By Bill Duggan, Group EVP, ANA
Posted: May 10, 2012 12:00am ET
I have just returned from the ANA Advertising Financial Management Conference, which drew a record 550 attendees. The following are ten key insights and highlights that I took away.
- Resiliency: In the opening economic keynote, PwC advised advertisers to “over weigh resiliency and under weigh growth.” Japan was noted as a key example of that – despite sluggish growth over the past two decades, the Japanese were very resilient following the earthquake/tsunami and the country is rebuilding as a result.
- People: Hans Melotte, CPO of J&J, stressed the importance of people. “Everything begins and ends with having the right people. Superior people result in superior outcomes while mediocre people result in mediocre outcomes.” Procurement at J&J is a key player that enables growth while cost savings are of secondary emphasis.
- Website Video: Paul Matsen, CMO of The Cleveland Clinic is an advocate of website video, a great example of owned media. The Cleveland Clinic has some 1500 videos on their website, which have certainly contributed to making that the #1 most visited hospital website in the U.S. Paul said that the “… use of video can transform marketing.”
- Agencies as Junior Partners: The great Martin Sorrell spoke of agencies being “junior partners” to their clients—not full partners and certainly not domestic servants, saying, “Don’t treat us as a commodity; it’s depressing and confrontational.”
- Patent Trolls: Beware of patent trolls, says Doug Wood of Reed Smith and ANA’s outside legal counsel. Patent trolls acquire patents that have not been utilized and are essentially worthless, target one or more industries with cease and desist letters, and then target a few companies to sue to apply pressure on the rest to settle for less than litigation costs.
- Accountable Compensation: Dustin Cohn, Jockey CMO and Rich Feitler, TPN president discussed their compensation arrangement built on the principles of partnership, accountability, fair and shared metrics, payment on output and not hours, and earning the entire agency profit margin based on meeting company goals. There’s so much chatter at ANA meetings about compensation and it’s great to see a client and agency doing something very different.
- Innovation: Kelly Mooney, CEO of Resource Interactive, emphasized the importance of a commitment to innovation. Marketers and their agencies need ongoing monitoring of emerging trends followed by rapid application of testing ideas based on those trends. A nominal budget should be allocated for such innovation to provide a constant stream of learning.
- Media Audits: The primary objective of a media audit is to improve the effectiveness of the media investment. For many marketers, media is the largest part of their marketing spend. Media audits also shine a light on client behavior that could drive up costs.
- CMO Insights: IBM shared results of C-suite global studies with CMOs and CFOs. I loved this simple insight on technology – CMOs have to use tools and technologies that their children understand better than they do. So those CMOs better get up to speed!
- Corporate Trade: Corporate trade (also referred to as barter) is a financial tool that provides the opportunity to realize better returns on excess inventory or other assets than traditional liquidators can offer and “trade” those assets for media or other goods. Active International, a leader in corporate trade, shared their perspective.
By Bill Duggan, Group EVP, ANA
Posted: May 3, 2012 12:00am ET
The ANA last week issued the white paper “The Found Money of State Commercial Production Incentives.” Many states now offer production incentives for advertisers willing to shoot their commercials in their state.
These incentives are offered by the states to create jobs and attract investment. Savings, which can range from 15 percent to 30 percent of the production costs, can be achieved without sacrificing quality. The ANA's position is that the state production incentives belong exclusively to the advertiser, not the production company or the agency.
The Association of Independent Commercial Producers, the trade association representing the production community, raised this issue with its members back in November. Last week, the AICP responded with a critique of the ANA’s position. In turn, the ANA issued a response to that critique.
It is important for ANA members to be aware ofthe benefits of state commercial production incentives, as well as our position that production incentive rebates belong exclusively to the advertiser.
By Bill Duggan, Group EVP, ANA
Posted: Apr 23, 2012 12:00am ET
Many states now offer financial incentives to advertisers to shoot commercials in their states. Although such incentives originated about ten years ago, more recently they have expanded to additional states and have become increasingly attractive to advertisers. The savings can be quite significant, often ranging from between 15 to 30 percent of production spending in that state.
The film and television industries have historically benefited greatly from these state production incentives. The incentives are clearly geared to reward companies for making the decision to produce in a particular state. Incentive programs target the companies that fund productions and give final approval on the shoot location. In the feature film arena, the largest recipients of these incentives are the major motion picture studios. More recently, advertisers have been participating. Savings can be achieved without sacrificing quality, as many states have been very successful in building production crew bases and equipment suppliers required by the industry.
States base incentives on hiring as many locals and purchasing/renting as much as possible from local vendors. Typically, all expenditures incurred in the state related to pre-production, production, and post-production qualify for state production incentives. The general rule of thumb is that the more the advertiser spends in the state, the greater the potential savings from the incentive.
The list of states that offer commercial production incentives and the specific details for each state, are continually evolving. Commercial production incentives are currently available from Alaska, Connecticut, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Montana, New Mexico, North Carolina, Oklahoma, Pennsylvania, Puerto Rico, Texas, Washington, and West Virginia. California and New York—two long-time commercial production centers—have active state film offices but do not offer commercial production incentives that advertisers can utilize. One resource available to help stay up to date on the various state policies is The Official Guide to United States Production Incentives at http://www.easecommercial.com/.
Production incentive rebates belong exclusively to the advertiser, not the production company or the agency—it’s the advertiser who funds the production and gives final approval on the shoot location. Importantly, contracts with agencies and production companies should be written to reflect the fact that any production incentive associated with the work covered by that contract is the sole property of the advertiser. This is a matter of protecting your corporate assets and receiving the financial benefits that accrue from your marketing expenditures.
State commercial production incentives represent a meaningful opportunity for advertisers and states. It’s a win-win situation. States have invested time and capital in creating these incentives to woo advertisers to shoot commercials in their state to help build their economies. Advertisers can use these incentives to help significantly stretch marketing budgets.
By Bill Duggan, Group EVP, ANA
Posted: Apr 19, 2012 12:00am ET
Earlier this week, Walgreens hosted ANA Agency Relations Day, which provided “nuggets and nuggets” of learning on client/agency partnerships, summarized below.
Production Decoupling: In June 2011 Accenture appointed TBWA Worldwide as its global advertising agency of record and Tag Worldwide as its global production agency. Decoupling production from creative via Tag was done to improve efficiency, drive further cost savings and improve the quality of execution. Production decoupling (also known as centralizing or unbundling) is the separation of the business of production from creative development. There seemed to be a general lack of awareness among Agency Relations Day attendees on this issue. ANA has a terrific insight brief that can help -- http://www.ana.net/miccontent/show/id/ib-production-decoupling-updated.
Agency Relations in A VUCA World: VUCA stands for Volatile, Uncertain, Complex, and Ambiguous, according to Debra Giampoli of Kraft. The world as we know it is over - it's no longer predictable, we can't rely on what's worked in the past, the speed of change is accelerating, technology is exploding and consumers are embracing it more quickly than most marketers are. If we’re going to thrive in the VUCA world we must not be afraid, take risks, be open minded, develop new skills, and always be evolving. Do it, try it, learn from it, and try something else. Immerse yourself in what’s new. Uncertainty is the new normal. Kraft has become a better client in this new world by having clear, tight, and consistent strategies. They have assumed responsibility for those strategies and identified internal champions with great taste. Kraft has made it a priority to make great client-agency matches through great chemistry and to build and sustain those relationships.
Agency Evaluations: For Walgreens, agency evaluations help incentivize agency partners to share in company goals and business objectives. Agencies feel part of the team, with “skin in the game.” Further, agency performance monitoring can greatly improve the effectiveness and efficiency of marketing. ANA’s own research shows that the vast majority of marketers (82 percent) report that their companies regularly conduct formal agency performance evaluations. The top benefits derived from a formal agency evaluation process are identifying and improving under-performing agency relationships (92%) and identifying and recognizing high-performing agency relationships (85%). ANA’s advice is to not only conduct regular agency evaluations but do so for all your agency partners (e.g., PR, multicultural, etc.).
Integration: For the United States Postal Service every communications element has a role and contributes to results. The USPS achieves integration via its strong belief in a core agency team at partner Campbell-Ewald comprising the right disciplines. There are not separate agencies and there is only one P&L. There is cohesion of ideas through one group of people working together, rather than departments overtly selling. Benefits include everything created together once, learning as a team, and cross pollination of skills.
Incentive Compensation: This is also called “pay for performance” or “performance incentives” and is a method where some, or all, of the agency’s compensation is tied to the achievement of performance results mutually agreed by the client and the agency. When done well, performance incentives align agency and client on business/communications agendas and goals – the discussion shifts from just hours/FTE’s/costs to meeting performance objectives. 46% of marketers use incentives with at least one of their agencies (per ANA survey results) with a skew towards the biggest spenders.
What Makes a Good Client: Great perspective provided by Rob Davis of Starcom who noted a client who ends every conversation with, “what can we do better?” According to Jack Rooney of Ogilvy, empathy and respect are key. Empathy for the fact that agencies are a unique breed that is genetically disposed to making clients happy. Respect for the agency’s craft—you hired them because you want them to do something you can’t do in your organization.
By Ken Beaulieu, senior director of marketing and communications, ANA
Posted: Apr 17, 2012 12:00am ET
This is part three of my recent interview with Chris Burggraeve, chief marketing officer at Anheuser-Busch InBev and president of the World Federation of Advertisers. In part one, Chris explained why it’s critical to understand the strengths of your competitors in each market, and how AB In-Bev’s “Way of Marketing” creates sustainable brand health. In part two, he discussed the importance of understanding a country’s unique cultures. Here, he shares his thoughts on the inherent challenges of marketing at a local level.
Q: Is AB InBev making a big effort to reach consumers at a local level with customized messages, media, and even products? What are some of the challenges global marketers must consider?
Chris: People may perceive some of our brands globally, but they drink locally. To manage the inherent complexity of global brands like Budweiser and Stella Artois, we apply a “Freedom in a Framework” principle. The framework is very clearly prescribed globally. A global brand has one relevant positioning created based on testing in key countries, one global look and feel (from packaging to communication), one global campaign, and one centrally steered renovation and innovation pipeline. It is run by a clear global brand owner, who, of course, functionally leads a team represented by the key countries.
The degrees of freedom by local marketers to manage the global brand are limited — by choice. But they do have some flexibility to adjust to local taste and custom. Take sports, for example, and its link to Budweiser. The global number one sport passion is soccer/football. But for Canadians, it’s ice hockey, and in the U.S., baseball is the “great American pastime” that fits the Budweiser brand positioning best. Any execution within our current “Anticipation” campaign and “Grab some Buds” creative executions will take these sensitivities into account to drive relevance. All great global brands learn over time to balance global consistency with local relevance. That is a core capability to being successful in this global brand-building game.
Conversely, we are portfolio marketers. We have plenty of big local brands in each local portfolio, such as Bud Light in the U.S., Brahma and Skol in Brazil, Jupiler in Belgium, or Harbin in China. We call them our “local jewels.” The local VP of marketing is the high-level brand steward of a local jewel. He or she completely determines everything local, within the methodology of the AB InBev Way of Marketing. They have a local degree of freedom, and a completely locally designed framework. For example, Paul Chibe, VP of marketing in the U.S., stewards huge local brands like Bud Light and Michelob Ultra, and a very wide range of U.S.-centric brands. Paul, who is based in St. Louis, and his team manage the full portfolio in the U.S., including the global brands Budweiser, Stella Artois, and Becks. On the latter, though, he works closely with the team of Frank Abenante, global VP of brands and insights, who is based in New York. Frank and his team interact with all VPs of marketing around the world on these three global brands.
As a marketer, it’s great to be able to acquire different skills over time within the same company — running a local brand, running a portfolio of local and global brands in a country, running a global brand from the center, and, ultimately, running a portfolio of global and local brands from the center. All require different skills, but I would advise any marketer to start on a local brand in a country first.
By Bill Duggan, Group EVP, ANA
Posted: Apr 12, 2012 12:00am ET
My two most recent blogs have reported on findings from the latest edition of ANA’s “Recession Survey.”
- “New ANA Recession Survey Results” on March 28.
- “Clients Asking Agencies to be Cost Efficient” on April 3.
These survey results have gotten quite a bit of attention. CMO.com, in fact, gave the recession survey the honor of “This Week’s Top Story.” CMO.com said:
Agency-related articles proved popular among CMO.com readers for this first week of April. Starting with our lead article, more than half of the respondents to a recent Association of National Advertisers survey said they intend to ask their agencies to find ways to cut their costs--which isn't to say marketers plan to cut agency compensation. It also doesn't mean they'll be outsourcing any less … What all of this does mean, however, is a redefined relationship between CMOs and their agencies.
CMO.com featured a terrific blog from Annop Sahgal of Adobe Systems, titled, “CMOs, Agencies Take Relationship To The Next Level” and highlights follow:
The digital age is driving marketing accountability to new heights. Marketers are more reliant on their agencies and other outsourced partners to help them succeed in a business landscape that has become far more complicated, as well as highly technology- and data-driven. All of that is forcing a new way to think about creative that goes beyond traditional norms.
Adding to the challenge are fundamental shifts in what is viewed as both creative and effective in engaging savvy consumers. CMOs and agencies alike have to rethink traditional ideas about a creative campaign and begin approaching and evaluating their initiatives as opportunities to create ongoing dialogues—sharing of stories—between a brand and its customers.
Modern-day marketers require many new skill sets and new types of talents from their partners. CMOs and agencies can benefit from taking six factors into consideration when working toward building the right teams and expertise, as well as embarking on new digital marketing initiatives.
- Learn how to manage and work with an extended network of talented specialists.
- Demonstrate the value of every marketing initiative.
- Become a great storyteller, not just a traditional marketer.
- Think utility versus glitz.
- Acknowledge that technology now drives marketing.
- Keep in mind that digital marketing is more than just a new advertising channel.
Read the full blog here. Thanks for that perspective, CMO.com and Annop!
By Ken Beaulieu, senior director of marketing and communications, ANA
Posted: Apr 9, 2012 12:00am ET
I had an interesting conversation about measurement with Paul Matsen, chief marketing officer at Cleveland Clinic, a non-profit academic medical center. He is responsible for all marketing and communications at the highly rated center, including public relations. Each year, Paul’s team creates 35 to 40 individual marketing plans for the organization’s various hospitals and service lines. It’s a challenging undertaking, and no plan sees the light of day without a robust set of metrics behind it.
In fact, in Paul’s eyes, a marketing plan without clear goals and metrics is about as valuable as a website without content. It’s a message he stresses internally with his staff and externally with his advertising agencies and communications partners. “The best way for CMOs to demonstrate our value to our organization is to be open and transparent, to measure the impact of what we’re doing,” Paul pointed out. “Effective measurement can be an incredibly powerful marketing tool.”
That message, however, continues to fall on deaf ears throughout the industry. A study by the Columbia Business School Center on Global Brand Leadership and the New York Marketing Association found that 57 percent of CMOs and other marketing executives surveyed don’t establish their budgets according to ROI measures. Sixty-eight percent of respondents said they base their budget decisions on historical spending levels, and 28 percent go with gut instinct. Moreover, more than half of respondents didn’t include any financial outcome when defining marketing ROI.
Another equally disturbing study, from Pardot, a cloud marketing automation software provider, found that nearly 37 percent of b-to-b marketers-- those tasked with creating and implementing effect lead management programs -- don’t track revenue generated by their campaigns. Why? Nearly 40 percent said they lack the time and resources to create and analyze reports. The survey also found that 20 percent of respondents don’t measure marketing-sourced leads at all, 30 percent are not tracking advanced metrics such as marketing-sourced opportunities, and 35 percent are not using lead nurturing for less qualified leads.
Studies like these leave Paul Matsen dumbfounded, especially in today’s bottom-line driven environment. “I think marketing people need to take responsibility for demonstrating the value of our function,” he said. “There are lots of tools to do that. And that’s what I stress to my team: ‘Let’s use all the tools we have to measure success.’”
For example, in addition to tracking national/local awareness and preference, Paul’s team has a robust scorecard for digital that includes unique visits, online appointment requests, Web requests, and Web satisfaction. For its search engine marketing program, the team tracks the total number of leads generated, cost per lead, and return on investment. Standard metrics for media activity include the number of placements, their estimated value, and the tone — that is, whether the placements were positive or negative.
“Having strong metrics is so important,” said Paul, noting that his team also uses different tools to measure social media engagement relative to competitors’. “We don’t rely solely on trying to measure return on investment, and we don’t excuse ourselves from measurement if we can’t perfectly measure ROI. You start with what you can measure, then work your way toward a more complete measurement. And if you can get all the way to ROI, outstanding.”
If you want to learn more about Paul’s use of data to drive strategic marketing decisions at Cleveland Clinic, be sure to register for the 2012 ANA Advertising Financial Management Conference May 6-9 in Boca Raton, Fla. He is one of several featured speakers, a list that includes Hans Melotte, vice president and chief procurement officer at Johnson & Johnson, and Sir Martin Sorrell, chief executive officer at WPP.
By Caitlin Nitz, Knowledge & Research Specialist
Posted: Apr 6, 2012 12:00am ET
I have never been to the opera, but this week I got three pieces of mail from the Met: a program for the 2012-2013 season, an appeal for donations, and a postcard announcing that individual tickets were now on sale for the Ring Cycle.
After a date cancelled on me for Saturday night, I was looking to stem my disappointment with some exciting plans. A brilliant idea struck me: I should get all dressed up and take myself on a date to the opera. The Met Opera postcard that had been sitting on my desk all week pertinently announced a 9pm show on Saturday night. I impulsively bought a ticket.
Direct mail has also gotten me to join a gym, subscribe to magazines, and spend way too much money at Bloomingdales. This time, however, I am very grateful for all that junk in my mailbox, as it saved my Saturday night and got me to try something different.
By Barry Garbarino, ANA, senior director of marketing & creative director
Posted: Apr 5, 2012 12:00am ET
It’s hip to be square, well at least that’s what Huey Lewis and the News told us in the late 1980’s and now a 110 year old retailer is telling us the exact same thing! JC Penney recently launched a “new” way of dealing with the myriad of gimmicky sales deals to streamline the way we shop. 2012 will surely be a year for the company to prove it is in this for the long haul (especially Black Friday, the day after Thanksgiving!)
It’s quite simple.
They have three kinds of pricing. Basically it goes like this…
1. Every day low prices (Good)
2. A month long discounted price (Better)
3. Two sale dates – First and Third Friday of the month (Best)
And a return policy that has other retailers baffled – any item, anytime, anywhere. So what is my point? The company is looking back at its heritage to a time where retailers treated their customers with respect and courtesy. In fact, James Cash Penney’s first store venture was appropriately named “The Golden Rule Store.” The mid-range retailer is standing by its founding of treating others they way that they would like to be treated themselves.
In addition to this dramatic change for the retailer, they have also introduced a new series of “story-book” hysterical/historical TV/video advertisements featuring Ellen DeGeneres that depict how silly some of the current retail policies that JCP’s competitors still hold onto (policies that do NOT treat the customer/consumer with respect or courtesy.) The series of vignettes shows Ellen encountering one consumer issue after another juxtaposed in varies times in history. The spots show how truly ridiculous some of the current industry standard practices are.
Take a look at the JC Penny spots featuring Ellen:
Squarely Stand by Your (Wo)Man
Recently when an organization entitled One Million Moms harshly attached JC Penney for their choice Ellen DeGeneres as their spokesperson (and they also accused the retailer of “jumping on the pro-gay bandwagon”) the company stood firmly by their decision.
“This organization doesn’t think I should be the spokesperson because I’m gay. For those of you who are just tuning in for the first time, it’s true. I’m gay,” Ellen joked on her show, Ellen, February 8th. “I hope that you were sitting down. I hate to break it to you this way but anyway.”
Following this, Ron Johnson, JCP’s chief executive officer, issued a statement on their stance on the protests and their continued support of Ellen DeGeneres as their spokesperson. “We stand squarely behind Ellen as our spokesperson, because she shares values that we do in our company. Our company was founded 110 year ago on the Golden Rule, which is about treating people fair and square, just like you would like to be treated yourself. And we think Ellen represents the values of our company and the values we share,” said Johnson on CBS This Morning, February 9th.
Bravo JC Penney and Ellen DeGeneres. Squarely done…
By Bill Duggan, Group EVP, ANA
Posted: Apr 3, 2012 12:00am ET
ANA recently fielded the sixth edition of our “Recession Survey,” a survey initiated in the depths of the recession in 2008 to understand how the economic atmosphere is affecting client-side marketers.
84% of marketers say that they are challenged with identifying cost savings and reductions in their current marketing and advertising efforts. Marketers were then asked how they plan to reduce costs and expenditures.
Only 17% of marketers surveyed said they plan to reduce agency compensation, a significant decrease compared to past surveys. However, 52% surveyed said they plan on challenging their agencies to reduce costs internally. So, instead of reducing agency compensation, marketers are asking their agencies with finding ways to reduce costs on their own.
Agency compensation has always been a topic of keen interest in ANA meetings during my twelve year tenure here. But perhaps many clients have squeezed all that they can out of agency comp and are now asking agencies to share the responsibility of being cost efficient.