Tag Archives: ROMI

3 Reasons Why Marketing Accountability Matters

1 Jan

AccountabilityAs 2015 has come to a close, many of us who are involved in the marketing and advertising industry will most certainly reflect on some of the challenges faced and lessons learned during the prior year. Rightly so, as future success is often based upon the knowledge gleaned from reviewing past experiences. 

We work in an industry that is dynamic and exciting and yes, at times, trying. The dizzying array of issues which industry practitioners deal with on a daily basis are not for the faint of heart; big data, ad technology, media fragmentation, changes in consumer media consumption behavior, industry consolidation, talent procurement and retention and a myriad of financial oversight challenges ranging from ad agency compensation to optimizing an advertiser’s return-on-marketing-investment (ROMI). 

One of the highlights from this past year is that a significant spotlight was cast upon a handful of seminal issues that have a direct and meaningful impact on the industry. These include conversations on improving transparency, mitigating the risk associated with fraudulent activity, particularly in digital media, and the need to strengthen client/ agency relationships. 

As importantly, we believe that a key takeaway from an advertiser’s perspective in 2015 is that accountability matters, perhaps more now than at any point in the recent past. There are three reasons why we believe that it is important for client organization’s to implement marketing accountability measures in the coming year: 

  1. Marketing expenditures represent one of an organization’s largest SG&A expense line times. As such the dollars spent in this area need to be closely monitored to insure that they are allocated and stewarded in an effective manner.
  2. Optimizing ROMI is the primary responsibility of marketers and their agency partners. This has never been truer than it is today given that CEO’s, CFO’s, CPO’s and Internal Audit are more focused on enterprise wide accountability initiatives than ever before. Further, many of these stakeholders view marketing as an expense to be managed tightly on a line-item basis, rather than an investment.
  3. Client marketing departments are the first and last line of defense when it comes to protecting an advertiser’s fiduciary interests. Gone are the days when ad agencies served as principal-agent for their clients. Ad agencies, ad tech firms, trading desks, publishers and fraudsters are all in competition to increase their respective share-of-wallet, often at an advertiser’s expense. As such, it is imperative that CMO’s work with their C-Suite peers to put in place the appropriate financial management processes and safeguards to protect the dollars entrusted to them. 

Ironically, in spite of these truisms, most advertisers have yet to implement formal accountability initiatives inclusive of agency contract compliance reviews, financial management audits or performance assessment programs to protect their marketing investments and to boost ROMI. 

While the reasons are many and varied, they are immaterial in the context of the current state. The reality is that client organizations which fail to embrace marketing accountability initiatives will be at risk when it comes to insuring that their hard earned budgets are spent in an appropriate and effective manner. In the words of Noreena Hertz, the noted English academic, economist and author: 

Transparency, accountability and sustainability have become the slogans of the market leaders.” 

There are many within the industry, including both client-side marketers and agency executives, who would argue that the move to improve advertiser controls takes time away from the business of creating and executing ad campaigns. 

Quite the contrary, in our experience, we have seen the implementation of accountability initiatives within the marketing area actually improve work flow, project briefing and approval processes; enhance client/ agency alignment, boost clarity around roles and responsibilities, provide rationale to upgrade marketing ops and clearly establish the expectations of both stakeholder groups. In the end, this can improve efficiencies, freeing up time for client facing activities and can help solidify the client/ agency relationship, all while enhancing transparency and controls. 

The primary reason for this is that accountability initiatives are predicated on enhanced levels of communications between clients and their agency partners and they ultimately drive understanding and trusts among C-Suite personnel at the advertiser in their agency partners. 

It is for these reasons that we believe that marketing accountability is a practice whose time has come. The stakes are too high for advertisers not to implement improved controls in 2016. Further, we know from experience that what is inspected is respected and respect is not a bad foundation on which to base a relationship. 

Interested in learning more about launching a marketing accountability program? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on the topic.

Moving Toward Strategic Sourcing

17 May

Advertisers strategic sourcinghave come a long way in forging stronger ties between their marketing and procurement teams.  Yet, there is much more to be done as organizations look for ways to improve their return on marketing investment (ROMI).  After all, while important, expense reduction is only part of the ROMI equation and some would argue a secondary consideration when contrasted with marketing’s role in demand generation.

The Association of National Advertisers (ANA) released the results of a recent survey of procurement professionals fielded earlier this year.  Not surprisingly, survey participants indicated that “cost reduction” and “cost avoidance” were the top two metrics by which their efforts were judged within their respective organizations.  No problem.  These are important financial goals for any enterprise.

However, the key to evolving the collaboration between marketing and procurement is to evolve their focus to include various means of boosting supplier performance.  The potential strategic value related to improvements in; agency relationship management processes, resource allocation decision making, supplier innovation and client/ agency engagement can have a meaningful impact on the bottom line.  On this topic, the aforementioned ANA survey would suggest that marketing and procurement have made significant progress, at least philosophically.

So what are the impediments to strategic sourcing playing a more meaningful role in marketing procurement and supplier relationship management?  Many in the marketing and advertising industry would suggest that “experience” is the principal challenge facing procurement professionals when it comes to the marketing services arena.  To be fair, this is not a procurement issue, this is an organizational issue. Recruiting sourcing talent with marketing experience, educating and training procurement professionals on the nuances of professional services sourcing and creating a culture which embraces accountability and transparency across the organization are key issues to be addressed.

In our opinion, marketing has a significant opportunity to shape the organization’s efforts in building the proficiency of the procurement team.  Work begins with, but clearly is not limited to, assisting HR to identify sourcing professionals with marketing experience, assisting in the crafting of job descriptions, educating and informing their procurement peers on differences between marketing services and other direct or indirect procurement categories, and working diligently to articulate their supplier optimization initiatives as the basis for driving goal alignment between marketing and strategic sourcing.

Unfortunately, in some organizations, rather than assist in developing procurement’s skill set and resource offering, marketers take advantage of the procurement team’s lack of category experience to stave off or minimize their involvement within the marketing services realm.  Given the significant level of marketing investment advertisers are making this is clearly not a desirable outcome; either as it relates to ROMI or relates to mitigating financial and legal risks inherent across the marketing services supplier network.

Unlike George Carlin’s “seven dirty words” which were once “forbidden” by the broadcast industry; accountability, audit, collaboration, cost containment, expense reduction, risk management and transparency are not taboo.  Rather, these activities should be considered necessary ingredients in any strategic supplier management initiative.   It remains a mystery as to why this perspective has been slower to take seed in the U.S. advertising marketplace than it has in the U.K. and Western Europe, but it is an issue that will need to be addressed for any real progress to occur.

Interested in learning more about constructive marketing procurement programs? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation.

Drive Contract Compliance, Boost ROMI

10 Jul

ROMIDoes your organization believe that its marketing investment can have a profound impact on growth, revenue flow and profitability?  If the answer is “yes,” then implementing a strong marketing accountability program can help boost financial outcomes.

Establishing performance criteria within the marketing function, and across the organization’s marketing agency network, is an important first step on the path to improved results and a higher level of accountability.  This can be accomplished by integrating agency financial performance metrics into the letter-of-agreement, and by linking agency remuneration and or incentive compensation to the desired outcomes.  Each metric and incentive goal should be well defined and directly tied to the organization’s business goals.  However, well thought out and agreed-to measures only lay the foundation – a constant review and feedback cycle is required to achieve the desired sound accountability.

A successful accountability plan must be sustainable and is dependent on the development of an agency performance monitoring discipline, relative to the letter of agreement, whereby progress and success criteria can be regularly tracked and communicated to stakeholders.  Unfortunately, too few organizations follow through and make the relatively minor investment necessary to implement and sustain such an initiative.

Perhaps the best way to jump start the control and feedback cycle is through the initial use of an agency contract compliance audit.  Let’s assume that the letters-of-agreement and agency remuneration programs were properly constructed and aligned with desired business outcomes.  Conducting an independent audit over marketing agency partner (creative agency, digital agency, media agency, PR firm, sales promotion agency, diversity agency) activity provides the requisite unbiased focus.  A well-scripted audit process will focus on testing past agency activity and reporting, detection of outlying transactions, review of parameters in place, metric refinement, and identification of process improvement opportunities to further enhance the program.

Reasons for an independent audit are many and varied, but here are a few key considerations:

  1. The organization may lack the depth of resources or subject matter expertise to conduct a thorough assessment of an agency’s contract compliance and performance.
  2. Independent auditors can provide agency stewardship insights and “Best Practice” feedback that can strengthen the client/agency relationship while laying the groundwork for improved performance.
  3. Contract compliance audit firms have the tools and experience to probe on all aspects of the marketing investment cycle ranging from agency staffing investment assessments and fee reconciliations to comprehensive billing reconciliations of both the agencies’ and the organization’s 3rd party vendors.
  4. The compliance and performance metrics gleaned from the audit process can enhance an organization’s marketing, financial and legal controls while supporting the firm’s corporate governance initiative.

In our experience, advertisers that have achieved success in optimizing their return on marketing investment (ROMI) have done so with the aid of a top-down accountability program.  At the end of the day, all stakeholders want marketing to succeed and to lead the way toward attaining its organization’s cash generation and brand equity building goals.  None more than the marketing team and their agency partners.  With solid stakeholder support, linking your marketing goals with your organization’s desired financial outcomes, creating a culture of accountability, and a dedicated effort to monitor performance, the path to success will become infinitely easier.

Interested in learning more about the potential benefits of a contract compliance and performance audit that can accrue to your organization?  Contact Don Parsons, Principal at Advertising Audit & Risk Management at dparsons@aarmusa.com for your complimentary consultation.

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