation for your “agency house” were very thought provoking.

The examples cited of Honda and HSBC Bank reinforce the need for client side CMO’s to own the strategy and execution oversight for developing, implementing and assessing the performance of integrated marketing campaigns.  Further, the trend cited by Forrester of agencies trying to “re-bundle” their services is fraught with risks to the advertiser.

In a fast moving market, with emerging technologies and the explosion in social media, the case could be made for companies to consider specialized “Best in Class” providers, rather than generalist shops. Of course this type of model will likely require an investment in internal resources to help shore up Marketing resources and capabilities.

In light of the risks associated with waiting on solutions to emanate from within the “agency house,” perhaps this is an investment worth making … Read More

Value-Based Agency Compensation Models; Viable or Not?

By Agency Compensation No Comments

moneyIt wasn’t until the mid-to-late ’80’s that the advertising industry’s century old reliance on commission based agency compensation systems began to evolve. The reasons for this evolution are not as important to the discussion surrounding agency remuneration as is the fact that multiple compensation approaches were spawned to replace the traditional commission-based approach.

One coveted, yet highly elusive approach, value-based compensation, provides a base fee sufficient to cover the agency’s costs of servicing a client and links their ability to generate a profit to the advertiser’s in-market performance.

The notion of an agency “having skin in the game” has long been discussed. Generally speaking, both advertisers and agencies have agreed that this type of approach could drive positive results for the advertisers business and for the agencies bottom lines.

Unfortunately, the industry has failed to settle on a workable methodology for constructing a value-based agency remuneration system that is considered fair and balanced to both parties. Why? There are several trends that impact advertiser/ agency relationships that have made this a difficult proposition:

  • The length of client/ agency relationships has continued to decline, as perhaps have both parties commitment to those relationships.
  • A typical Chief Marketing Officer’s average tenure with an organization is less than two years, creating a number of “continuity” impediments to forming and maintaining a productive relationship with their agency partners (CEO tenure is not much better).
  • The move away from full-service agencies, driven largely by the advertising agency move to unbundle their services has resulted in most advertisers having a fragmented, diverse agency network making it difficult to clearly attribute responsibility for in-market results.
  • The Marketing function is not as highly regarded by many organizations today as it once was, which has negatively impacted the view of marketing services providers in general and advertising agencies in particular.

Perhaps, advertisers and agencies can take a positive step in the right direction by first linking compensation to agency performance. Linking an agency’s remuneration to their ability to effectively satisfy the deliverables identified within a contractual statement of work and to deliver a level of service commensurate with the staffing plan has many benefits.  Primarily, this approach aligns agency compensation with advertiser expectations and allows for a clear, fair assessment of performance, eliminating the ambiguity that is often associated with attributing credit for success or failure within a value-based compensation system.

Structured properly, agency delivery against the client’s expectations will drive in-market results while satisfying client-side Financial and Procurement Teams desirous of performance based vendor remuneration. It can also serve to strengthen the relationship between the client and the agency.

Collaboration Enhances Marketing Procurement Process

By Marketing Procurement No Comments

marketing collaborationMuch has been made regarding the expanding role of the Strategic Sourcing Group in the selection and or negotiations with Marketing Service vendors and the strain it places on both the process and the relationships between the Marketing Team and their resources. This scenario can easily be avoided if Marketing and Strategic Sourcing work collaboratively.

The following tips will enhance the level of cooperation and increase the chances for a successful process:

Overall

  • Both the Marketing Team and their vendors must recognize and respect the Strategic Sourcing Group and their assigned role in helping the enterprise manage their sourcing initiative.
  • All parties (including the vendors) must move beyond the notion regarding the “uniqueness” of Marketing Services and the fact that because these relationships often create intangibles that cannot easily be valued, they should somehow be exempt from the procurement process.
  • Clearly define roles, responsibilities, timelines and desired outcomes and communicate these to everyone involved in the process.

Procurement

  • If you do not have Marketing Services subject matter expertise on your Team, consider the use of an outside procurement consultant or independent contractor with experience in this area to assist your group.
  • Provide a clear process overview to the Marketing Team and their resources prior to the onset of the review and or negotiation activities:
    • Timeline
    • Desired Outcomes
    • Scoring/ Valuation Criteria
    • Roles & Responsibilities
  • Establish compensation methodology guidelines upfront (i.e. value based, project based, fee based, etc…) and the benchmarks that will be used to assist in setting compensation levels.
  • Lead the contract and compensation negotiation process, relying on the Marketing Team for feedback and insight into the impact of the negotiation outcomes on their deliverables.
  • Work diligently to ensure that there is a level playing field for all participants.

Marketing

  • Remember, you have been charged with managing your organization’s Marketing Service vendor network. As such you should work diligently to support the efforts of your partners in Strategic Sourcing throughout the entire process… whether you lobbied for their involvement in the process or not.
  • Clearly communicate your expectations of the process:
    • Desired Outcomes
    • Capabilities/ resources required of the vendor or prospective vendor
    • Clear and concise scope of services
    • Method and criteria that you will employ for evaluating the performance of the vendor
  • Quantify the potential risks/ costs to the organization in the event that a change in vendors occurs and the impact on the roles and responsibilities of the other firms in your Marketing Services network.

Optimizing Client & Marketing Agency Relationships

By Client Agency Relationship Management No Comments

relationship managementThe pressure to drive revenue, reduce costs and increase transparency has never been higher for marketers and their suppliers. How can success be achieved on each of these fronts?

Below are ten suggestions that will help you to in your quest, while optimizing your Marketing supplier relationships:

1. Drive alignment between the organization’s business objectives and the resource  allocation decisions of each of your suppliers.

2. Clearly define the roles and responsibilities of each one or your marketing suppliers to eliminate redundancies and focus efforts.

3. Communicate expected deliverables and establish the criteria to be used to evaluate performance against each deliverable.

4. Maintain honest, two way communications across every facet of your supplier relationships, encouraging feedback at every turn.

5. Build consensus among your internal stakeholders to help gain momentum for your key marketing initiatives.

6. Invite peer review of Marketing’s performance and socialize the feedback across your supplier network.

7. Assess the breadth of your supplier network, focus on fewer, higher quality supplier relationships.

8. Structure supplier compensation to incent and reward extraordinary performance.

9. Drive complexity out of your supplier network… step # 1 in driving costs down.

10. Ask good questions of your suppliers (and yourself), while repeatedly pushing for better results.