Marketing Math Blog

Jan 07
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How Will Programmatic Media Buying Impact the Role of Agency Media Buyers?

By Agency Compensation, Agency Fee & Time Management, Digital Media, Media No Comments

One of the biggest trends in media buying is occurring within the online display advertising segment, the rapid expansion of programmatic buying.  Ironically, few advertisers have delved into the intricacies of this approach and its impact on the stewardship of their media buys.

In short, programmatic buying is the execution of online media buys utilizing quant technology, demand side software interfaces and algorithms to book, analyze and optimize display ad campaigns, often on a real-time basis.  The RTB exchanges, ad exchanges, demand side platforms (DSPs) and sell-side platforms (SSPs) were initially utilized by publishers to move remnant display space.  However, given the success of programmatic media buying, there is a growing push by agencies and ad exchanges to encourage publishers to expose more, if not all of their inventory, including premium inventory with guaranteed impression delivery which is currently sold on a direct basis. 

Why?  The use of programmatic buying yields a number of benefits ranging from enhanced targeting, the ability to select desired rather than bundled impressions, price clarity and enhanced agency control.  Programmatic buying is a more efficient means for agencies to place and manage media buys.  The processes and workflows affiliated with programmatic buying software solutions allow for improved analytics while yielding significant operational efficiencies for ad agencies, chiefly related to time savings.  Furthermore, they can also integrate with other financial and marketing automation platforms which work across paid, owned and earned media channels. 

The concept of selectively targeting users based upon behavior and projected responses to campaign inputs and to dynamically allocate resources based upon near real-time analysis of reams of data tied to a campaign’s objectives is appealing.  Demand side platforms make decisions for an advertiser based upon inventory availability, pricing, placement data, context and other decision making algorithms that align the advertiser’s media plan, budget and campaign KPIs.  Hence, the potential of programmatic buying to enhance the effectiveness of an advertiser’s media investment and to positively impact their return on marketing investment could be substantial.  Thus, it is no surprise that many stakeholders are already talking about the potential expansion of this concept to cover a higher percentage of online media activity and even extending its application to other media types such as television and print. 

The application of new technology that can effectively leverage “Big Data” to make better resource allocation decisions and evolving media marketplaces that dynamically match seller inventory with buyer demand has tremendous potential.  In fact, most would agree that this is a “game changer.”  Who wouldn’t be supportive?  The question to be addressed in the context of programmatic buying is, “What is the impact on the role of media buyers in the placement and stewardship of a client’s media buy?”  Further, how does an advertiser benefit from the realized “operational efficiencies” generated by programmatic buying that currently accrue to the advertising agencies and publishers?  Perhaps more importantly, “How will this automated approach to media buying and stewardship impact the role of agency media buyers?”

Today, marketers pay a premium in the form of agency fees and commissions for digital media buying relative to those paid for traditional media.  If technology is ushering in a more efficient, more automated form of buy management should advertisers be paying more, or less?  For some of the more progressive client organizations, the question may even be, “Should we utilize an agency at all or purchase media directly via electronic exchanges?”  The potential for disintermediation is very real in this context.  The challenge for media agencies will be to redefine the role of their media buying organizations in an evolving media marketplace to clearly identify how and where their buying staffs add value.  It is likely that their future role will be more strategic, giving way to technology to handle the basics of media execution such as the placement, monitoring, analyzing and adjustment of buys.  That being said, there are media buyer generational issues which will require training and development to school agency media buying professionals on emerging programmatic buying platforms and electronic exchanges.  All stakeholders can benefit from the perspective of Bill Gates when it comes to the promise of technological advancement:

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

Exciting times to be sure.  Will there be challenges for clients, agencies, publishers and media workflow and data management system providers?  Absolutely.  But in the end, all have the opportunity to benefit from a rapidly evolving and much needed evolution in the way media buys are executed and optimized. 

Interested in discussing the impact of programmatic buying on your client/agency letter of agreement, staffing plans and remuneration system?  Contact Cliff Campeau, Principal at AARM at ccampeau@aarmusa.com for a complimentary consultation. 

 

Dec 30
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Advertising Financial Monitoring

By Advertisers, Marketing, Marketing Accountability, Marketing Agency Network No Comments

????????????????????????????????????????What is it?  Should a marketer consider it?  Should it be done out-sourced or done in-house?  Three great questions as it relates to a growing aspect of marketing accountability.  

Let’s start with a brief overview of the advertising financial monitoring function and its role.  Marketers have historically made significant investments in advertising ranging anywhere from 1.5% to 5.0% of gross sales, depending on their category, market position and growth posture.  Many organizations have struggled to establish a causal relationship between this investment and in-market performance results; overall, by product, by marketing mix element and or by agency partner.  The goal of advertising financial monitoring is to provide timely, relevant feedback on the stewardship of advertising investment across geographies, brands, agencies and disciplines. 

An effective advertising financial monitoring program provides a streamlined framework for timely capture and analysis of data to yield insight into handling of the organization’s marketing budget and performance of agency partners.  Corporate strategy and accountability protocols serve as the basis for developing the processes to be employed.  And the advertiser’s individual contracts with agency partners establish the performance metrics to be tracked and reported on.  

How many marketing services agencies does your company employ?  It is not atypical for an advertiser to utilize dozens of agencies to formulate and execute the advertising and marketing plan; Full-Service Agency-of-Record, Creative Services Shops, Media Agencies, Diversity Shops, Digital Agencies, Public Relations Firms, Social Media Shops, Regional Marketing Firms, Shopper Marketing Specialists, Event Marketing Agencies, Direct Response Shops, Sale Promotion Agencies, etc…   

In our contract compliance, fee reconciliation / billing, and agency performance review experience, one of the biggest shortcomings is a lack of clarity around “Who Owns” the agency relationship.  A weakness often resulting in overlapping agency responsibilities, limited agency oversight or control, lack of performance monitoring and limited transparency into an agency(s) stewardship of client resources.   

What is your annual marketing spend?  $75 million?  $650 million?  What would efficiency gain in the range of 1.5% to 9.0% mean to your organization?   This is a typical return-on-investment for improved and focused accountability.  Beyond financial yields, benefits are derived from a streamlined data gathering process and a constant flow of process improvements.  Most importantly, advertising financial monitoring will positively shape agency behavior for resource investment and in-market performance.  In the words of Michael Josephson: 

“What you allow, you encourage.” 

Outsource or Build?  It’s the same old discussion – most organizations don’t have the requisite technology or resources to architect, implement and manage such programs in-house.  As well, there is the significant benefit of having access to niche counsel which compliments in-house marketing, procurement, and finance team knowledge. 

As a result, each stakeholder in the marketing planning and investment cycle becomes awakened to the potential for achieving heightened levels of performance.   That is a good thing. 

Interested in learning more about the benefits of an “Advertising Financial Monitoring” program?  Contact Don Parsons, Principal at Advertising Audit & Risk Management at dparsons@aarmusa.com for a complimentary consultation on this topic.

Dec 27
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A New Year’s Resolution for Marketers

By Advertisers, Advertising Agency Audits, Contract Compliance Auditing, Letter of Agreement Best Practices No Comments

new year resolutionInevitably, as 2012 draws to a close our mind turns to the New Year and we begin to reflect on things that we are thankful for, ways that we can better ourselves as individuals and how we might contribute more broadly to our families, companies and communities.

Having survived the Mayan “Doomsday” prophecy we can all breathe a sigh of relief and focus on the future with a renewed sense of vigor and commitment.  So what will it be?  Shall we resolve to give up caffeine, drop fifteen pounds or go the “I’ll be a better person” route?   Based upon our past resolutions, how should we handicap our chances for success in 2013?   Should we share our resolutions with others, or heed the words of the renowned 16th century English statesman John Selden:

“Never tell your resolution beforehand, or it’s twice as onerous a duty.”

Looking to mix it up a little and try a different approach?  Here’s an idea that will take less than 30 minutes of your time and can yield financial benefits and productivity gains that will benefit your organization throughout the year.   Go to the “Legal” drawer of your marketing services agency filing cabinet and pull out a copy of the letter of agreement for your firm’s agency of record, creative services partner or media agency.  If you’re feeling ambitious, pull all three.

When was the last time you reviewed these contracts?  In our advertising agency contract compliance audit practice too often our clients answer is, “It has been years” or “I have never seen them.”  Sadly, from time-to-time the advertiser cannot even locate a copy of their agency agreements, or at least an executed version of the contracts that govern their supplier relationships in this important area.

Whether your budget is $50 million or $500 million an annual review of your agency agreements is a worthwhile investment of an organization’s time and resources.  After all, the intent of these instruments is to provide the legal and financial safeguards required to protect the organization’s marketing investment, intellectual property and brand assets.   As importantly, they set the tone for the Client/ Agency relationship, establish performance expectations and provide the framework for shaping supplier behavior and resource investment.

The brief review will yield insights into statement-of-work deliverables, agency’s staffing plan and agency compensation methodology.  You might also notice a looseness of terms or that important controlling language is missing.  Once identified, you can set about fine-tuning the document to reflect the current nature of the relationship with that particular supplier and shoring up the language that will afford your organization the level of protection, transparency and control that it desires. 

An initial Client/ Agency agreement review is exactly the first step in any AARM advertising agency contract compliance audit process – a high level risk assessment based solely on agreement terms based on having tested hundreds of such agency agreements on behalf of our clients.  It is this experience and knowing where, in actual practice, financial and performance controls have fallen short of client expectations that set the stage for an expanded assessment of supplier contract compliance. 

Next steps then expand out to stakeholder discussions, agency data analysis, discrepancy identification and on-site audit work.  The net result of the discovery and analysis conducted around contract compliance involves financial true-ups, process refinements, improved reporting and controls and future efficiency gains. 

So as you consider your New Year’s resolutions for 2013, you may want to add a review of your advertising agency agreements to the list.  To assist on the path to improved agency stewardship, AARM is offering a “Free Agreement Based Risk Assessment” to any advertiser who reaches out prior to close of business on January 4, 2013.  Contact Don Parsons, Principal at AARM via email at dparsons@aarmusa.com  and we’ll follow-up to discuss scheduling.

Dec 14
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“What’ll You Have …?”

By Advertisers, Contract Compliance Auditing, Marketing Accountability No Comments

pabst blue ribbonRead on to learn the answer to this iconic brand jingle lead-in. 

“The Giants are at the Patriots’ six yard line, Manning hands off to Bradshaw who punches it in for a touchdown as the Giants take the lead…”  Time for a beer and bathroom break, or do the assembled masses remain glued to their seats to be regaled by the much anticipated commercials?

The world’s greatest advertising spectacle, the Super Bowl, is rapidly drawing near.  With the prospect of reaching 100 million+ viewers, some 35 to 40 advertisers will line-up to pay on average $3.7 million for a 30 second TV spot… exclusive of production costs. 

After all, everyone remembers Apple’s “Sledgehammer” spot, Coca Cola’s “Mean Joe Green” commercial and the ever popular Budweiser “Frogs” execution.  Maybe so, but are these and a handful of other examples simply the anomalies from 46 years of Super Bowl advertising?  Let’s face it, the Super Bowl is a time to gather with friends and family to enjoy a few libations and perhaps even to watch a little football. 

As much as Madison Avenue would like to think that the event has evolved to be as much about the commercials as the game, practical experience might suggest otherwise.   Fact check time;  Does anyone remember  Miller Lite’s  “Evil Beaver” spot from the 1998 Super Bowl or the 2nd Story Software “TaxAct”  commercial from 2012?  Thought so.  Just because an advertiser coughs up millions of dollars for a 30 second shot at reaching a fraction of the 100 million+ potential viewers or in creating a pop-culture phenomenon doesn’t mean they are guaranteed that their efforts will succeed.

Legalized gambling.  A reference often used in the context of the ever popular state lottery games, is an apt description of Super Bowl advertising.  The house, in this case the network, certainly wins and sure a few advertisers (gamblers) will let their annual budgets roll on one high profile execution that may even pay off.  If you’re GM with a marketing budget of $4.5 billion or Anheuser-Busch Inbev at $1.5 billion, the risks are minimal.  On the other hand, for some of the smaller advertisers such as Master Lock, McIllhenny Co. or Soda Stream who have braved these proverbial waters the potential consequences of failure are substantially greater.

We all recall the Monday at the office water cooler where everyone is re-living the prior evening’s game, the athletic performances, scoring highlights and yes… the commercials.  The conversation typically starts out with “did you see the one with…” and frequently ends with everyone with trying to recall the advertiser’s name.   To suggest that advertising recall is an unattainable goal would be an overstatement to be sure.  However with a viewing environment marked by sensory overload for a sports and entertainment spectacle such as the Super Bowl, breaking through the clutter is damn challenging.   Diligence and luck certainly play a role in realizing this objective.  In the words of the bard of Avon, William Shakespeare:

“Fortune brings in some boats that are not steered. “

Taking calculated risks is a component of every marketing resource allocation decision, precisely because there are no guarantees and the linear relationship between stimulus and response remains so nebulous.  It is for this reason that advertisers should seek to mitigate the risks associated with the performance of their advertising investments on a year-round basis, once resource allocation decisions have been made.  Unfortunately, too many organizations are willing to “roll the dice” when it comes to assessing contract compliance or vetting performance when it comes to their agency network and third-party vendor relationships.   The irony is that the link between cause and effect is more certain when it comes to contract and performance auditing than it is with any other facet of the advertising investment cycle.

Here’s hoping that you enjoy the 2013 Super Bowl and all of the attendant festivities.  But don’t be surprised when your guests or the bar patrons next to you respond to the question of; “What’ll You Have?” with an answer of Pabst Blue Ribbon as they’re being entertained by the spot with the Clydesdales or taking in the Bud Bowl.  And when the Super Bowl has come and gone and the buzz surrounding this year’s “Top Spots” has faded into memory, take a moment to reflect on how your organization can take the requisite steps to boost its chances for marketing success by embracing a comprehensive accountability initiative.  In the end, you will be glad that you played the odds and didn’t “let it ride.”

Interested in learning more about marketing accountability and how to implement the appropriate controls and transparency? Contact Don Parsons, Principal at Advertising Audit & Risk Management at dparsons@aarmusa.com for a complimentary consultation on this topic.

 

 

 

Dec 03
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Deadlines Don’t Make Great Partners When It Comes to Marketing Procurement

By Advertisers, Contract Compliance Auditing, Marketing Procurement No Comments

hThe economic forecast for 2013 can be summed up in one word, “uncertain.”  One of the results of this uncertainty will likely be downward pressure on corporate budgets…. including marketing spend.  Whether this results in budget stagnation or enterprise expense reduction initiatives, companies will be looking to balance their revenue generation efforts with the need to contain expenditures.

Point-in-fact, a recent study released by the UK advertising agency group IPA, found that as of the end of October 2012, marketing budgets “had been reigned in during the third quarter of this year to a greater extent than at any time since 2009.”  Of note, 23% of survey respondents “reported a reduction in marketing spend” with only 18% indicating that their budgets had increased.  According to the group, that -5%+ differential “represented a dramatic fall” when compared to the -1.1% in the second quarter and +1.0% in the first quarter of this year.  

In light of this challenging environment, it is highly probable that corporate procurement will be asked to expand their involvement with marketing to identify potential cost savings for the coming year.  These types of corporate edicts complete with succinct timetables and “hard” cost-reduction targets can create challenges on both sides of the aisle.  If procurement and marketing haven’t already forged a close working relationship and a base level of understanding of the role that each group plays and the expertise that they bring to the task at hand, then the risk exists that the process will be fraught with anxiety and tension.  Clearly Bill Phillips had it right when he intoned:

“Stress should be a powerful driving force, not an obstacle.”

Unfortunately, this is not always the case.  One has to look no further than the political gridlock in Washington D.C. over the “Fiscal Cliff” to see that time-constrained processes designed to address challenging financial issues are difficult, to say the least.  Stakeholders tend to become more entrenched in their views and focus on defending budgetary “sacred cows” or attacking perceived “excesses” rather than working together to map out a balanced approach. 

Marketers, let’s be honest, whether you’re managing a $15 million budget or a $500 million marketing budget, there are always opportunities for improved efficiency’s.  The key to success in working with procurement on a near-term expense reduction initiative is to help identify the “nice to have” budgetary line items versus the “need to have.”  Remember, it is still marketing’s obligation to optimize the organization’s revenue potential during uncertain times.  Prioritizing areas to explore to achieve the organization’s expense reduction goal will be a significant help to the procurement team and will provide the catalyst necessary to jump-start the process.

One area often overlooked by marketing and procurement teams when seeking hard cost savings are the dollars that can be generated from a historical review of the organization’s marketing investment.  Agency contract compliance audits and billing reconciliation reviews can yield significant financial true-up opportunities as well as potential future savings.  In our experience, it is not a-typical for a contract compliance audit to return between 2% – 9% of audited billings in the form of financial returns and or future savings to the advertiser. 

Best of all, by engaging an independent contract compliance auditor this process can take place concurrently with the efforts of marketing and procurement in reviewing the existing/ proposed budget for potential savings.  Further, given the historical, data-driven approach which should be the hallmark of a contract compliance audit, the process requires little time on the part of the marketing and procurement team members and virtually no time on the part of the agency account teams that often play a critical support role in working with the client to identify potential budgetary savings. 

Every dollar’s worth of saving is generated from historical rather than future expenditures and the risk to the organization demand generation efforts are significantly lessened. This is precisely the type of scenario in which all stakeholders can find grounds for agreement.

Interested in learning more about the benefits of compliance auditing and its role in an enterprise expense reduction initiative?  Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on the topic.

 

Nov 26
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When Agencies Become Resellers

By Advertisers, Advertising Agencies, Marketing Accountability, Right to Audit Clauses No Comments

agencies as resellersEase of access, streamlined delivery, cost-efficiency and enhanced profitability are all viable bi-products of vertical integration.  There is no arguing that businesses can realize value by minimizing their own costs, while simultaneously influencing market rates and their competitors’ costs. 

But what if that business is an advertising agency?  Viewed through the eyes of an agency holding company and its shareowners, vertical integration is quite intriguing.  On the other hand, from the perspective of the clients they serve, the concept raises some moral and fiduciary concerns that should be addressed in the context of a client-agency agreement.

Some would argue that it is never appropriate for an agency to become a reseller of goods and or services.  Others might suggest that as long as it allows the agency to deliver better-than-market values or efficiencies, why not, the client is the beneficiary.  Where one stands on the issue is no longer material.  Why?  The proverbial “train has left the station” as agency holding companies have continued to rely on vertical integration strategies as an important means of driving agency revenues and profits. 

From a client perspective, the phrase; Caveat Emptor or Buyer Beware comes to mind.  When an advertiser hires a full-service advertising agency, media, digital or creative services shop or a specialty agency, they do so with the implied understanding that the agency will always act in the client’s best interest.  Is this a realistic expectation for agency holding companies whose acquisition strategies have directly fed vertical integration strategies that often generate significant below-the-line revenue opportunities? 

Unfortunately, too often there is a lack of transparency regarding how an agency holding company deploys certain services, their ownership position in those resources and or the nature of the remuneration they receive from “owned” or independent sellers.  It’s been our experience, that transparency is the fundamental issue when it comes to advertisers’ rights and agencies’ fiduciary responsibilities.  What has been divulged can be discussed.  In turn, these discussions can form the basis for negotiating terms of use and responsibilities that can then be laid out in the client-agency agreement, providing the requisite levels of transparency and control to protect both parties.  In the words of the German philosopher Friedrich Nietzsche, who wrote critical texts on morality:

“There are no facts, only interpretations.”

Surprisingly, too few contracts address the reality of agency brand and holding company inter-connectedness or the mode and level of compensation derived from the reselling of goods and services.  At a minimum, the following protections should be built into a letter-of-agreement:

  1. Advertiser “right to audit” clause
  2. Extension of contract terms and obligations beyond the agency brand to include the holding company and its subsidiaries along with wholly and or jointly owned entities
  3. Clear language regarding agency remuneration, sources, amounts and limits
  4. Assertion of advertiser rights to its pro-rata share of any and all discounts, rebates or incentives earned by the agency on the advertiser’s behalf
  5. Require agency to fully-disclose any commitments made to parent/sibling agency resources or to sellers offering agency incentives beyond commission
  6. Assertion of intent with regard to the agency’s obligation to competitively bid all creative, production and or media services
  7. Require agency to fully-disclose when services covered as part of a retainer or commission structure are sub-contracted to a parent/sibling agency or third-party.  To protect an advertiser from paying an agency for services it is not performing or is only partially performing, clear contract language needs to be established to address the circumstances that either reduce agency remuneration or reallocate unearned funds to other areas.

It is important to bear in mind the extent to which agencies have extended their supply chain “reach” with their vertical integration efforts.  These include ownership in: in-house studios, barter firms, broadcast production companies, ad exchanges, ad networks, media rep firms, staffing firms, original content production companies, and the like.

From an advertiser’s perspective, the goal is to establish contractual responsibilities and controls that will shape agency behaviors and performance in a manner that insures a level of objectivity and resource investment desired by the client.  Simple.  Right?  Not so much.  In the words of M.C. Escher one of the most renowned graphic artists of the twentieth-century:

“Are you really sure that a floor can’t also be a ceiling?”

Interested in learning more about the benefits of compliance auditing as a means of improving transparency into your marketing investment and control over the stewardship of those funds?  Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on the topic.

 

Nov 15
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Social Media Can Teach Us a Lot

By Advertisers, Contract Compliance Auditing, Media Rebates No Comments

social mediaI’m being polite.  The real point of this article is “Advertisers Beware.”  After serving as an agency account director and client-side marketing executive, I thought I had heard it all. However, after becoming involved in marketing accountability consulting my eyes were opened… or so I thought.  

Recently, a post by an agency media professional on a social media group to which I belong caught my attention.  The two-part question had to do with: 1) Whether or not an agency buyer should request unspent monies back from the media; and 2) If so, was the agency entitled to keep those funds.  What was surprising was not the question per se but some of the responses from group members, largely media buyers and sellers, suggesting it was appropriate for either or both of those parties to retain an advertiser’s unspent funds.     

Either the advertising industry has lost its moral compass or there is an urgent need for training and education in and around agency and media stakeholders’ fiduciary responsibilities to the advertiser.  As British philosopher and social critic Bertrand Russell once said: 

“We have two kinds of morality side by side: one which we preach but do not practice and another which we practice but seldom preach.” 

In our agency contract compliance auditing practice the need for education and a greater level of financial controls on the part of the advertiser is played out on a regular basis.  It is not uncommon to identify aged media credits that are extremely old or to learn that prompt payment discounts, volume discounts or AVB’s that have been earned by the advertiser have not yet been “processed.”  

For too many years the advertiser community has turned a blind eye toward many of the industry’s practices regarding agency and media use of advertiser funds.  These include items such as the interest income earned on float and the retention of compensatory media weight.  However, if there are stakeholders within various facets of the media purchasing cycle that are unclear about the need to return budgeted, but unspent funds to the advertiser than we should all take heed.  

This is obviously a serious issue and importantly one where there should be no debate.  The only answer to the aforementioned question is that media agencies and media owners have a fiduciary responsibility to their clients.  Any unused funds, media credits, compensatory media weight for underdelivery, prompt pay discounts and or rebates should go back to the advertiser, plain and simple.  Let’s remember, it is the advertisers’ money being invested, not the agency’s and not the media properties. 

Further, on the topic of AVBs, policy action is required by the ANA and 4A’s as it relates to the growing use of volume rebates both globally and within the U.S.  Advertisers should be reassured that their agencies are planning and deploying their media budgets in an optimal manner based upon sound, fact-based analysis tied to maximizing the advertiser’s return on media investment.  The faintest specter of allocation decisions being skewed by the presence of an AVB offered by the media to an agency holding company is simply inappropriate. 

However, as we all know, education and the enactment of industry policy takes time.  Consequently, in the short-term the best way for an advertiser to monitor their marketing investment may be through the use of independent contract compliance auditing.  

A good approach would be to begin with upgrading agency contract language to provide the requisite legal and financial safeguards to protect the advertiser’s interest on these topics and to incent all parties to conduct themselves in an appropriate manner.  This would be followed by some combination of contract compliance monitoring, performance assessments, billing reconciliations and time-of-staff/ fee reconciliation reviews.  In the end, this type of accountability program will both protect an advertiser’s interests and clearly communicate its expectations regarding “appropriate” behavior among its agents and 3rd party vendors when it comes to their financial obligations.  

Interested in learning more about the benefits of compliance auditing as a means of improving transparency into your marketing investment and control over the stewardship of those funds?  Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on the topic.

Nov 03
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Marketing Accountability. Who Owns It?

By Marketing, Marketing Accountability No Comments

marketing accountabilitySeems like a straight forward question.  And the answer is vital to the success of an organization’s marketing accountability initiative. 

From a functional perspective, should it be Marketing, Finance, Procurement or Internal Audit?  Should the CMO, CFO, CPO and or their lieutenants take the lead?  And of course the real zinger; “Whose budget will cover the cost of the initiative?”

Simple questions?  Yes, but with answers that have organizational implications that frequently pose significant impediments to fielding a marketing accountability program.  The reasons cited range from “We’re short-staffed” to “We want to do it, but budgetary constraints won’t allow for it this FY.”  Thus, for most advertisers, their marketing accountability initiatives are DOA.  It’s a shame when you consider the hundreds of $millions in marketing spend committed annually with little in the way of contract compliance auditing, financial reconciliation, performance monitoring or independent oversight. 

The obvious question for stakeholders is: “Would you play it so loose if it were your own money?”  Probably not.  Truth be told, accountability is everyone’s responsibility and is a pillar of good corporate governance.  The tone is typically set by the CEO and over time, becomes part and parcel of an organization’s culture. 

From a marketing perspective perhaps the best model to consider is a multi-functional team of internal stakeholders from Procurement, Marketing and Finance with the source of funding being the marketing budget and the CMO serving as the leader of the initiative.  Why Marketing?  Because Marketing will be the primary beneficiary of the resulting process improvements, efficiency gains and financial true-ups that are typically realized as part of an accountability effort.  Further, while business results, brand building, strategy development, analysis and leadership are skills required of the CMO position, accountability and responsible stewardship of the organization’s marketing investment are vitally important elements as well.

In the end, the organization realizes a number of benefits that will improve the efficacy of its marketing spend, boost ROMI and improve the performance of their marketing services agency network:

  • Enhanced agency stewardship systems (i.e. contracts, compensation and evaluation systems)
  • Improved controls, transparency and reporting
  • Efficiency gains
  • Improved financial stewardship practices

So what are the critical components of a marketing accountability program?  At its root, it begins with the clear articulation of the organization’s business objectives, marketing goals and expectations of each stakeholder group involved in the marketing process.  One of the most critical stakeholder groups is the organization’s marketing services agency network.  A well-conceived marketing accountability program will help both advertiser and agency align resources with the organization’s goals.  In turn, these decisions will ultimately drive decisions regarding roles and responsibilities, deliverables, agency staffing, remuneration and the criteria that will be utilized to assess performance. 

Successful accountability management programs are not one-and-done propositions.  They involve implementing and executing a system which has an ongoing monitoring component.  Often times, this may include utilizing independent auditors to help instill the requisite feedback and control processes into the culture of the advertiser and each member of their marketing services agency network. 

Marketing accountability and the attendant activities associated with these initiatives (i.e. performance monitoring, compliance testing, independent auditing) form the basis for organizations to ensure that the millions of dollars spent on marketing are tracked appropriately.  More importantly, these actions will afford an advertiser the opportunity to drive each of the stakeholders that comprise their marketing supply chain to extraordinary performance.

Oct 22
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What is the Outlook for 2013

By Advertisers, Marketing Agency Network No Comments

marketing spend forecastAccording to the International Monetary Fund’s world economic outlook, the “risks for a serious global slowdown are alarmingly high” in the coming year.  So how will the economic uncertainty impact the advertising industry? 

Marketing budgets are already under pressure as the U.S. economy plods along at steady, but lackluster growth rates and international markets struggle with the uncertainty surrounding the European Union.  Like it or not, Europe is an important part of the “growth” conversation.  Why? Europe accounts for approximately one-fifth of both the U.S.’ and China’s total exports.  Thus, if the economic situation in Europe takes a downturn, the repercussions on the world’s two largest economies could be significant.

In spite of the challenges posed by the global economic situation, from a marketing perspective, Zenith Optimedia is forecasting a 4.5% spending growth rate in 2013 to $524.7 billion.  Of note, a majority of the growth will occur in the United States.  Zenith’s CEO commented that while marketing spend levels are “solid,” companies are “seeking to ensure that any expenditures are delivering strong return on investment.”

With demand generation a desired, but uncertain outcome for marketers, the role of marketing accountability increases in importance to help keep all stakeholders focused on performance.  Establishing clear marketing KPIs that are aligned with an organization’s business goals, and translating those KPIs into specific performance criteria for each agency in an advertiser’s marketing services agency network, is a critical first step in any accountability program.

Once performance goals have been established, everything will fall in place, right?  Not necessarily.  Advertisers may want to evaluate agency remuneration programs, staffing plans and statements of work to insure that these foundational elements of an agency stewardship system are properly constructed and conducive to aligning their agencies’ resource investments with the desired outcomes.  Layer on a continuous monitoring program which provides all stakeholders with the requisite information for assessing progress and adjusting resource allocations on a timely basis and the chances for improving the efficacy of one’s marketing investment will be significantly enhanced. 

While there are no guarantees when it comes to ROMI, experience has shown that a deliberate systematic approach to marketing resource management can boost results.  In the words of Sir Edward Coke the noted English barrister;

“Precaution is better than cure.”

In a slow growth environment, with budgetary pressures likely for the foreseeable future, this may very well be the “cost of entry.”  In our Agency Contract Compliance & Performance practice, we see the results of marketer commitment to sound accountability practices first hand.

Interested in learning more, contact us for a complimentary consultation on, “Building a High Performance Marketing Agency Network.”  Simply contact Don Parsons, Principal at dparsons@aarmusa.com to schedule a convenient time.