Is your marketing spend working hard enough? Five warning signs for CMOs Brand Equity MUMBAI
VENKAT, a marketing veteran, and now the CMO for a large consumer durable company is a disappointed man, post his board review that is. Despite his passionate attempt to convince the board’s members that the company needed to increase investments in its brands during the downturn, he could not get the budget approvals. Instead, the pressure is on him to cut back on marketing expenses. One of the board members even gave him a competitor’s example on marketing spends optimization. The CEO has been asking him take a hard look at spends which have been going northward at a fast clip for last few years. Now Venkat is beginning to wonder, is there a real issue with the way spends are being managed and can be identified and fixed? He needs to quickly understand if there are issues with efficiency and effectiveness of marketing spends and if he is really getting the maximum bang for his marketing rupee.
Marketing spends have grown at more than 20% annually since 2005 and the overall media spend figure crossed Rs22,000 crore in 2008. In the recently concluded growth phase, marketing enjoyed significant war chests and creative freedom. And in a rising tide, assessing the effectiveness of these spends were not a priority. Today, the economic slowdown is focusing the spotlight back on where marketing moneys are spent, because as a whole, it can account for 6-10% of sales in many consumer-focused industries. Reductions in advertising spends are expected across most, if not all, sectors. In fact, within boardrooms, there is a call for greater accountability of marketing spends.
The excesses of the last few years - proliferation of products, brands and communication platforms — resulted in over-communication, low brand-recall and consumer indifference. In this scenario, it is imperative for CMOs to look for ways to burn fat and build muscle. A starting point is to closely examine five key signals of inefficiency. If the assessment throws up three or more of these warning signs, it’s time for some serious action. Our recent experience indicates that a zero-based review of the marketing spend, in these times, will generate benefits of at least 5-15% in terms of improved return on each rupee spent — enough to fund other business initiatives or simply, make a valuable contribution to bottom line.
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Little or no integration and optimization across a range of marketing initiatives
With leading marketers already adopting an integrated approach across marketing levers, a large number of players still do not display rigor in understanding the true impact of each customer-contact opportunity available to them. Specifically, some key tradeoffs are not explored. For example, should an integrated brand retailer in a sales downturn situation, spend more on catchment area promotion awareness or on broad based TV advertising? How can OOH spends be compared against those on traditional media? Such questions are seldom asked or answered in a rigorous fashion.
Attaining excellence in brand activation calls for redefining guidelines for an integrated marketing mix in order to breathe life into the creative idea across all consumer touch points. Often, spend analysis across different marketing platform is uncoordinated and unshared. To support an integrated marketing mix plan, an integrated briefing process is critical. This means not only briefing across creative, BTL and PR agencies but also including packaging, sales organization and channel partners to truly magnify the impact of the initiative. This can be supplemented through periodic team meetings across various marketing agencies and the internal organization team which are useful for perspective building and in determining a holistic and robust marketing plan.
Lack of robust guidelines and standard procedures for media strategy, planning and buying
Adrenalin rush associated with overnight responses to competitor initiatives is the stuff that marketing legends are made of. Nobody can deny the critical need for strong tactical responses to competitor initiatives, especially when the battle lines are clearly defined. However, short term tactical responses become an issue when they start to dictate strategy itself. One of the soundest tests to gauge this is the level of compliance to the strategic plans of the brand and to the gate-keeping processes laid down by the organization even for tactical moves. If the marketing spend process compliance is not very high, then either the processes themselves need to be restructured or there is a need to reinforce the need for compliance. In many cases we observe, that the rigor of challenging media planning and buying decisions is not formalized through standardized guidelines or documentation. While in some cases, a lot of data is accessible and a lot of presentations are made, robust decision making frameworks are still not available to the marketing teams. Is there a standard checklist which marketing teams can access to check if “Weeks on Air” (WOA) and Frequency recommendations are logical for the category? Is there dynamic buying framework which allows for channel wise spend plans to be reviewed based on leading predictive variables? Is there sufficient analysis to justify the impact buys? Players who are able to develop and constantly stick to process guidelines and strategic plans utilize their marketing rupees significantly better. Some relevant indicators tracked regularly in form of CMO level spend efficiency dashboards can help estimate the magnitude of the issue – number of unplanned ‘additional’ campaigns launched, number of campaigns with budget overruns, number of campaigns with success rate in terms of reach and frequency, etc. Best practice companies adopt process frameworks even for tactical initiatives which can have built in flexibility to ensure spend optimization without compromising time to market.
Limited focus on building internal media capabilities
Marketing teams have traditionally focused on activities that are generally considered to have a significant bearing on top-line such as consumer insights, market research, innovation channel / distribution management and the like; media is viewed often as a ‘cost’ item that needs to be optimized, but not necessarily as a lever that can actually improve returns based on micro-targeting of the consumer. Hence, marketers today may not necessarily understand the intricacies of media industry and its business models. With an increasing focus on micro-targeting the consumer in the media clutter, it is imperative for the marketing team, the owners of the brand , to strengthen their internal capabilities. The added complication in the Indian market place as compared to developed markets such as US is the lack of transparent and third party data around cost benchmarks and actual performance in a medium like OOH. Hence there is a high reliance on the media agency in India to provide the baseline for any such analysis resulting in a high dependence on them for media ideation, campaign planning and postbuy analysis. Marketing teams who understand their target audience’ media consumption habits, competitive benchmarks (spend, GRP/TRP deliveries etc) can contribute to evaluation of media mix choices and brand led media innovation. In fact our experience shows that the marketing team can contribute significantly to media buying negotiations along with the agency. Ability to go beyond discounts on “inflated” rate cards will require marketing teams to develop knowledge about media at par with their suppliers – best-practice Indian companies have already started the process of investing in internal capability building.
Accountability for results is not built into your partnership contracts
The relationship between advertising and media agencies with their clients is truly one of the long standing examples of partnership and collaboration across business functions. While a relationship of trusted partnership with the advertising and media agencies is essential, it is also mutually important for the players to follow a diligent and regular review process across all aspects of the relationship. Apart from adherence to processes and policies, a re-assessment exercise re-calibrates and authenticates existing contracts, spends and execution pattern. Variable payments often are a very small portion of the overall remuneration, KPI-linked payments are few and far in between and there is scope to improve transparency around financial transactions. This exercise should ideally leverage other internal departments like Finance and Procurement as well. If the relationship with the agencies is based on very high mutual trust then it is easy to make these assessments an intrinsic part of the checks and balances regime. Key performance aspects like agency remuneration, performancelinked spend analysis, assessment of media campaign effectiveness and competitive benchmarking should be a part of the scope. Market leaders find that regular assessments throw up insights and information that critically determine how their marketing budgets can be better utilized.
Innovation streak has not yet reached your media strategy
Given the widespread challenges advertisers face in terms of communication clutter and inability of people-meters to go beyond the demographic variables, innovation in media strategy is essential to enable brands to reach their target segments effectively. Best practice leaders have demonstrated that breakthrough innovation is possible across channels - be it the use of advertiser-funded programming or innovation in outdoors through 3D billboards. Hand on heart, not many marketing teams can stake claim to breakthrough ways of reaching their target audience and this points to capability and process issues. Another area that Indian advertisers as a whole have been slow to adapt is the use of non-traditional media. While in most developed countries TV and print contribute 50-75% of all media spends, the number is still as high as 85% in India. While some brands have adopted brand-led webportals and targeted SMS-based promotion routes, this area remains unexplored. There is an urgent need for brand teams to decipher and fully understand the multiple forms of web advertising, email ads, search engines ads and now mobile advertising as consumers have taken to these media at a rate much faster than advertisers. Again, the key prerequisite for innovation is for brand teams to build capabilities which otherwise would have been considered outside their domain.
While there is immense pressure on CMO’s like Venkat to optimize spends; it is also a great opportunity for them to fundamentally alter the processes and capabilities which define how they are able to invest in their brands in the time to come. A rigorous assessment of their marketing organization process and capability can not only lead to cost efficiencies in the region of 5-15% but also infuse innovation and energy into the marketing setups.
Authors
Saurine M Doshi
Partner & Vice President, AT Kearney
Debashish Mukherjee
Principal, AT Kearney
