Tone Your MARKETING. Muscles
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1 Tone Your MARKETING Muscles
2 Get fit for optimal performance in marketing By Erin Christopher, Ishmeet Singh and Steffen Oder ike the opposing muscle pairs in the body that produce coordinated motion, the opposing marketing-function muscles efficiency and effectiveness must operate synergistically to lead organizations steadily toward stated goals. The challenge is that initiatives promoting efficiency and effectiveness can become imbalanced and out of sync, causing the marketing organization to veer off course. Losing Balance When budgets are tight, it is all too easy to lapse into a reactive, efficiency-minded, tunnel-vision mode. It s all about saving money. Aside from creating stress and frenzy, this impacts the ability of the whole team to behave rationally; make sound, balanced judgments that facilitate highquality campaigns; and deliver strong returns. Even in the toughest of times, marketing efficiency and effectiveness must be addressed together to promote sustainability and to position you to flex your marketing muscles in the direction of growth when economic conditions improve. Disequilibrium At the same time that efficiency in marketing spending has become imperative for Chief Marketing Officers, measuring marketing return on investment has become harder. What has caused this measurement problem? With the Internet established as a mainstream medium and the digital/social space exploding with activity, the marketer s tool kit has never looked more interesting or more complex. Breakneck speed in technological developments has given rise to a herd mentality among marketers. They dive into digital media without first developing tangible goals for evaluating 30 MARKETING MANAGEMENT WINTER 2012
3 the effectiveness of campaigns, in terms of building the brand and developing new business. Are the number of visitors, page views and Facebook likes the right metrics for measuring return on investment? Where are the costs and revenue in those metrics? Businesses across all industries are struggling to keep up with the changing landscape, build the right capabilities and skills, manage the massive amounts of information now available and transform the traditional mindset of their brand teams. Marketers are playing catch up in this game at a time when they need to be leading it. The Efficiency Imperative Transformation of the media landscape has come at a time of heightened scrutiny on marketing budgets, with procurement departments being charged with providing marketing the training and tools required to manage spend efficiently. For example, we worked with one mid-sized consumer company that adopted a recent policy change that requires the CMO to route marketing-service requests over $50,000 through procurement for approval. This type of scrutiny is becoming more commonplace across industries. Clearly, CMOs can no longer afford to operate without granular visibility into their marketing expenditures. They need, more than ever, to stay in line with their budgets. Large, global companies with decentralized business divisions also need oversight into the portions of brand budgets that they don t control, to be able to make holistic investment decisions. Being successful in this new reality demands a fundamental rethinking of the traditional ways that marketers are used to working. A more proactive and measured approach is required to stay ahead of the curve. We work with many companies challenged by cost overruns with their creative agencies which can mount to millions of dollars. If you see yourself in this scenario, you are not alone. Even with a contract in place, it can be very challenging to manage costs or separate out where overruns are being absorbed by the company or by the agencies. Things can get so out of balance that massive overruns can mount up, even when the company only "Marketers are playing catch up in this game at a time when they need to be leading it." works with one creative agency for all of its multichannel marketing. In the end, the most important matter is to get down to the root cause. How can it be that organizations lack this very basic level of marketing-spend transparency? One answer is that, in order to juggle priorities, they may not have done a holistic review of their marketing spend in years. At a deeper level, however, it is important to understand some of the issues that arise from the way marketing organizations are structured and operate vis-à-vis their agency partners. These include: Proliferation of unique agencies across divisions; Lack of an integrated strategy and approach across consumer promotions, shopper marketing, digital, buying and planning, etc.; Multiple points of contact with the agency, allowing for any marketing person to authorize ad hoc work requests; Overreliance on agencies to perform the traditional work of brand managers; Insufficient detail in statements of work (SOWs) that make it difficult to assess in-scope and out-of -scope work; and Resistance from agencies to open their books and be transparent. WINTER 2012 MARKETINGPOWER.COM 31
4 32 M A R K E T I N G M A N AG E M E N T W I N T E R 2 012
5 FIGURE 1: MATURITY LEVELS IN MANAGING MARKETING SPEND Stage 3: Best in Class How to operationalize changes Stage 1: Traditional Stage 2: Sophisticated Establish statements of work (SOWs) Use rate cards and benchmarks Establish KPIs Establish a symbiotic relationship Develop productivity targets Use joint process improvements (JPIs) Regular cadence of audits (media, quality, resource modeling, etc.) Develop and measure against key performance indicators (KPI) Use differentiated KPIs by type of work Periodic third party audits (media, quality, etc.) Customer satisfaction surveys Procurement oversight Maturity Level Turning the Corner In our experience, a comprehensive marketing transformation program can quite quickly bring 5-15% efficiency gains without changing agency partners even when budgets have been slashed. To illustrate this, we provide a case example from a U.S. consumer packaged goods client, with which we recently led a marketing transformation. Core elements of its marketing transformation included: 1. Set up guard rails essential for success: Obtain senior leadership buy-in and support for the program. Clearly communicate program objectives to the agency partners. Conduct a holistic review of cost, quality and process aspects of service. 2. Align spend to strategic imperatives: Have a strategy and keep to a plan. Manage scope to brand portfolio strategy. o Not every brand needs the same attention, nor do line extensions need the same level of attention. Scrutinize what you re asking agency partners to do. o What can be done by brand managers? Consider a shift toward portfolio marketing events vs. brand-specific tactics. Develop workflows to streamline communications with agencies. 3. Delve into the details: Dissect marketing expenditures at a granular level. Balance agency hours in line with business requirements. o Right-size the proportion of working to nonworking dollars, to be in line with peer benchmarks. Unbundle the staffing model. o Don t just focus on rates. Rates may be competitive, but what about the hours applied and ratios of leadership to creative time assigned? Build transparency in SOWs. o Allocate time and resources against each activity level description. o Establish rate cards for out-of-scope work. WINTER 2012 MARKETINGPOWER.COM 33
6 Effectiveness Doesn t Just Happen Making it Happen Equally important to ensuring efficiency in marketing is optimizing the effectiveness of marketing budgets. It is widely known that media agency fees account for only about 5% of the total media budget. To address the remaining 95%, advertisers must continuously benchmark and adjust their media plans to optimize for target rating points (TRPs) or cost. This will unlock further value in the form of additional dollars to be reinvested or additional TRPs to stretch the same marketing budget for greater reach and/or frequency. Many advertisers claim that they already do ROMI (return on marketing investment), but we often find this to be a misnomer. Doing ROMI is part of the equation, but without a deep dive into effectiveness by medium, value is often overlooked. Advertisers who successfully pursue media optimization and implement the optimized model can unleash returns of 15-20%. One large retail advertiser that we worked with was certain its media buy was fully optimized. However, after conducting a detailed assessment of purchases, according to its specific parameters and constraints, we identified a savings of about 15%. Of course, it is easier said than done. However, there are several best practices and key success factors that can help ensure you are positioned to realize your total potential. We have seen companies fall into one of the three stages of maturity, in terms of how well they manage their marketing operations. (See Figure 1 on page 32.) Companies in stage 1 establish the core metrics, benchmarks, rate cards and SOWs for management of marketing spend. As they get more sophisticated, in stage 2, these platforms are fully operationalized, along with customer-feedback mechanisms and procurement support for monitoring expenditures. Leading companies, at stage 3, are more farsighted, having established collaborative relationships with agency partners to undertake joint process improvements that foster productivity. They periodically audit these for measurement of quality and overall performance. While the following is by no means an exhaustive list, we suggest some ways to help you ascertain what work needs to be done to get you to the next stage of operational maturity: 34 M A R K E T I N G M A N AG E M E N T W I N T E R 2 012
7 Do your homework. Continuously testing the market and keeping an open dialogue with your marketing partners will help identify untapped value. When was the last time you conducted a media audit? What did you do with the results? Challenge your assumptions. Just because the retainer for your agency this year is in line with what you expected, are you sure your expectations are right? When was the last time you took a hard look at the SOW and underlying assumptions about what you should have your agencies do vs. what can and should be done inhouse? Talk to each other. Integrated planning and communications are essential. This one may seem like a no-brainer, but it can be the most difficult for organizations to master. Developing the best campaign is useless if there is no budget to fund it. This doesn t mean you need to divulge your budget to your agencies, but it does imply that you can avoid churn, rework and additional expenditures by making sure you design to cost. Measure and monitor. The labor market, rating points and product trends change over time. Target metrics may not be the same two years later. It is important to refresh key performance indicators and make sure they are being used to evaluate both efficiency and effectiveness. Need More Marketing Power? go to marketingpower.com AMA Articles Make Three Changes to Achieve Integrated Marketing Success, Sitecore, 2012 The Fifth 'P,' Marketing News, 2012 Brand Watch: How to Keep Your Brand on Track, Marketing Thought Leaders, 2012 "Equally important to ensuring efficiency in marketing is optimizing the effectiveness of marketing budgets." We all see it: Advertising as we have known it is changing. Print media is moving to digital media, digital is moving to social, social is moving to mobile and so on. And these are just trends from the past five years. These trends will require advertisers to be more nimble and capable of analyzing the relative effectiveness of campaigns, in order to ensure the best use of limited budgets. If you placed yourself in stages 1 or 2, it s time to get moving because the train has left the station. It will be impossible for you to spend the necessary time on strategic and pressing issues, such as how to market to a continuously changing consumer in a multichannel retail environment with multimedia marketing. But then again, you could always send a coupon for a typewriter via direct mail to a post-office box and hope you get a call to action. A sustainable future is dependent upon reaching stage 3, where collaboration and continuous improvement through regular auditing of key performance metrics are embedded into the organization, and course corrections can be nimbly undertaken based on feedback from an ever-changing marketplace. And this, of course, requires working the paired muscles of efficiency and effectiveness. It is all too easy to rely on our strengths in one area and neglect the other. MM ERIN CHRISTOPHER is a partner, and ISHMEET SINGH and STEFFEN ODER are managers at A.T. Kearney, San Francisco. They may be reached at Erin.Christopher@atkearney.com, Ishmeet.Singh@atkearney.com and Steffen.Oder@atkearney.com, respectively. WINTER 2012 MARKETINGPOWER.COM 35
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