This summer, we are looking for 4 future marketing stars to join ID Comms for our first annual summer intern programme.
Click the link below to download the information sheet and get in touch if you would like to be considered for the first intake in July, 2012.
Thanks.
Are rebates going to become this years hot topic? We hope so but Darth Vader may have something to say about that.
The WFA published its findings from a recent survey of advertisers about their perceptions of rebates in media trading. It makes for some uncomfortable but wholly unsurprising reading.
Media rebates have been an issue for many years. Like spiders they are ugly and unsightly and many (including myself) would kill them off tomorrow given the chance. Yet a large proportion of the business champion them as being part and parcel of the media trading environment, that they perform a role and are important to the equilibrium and the food chain of media trading.
Whichever side of that particular gnarly tuffet that Miss Muffet sits, it is good that the WFA are trying to raise awareness of rebates broadly. I’m often surprised how little knowledge and understanding there is about rebates amongst many senior media clients companies.
This is no particular fault of their own however, they have perhaps just never been exposed to the rebate question or have worked with agencies that have successfully kept the rebate discussion out of their contracts.
I suggest that understanding of rebates and what they do is a critical part of responsibly managing a media budget these days because despite the media business presenting itself as becoming more transparent and accountable (largely using digital media as the “new Hope”) the rebates issue in its many guises could well be becoming worse.
To maintain my StarWars analogies, like ‘The Force’ in StarWars, digitisation of media trading has potential for immense good to happen (in the form of greater accountability and measurement) but also gives agencies scope for evils (in the form of opaque trading and media brokering) should they decide to follow the Dark Side of the force. Rebates in digital media trading could become far greater sources of ‘unofficial’ income for agencies than ever before if not kept in check.
Clients need to watch out. A similar recent article in AdAge quotes Mark Butterfield suggesting client’s should use an auditor to manage rebate policy but an auditor may only be able to diagnose dodgy rebate practices in the agency, rather than supply the cure. What clients really need is someone to review your contract terms and close the loopholes that permit rebates to be retained by the agency, ie treating the causes of the problem rather than just the symptoms.
Hand-in-hand with this needs to be a grown up conversation involving agency, procurement and marketing to define how the agency should be incentivised transparently (and paid fairly).
How incentive is the lifeblood of success, especially in the marketing business.
There has been a jolly great hoo-har over the bonuses paid to bankers this year. Whatever we think about bankers, I think making bonuses the felon is wrong.
Anything that requires performance, or indeed anything that requires out-performing the market, should be incentivized by a bonus of some form.
Bonuses themselves are not wrong, but perhaps they have been misused by some companies to reward short term gain when really they are a long-term incentive. We work in an industry which relies on out-performance, everything is geared to be “more efficient, more effective, better ROI, deliver incremental improvements etc”
Whether you are a marketing client or an agency we are all working to the same principle of marketing success, which is that your brand’s investments need to be ‘disproportionately more effective than anyone else in the category’.
In lay terms, make every dollar work harder than your competitor and you’ll come out on top, all other things being equal. If you can make your communications more effective than the competition, you’ll spend significantly less on it over time allowing you to invest more in service, product or pricing (which build a reputation in a different, arguably more sustainable way).
I believe that should be the yardstick by which we define a marketing success. You can of course define ‘effective’ however you want but there’s no escaping the reality that effective marketing should usually be adjudged upon the growth of the company doing that investing (whether that growth be for short term, immediate sales uplift for longer term, brand value).
Every brand should aspire to spend less on branding / media / advertising (whatever you want to call it these days). That’s not procurement talk, that’s a truth. By so doing, a business can gain an advantage against their competitor who may be wasting their money against less effective means.
The best piece of business advice anyone ever told me was “to succeed you don’t need to be brilliant, you just need to be better than the next guy”. In order to achieve this you need to consider how to incentivize your marketing service suppliers to help you “be better than the next guy”. For companies (like agencies) that are managing your money with a responsibility to add value to it (making it worth more) then a bonus culture is entirely appropriate. I would argue it is critical to gain this competitive advantage.
Can we avoid bonuses? Nope. Because the alternative is to just pay a regular income irrespective of performance and that really makes no sense for a company that has a long-term ambition for growth.
The reason regular people earn a monthly salary is because we need them to turn up in the short term, regularly every month. The reason we give some people the prospect of bonuses is to incentivise them to deliver performance over the longer term, not just turn up. This makes complete sense.
Unfortunately it has become easy and fashionable to bash bonuses as a principle, especially as people saw bankers who had destroyed their companies being handsomely rewarded for failure. Of course this is wrong. The critical distinction is that bonuses should be directly linked to out-performance of the market over time, so for a media agency that means making media investment work harder than anyone else to deliver the equivalent core KPIs of a client. That takes hard work and some skilled thinking, but should be handsomely rewarded if successful.
Many agency contracts include performance bonuses, I think these should be ‘out-performance’ bonuses, call it the “better than the next guy” clause and put a big number beside it. Because if everyone is performing the same then there’s no advantage to investing in marketing and we’ll soon find our client companies find something more productive to do with that money than marketing.
This ID COMMS article originally published on M&M Global
Why do agencies seem to go through peaks and troughs of winning and losing business? I don’t think it’s an accident, I think it’s a rational strategy.
When I was working within agencies I spent more than half of my time with some form of new business opportunity on my desk, whether that be a media or advertising pitch, a proposal to write or managing an agency’s entire review. I recently tried to tot up the value of the pitches I’d been involved in or managed and it is at least around $7bn in billings terms (which is about the size of Zimbabwe’s economy. Or just three of GM’s media pitch).
Some years we would win a lot, some years nothing and we always assumed this was due to some natural, unexplainable cycle of peak-and-trough. When we were winning we didn’t question it too much of course. However when we were losing we often lost to the same one or two agencies and always considered that the winning agency was having a purple patch whilst we were having a tough streak. Beyond that, there was no rational explanation. We always fought hard at every review we decided to go for so losing was always a shock beyond the normal disappointment.
Now on the consulting side and having more visibility of the different ways that agencies pitch I can see more clearly perhaps why these trends might exist. Put simply, I think that agencies themselves work in cycles of winning and losing. It is clear that some agencies will over-invest in their business development resources for a period (probably on a 3-5 year cycle) and then spend the next few years investing less in business development and focusing on bedding in the new business that they have hopefully won.
No agency can manage to win pitches consistently over the years because the focus of the agency primarily has to be on either winning or servicing. I don’t believe you can ever do both at any one time. It takes a huge concerted effort to land the big pitches, these cause a massive distraction and disruption to any agency that has not staffed up its business development resources to take much of this strain. It also requires that the agency has to gamble somewhat on slightly dialing down servicing their existing clients to free up sufficient resource to focus on pitching. This is a gamble because you don’t want to start losing business while you are in the process of winning.
In addition, the agency management must be aligned behind that strategy and also (without exception) be prepared to divert a good proportion of their work time towards winning business, which is hard when the day-to-day operations of existing client are so consuming.
The model is akin to the ‘crop rotation’ approach that those farmers and geography students amongst you will know well. Work the land hard in cycles, giving it room in between to replenish its energy.
The implications here are that it means an agency has to make a considered long term plan for the coming 5-10 years an identify when to put the foot on the gas and look to win, and when to ease off and consolidate what you’ve won. Winning of course is more than a simple determination. It’s hard competing in an industry with too much competition in the agency market and ever increasing demands of clients in managing agency reviews, it requires incredible dedication to the process of a pitch to even have a sniff of victory.
Much like a talented racing driver seeking the fastest qualifying lap, each 4 year cycle of business development can be broken down into laps:
- Entry lap (get the right resource and structure in place),
- Warm up lap (be prepared to compete and lose a few but get match fit and tweak the process),
- Flying lap (pitch for everything you can and try and win everything going),
- Warm down lap (pick off a few more before dialing down your over investment and spent the next few years over-servicing those clients to reach maximum profitability).
This ID COMMS article originally published on M&M Global
If I was a marketer I would be glad I waited out the (last) recession to review my media investments. It may prove that patience is valuable in seeking additional value from media spend. However, I would probably be getting ready to review in 2012 (if there is a current commercial imperative within the business). Get set, go!
I wrote recently about some of the implications of media business reviewing next year and I have a few posts lined up on this subject looking at specific implications for agencies, clients, media owners and auditors.
For now, below are some thought starters on whether this is the right time for you:
What does 2012 mean?
It’s probably the year of value propositions. Agencies are likely to start seriously pushing back against the commoditization of media, a few media agencies are forming some strong new propositions based on data platforms and measurable performance. Providing for the first time a real sense that there may after all be a rational link to be found between investment and return when it comes to marketing. Hope I’m not speaking too soon but the signs are good.
Two scenarios: a) 2012 as a recovery market (maybe) – everything sounds better and budgets easing, time to innovate. b) 2012 as a Double-dip market (maybe) – agencies seeking volume, deals to be had, time to innovate. Take your pick…
Plus of course its Olympics year when we all go brand crazy and marketing budgets sound like Scottish lottery syndicate winners. Perhaps not.
Getting ready
Our advice at ID COMMS is always start your considerations early – it is never too early to seek help and get your own teams aligned and prepared. Reviews that rush to market too quickly (sometimes because they are prematurely leaked to the market) are not rewarding for anyone. The old adage “if you don’t know where you’re going just about any route will get you there” is never truer than in agency review. Pre-planning pays off in heaps, not just peace of mind but in financial gain too.
Opportunities next year
Since the recession kicked in some big new client/agency contracts have created (see previous posts) this means many big trading positions have been established by reviews in 2008/09 which have left the market exposed in some places, some agencies struggling to deliver promises to clients in some areas. However there are smart clients that waited to see what their competitors did and can now take advantage of a very different media landscape whilst their competitors are ladened with savings-focused trading deals from 2009 that are not flexible enough to become value-creation deals and can’t exploit the current excellent media thinking in agencies. The dust has settled, trading positions become clearer. These challenger brands are (and should be) looking for more than price reduction opportunities in the current market place.
Talent, talent, talent. Lots of fresh resource in agencies, the recession allowed agencies to cut out some dead wood and lose expensive resources that were underused or misused. Most agencies now seem to have much leaner, efficient, modern structures. The recession allowed them to rethink how they service clients, their propositions, how they build teams and where their strategic priorities should lie. They’ve had a couple of years to do this cleansing and rebuilding and now they are ready with fresh teams, new offices, new processes and structures. Ready to be put to the test by the next wave of post-recession / double-dip review.
Agency world is bouncing back, the numbers are still tough but there are some strong propositions out there now, with new innovations in performance and data management.
If I had a budget, I’d be looking at a new approach for media next year. Start thinking…
This ID COMMS article originally published on M&M Global
Are agency rosters getting harder to manage or easier?
(the picture is not a clue btw, honest)
Earlier this month I heard again another very senior marketer ask a room of people (other very senior marketers) how to best manage a large roster of agencies. This is a big question, and in our experience becoming increasingly frequently asked. It’s advisable (for sanity’s sake)to consider this a simple problem rather than a complex one.
I believe the issue has two elements, firstly to get agencies aligned and focused enough to be able to collaborate in a constructive way that does not become a distraction for the business, second to avoid serious duplication of resource and therefore duplication of non-working marketing budgets (that is the bits that get paid in fees rather than actual marketing to customers for example).
The first thing that strikes me is that as a general rule, we still hear more negative than positive remark about agency-land. Perhaps much of that is unjustified but however much evolution, collaboration and modern thinking exists in agencies now compared to five years back, there are still some fundamental, huge issues which sit on marketers desks and are not being addressed by their (often handsomely paid) agency execs.
For many years marketing clients have been working through a process of rationalizing costs, whether by interrogating production budgets (and agency production income) or by leveraging down mass media costs and overall agency fees. For many marketers that process has reaped many positive rewards and costs have been reasonably managed to an appropriately competitive level (usually based on volume). However now the language is more commonly about value creation (or variants thereof) which is charged directly at a specific agency “we want more value from our contract with you” or at the roster as a whole “you guys need to work better together to create greater value”. Both are valid.
We believe that marketing will be the next frontier of corporate productivity gains. Those gains won’t come from cost cutting, they will come from a strategic approach to sourcing marketing services partners (“what do we need, who can supply that, how will we measure success and how shall we pay for that success”). Its about cost-management rather than cost-cutting. In the coming months and years we expect to be advising clients how to cut (yes, I said that out loud!) their marketing budgets by designing and organising their roster more efficiently around a business marketing strategy.
So, in short I think the recent era of cost-cutting in marketing (the naughty procurement) will be replaced with an overdue era of diligent cost-management (the smart strategic procurement), based mainly on a roster’s ability to demonstrate value delivery.
See, I told you it was simple….
This ID COMMS article originally published on M&M Global
This month we’ve seen what some are calling the beginning of a double dip recession, although nobody has actually dared say that out loud. America’s credit has been downgraded for the first time and they’re pulling money out of Europe, the Eurozone is causing nervousness by not adequately addressing the issues in Greece, Portugal et al putting huge pressures on Germany and France economies and their confidence to the point where the Euro itself is at risk. Alongside this, various agencies have also naturally scaled back their growth forecasts for this and next year and some large brands are starting to review their agency arrangements more than usual for a traditionally quiet summer for new business.
In 2003 Sorrell famously predicted a “bath-shaped” recession. I’m thinking its going to be more of a “Jacuzzi-shape” this time (see kindergarten quality diagram) and we are on the edge of our seats (ahem) waiting again to see how this will play out in adland.
As we hurtle towards Q4, naturally brands start to consider budgeting for next year and will be re-evaluating their marketing investments in light of the insecurity of consumer spending and growth potential in the market.
Is this all sounding rather familiar? True, but how might it affect our industry this time around? Will 2012 be any different to the madness of agency reviews we saw in 2009.
I think we may be seeing the beginnings of another round of 2009 style agency reviews. GM’srecent announcement of a $3bn kick-start to this inevitable process rocked media agencies around the world. At the time we said 2009 would be the year of the pitch and indeed it was with a collection of behemoth global FMCG and telecom reviews. I expect that 2012 is shaping up to be the same, with a likelihood of many agency reviews commencing across Q4’11 to Q1’12
Over the coming days and weeks I want to consider the implications of this scenario for some of the key stakeholders; namely clients, agencies and media owners. Some of who are still battling with the legacy left from 2009 reviews where deflationary pricing triggered some very aggressive reviews and promises made in media.
I’m going to share with you a chain of related posts that I’ve been writing for the past few months in somewhat anticipation of this scenario happening.
Keep an eye open and stay out of the Jacuzzi for now…
This ID COMMS article originally published on M&M Global
You’ll no doubt have found it hard to miss the news that this week General Motors announced a review of its global media spend, estimated to be in excess of $3bn. The business is currently split regionally, there is no suggestion yet that this is a consolidation and we don’t yet have sight of the broad brief. I found it interesting that much of the debate and discussion when this was announced was the assumption that this was inevitably a “pre-double-dip” cost-cutting exercise which many accused Unilever and Vodafone (amongst others) of conducting in 2009 as the first recession hit adland.
I would like to believe that this review has a strategic ambition but there’s not yet much word coming from GM, or indeed the market, to suggest this. The appointment of an auditor (R3) to run the review probably isn’t reassuring the incumbent agencies either….
A review of this scale is going to remain in the headlines for its duration, many perhaps seeing it as a bell-weather for what double-dip agency reviews might look like in the coming (terrifying) 18 months for agencies. I would encourage GM and their auditors to take the opportunity to make a strategic ambition a publicly visible core of this review and hopefully avoid a frenzy of cost-cutting reviews in the wake of this big news from GM if the only news that trickles out is alarm concerning aggressive cost demands…
You can see my additional comments on this at AdAge.
Tom Finneran has posted (another) very insightful piece about the role consultants play on agency reviews. One that we share here at ID COMMS. The 4A’s in the US is drafting a paper on the subject, which we support and will be offering our input to.
See the full article here
