Giving a Haircut Without Talking “Savings” — Tips for Smarter Marketing Spending/Sourcing (Part 1)

Internal marketing types often place far too much artistic license in the non-scientific evaluation of agency performance. But as an increasing number of metrics become available to measure both internal and competitive marketing performance across digital and non-digital areas, it's possible to hold your agency or record's feet to the proverbial fire and take back the marshmallows they've been toasting at your expense for years, without being held fully accountable for their actions and work on your behalf. In a series of posts looking at marketing sourcing and Spend Management opportunities over the coming weeks, we'll share experiences and ideas from a handful of providers and tools vendors, beginning with some recent observations that ICG Commerce shared with Spend Matters about tips for approaching the marketing category.

Perhaps most important, the ICG team cautions that marketing spend essentially involves a direct path to c-level involvement -- there are almost always critical engagements, especially when an agency is involved and it's a marketing-focused industry like CPG. For this reason, the biggest rule of thumb is "not talking about savings," ICG suggests. Rather, it's a preemptively disarming move to silence potential internal critics (e.g., the CMO) about pushing the discussion to more effective engagement of key partners. As part of this effort, it's important to speak the language of marketing. Start by using terms such as "agency of record" rather than talking about marketing's partners as "vendors" or "suppliers."

ICG also suggests keeping the dialogue focused on the heart of the issue, rather than peripheral spend areas (e.g., printing, market research, etc.) In other words, keep the agency discussion front and center. The benefits of this are clear: if you open up a beachhead by establishing credibility on a higher level, everything else opens up after that. In this regard, it's also important to avoid labeling yourselves (or any partners you work with) as part of the "procurement" effort. Come up with another title (besides, if you work for a company and you're managing the marketing category and you come from procurement, chances are you're embedded with marketing anyway). There's simply too much baggage both internally and externally to have a "procurement-led" marketing sourcing and category management effort, even if in reality that's the desired effect.

Speaking the language is often the first step in engaging in a dialogue that will allow both internal parties to open up and have a candid conversation about marketing. ICG suggests that if you're able to engage on the right level, then it can open up key spend across all non-working areas including: design agency, ad agency, media agency, digital agency, experiential/promotional agency, PR agency, direct marketing/fulfillment, customer marketing/brokerage, commercial production, commercial print & prepress and market research/syndicated data. Ideas for program improvement can come across these areas through a variety of more data driven means (e.g., benchmarking efforts focused on agency and other rates, broader/more creative application of incentive compensation models, SRM programs, etc.).

The types of results that are possible from pursuing data-driven and expert approaches to marketing spend are often larger than many think (and that marketing executives can imagine). As examples, ICG likes to cite the case of a food company that through an improved agency compensation model, was able to drive 30% savings with its agency of record. Or consider the case of a CPG company that investigated an optimized media and creative agency relationship to address performance issues. In targeting its efforts by benchmarking and developing an index-based incentive compensation model that balanced media quality and value, the organization was able to free up $7.5 million in additional budget (i.e., redeployment of savings).

In our next post in this series, we'll turn our attention away from process-based engagement models to target marketing spend and instead focus our sites on the underlying role technology can play.

- Jason Busch

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