Tag Archives: The CMO Survey

Does Your Organization View Marketing Spend as a Material Expense?

2 Mar

digital mediaWhile on the surface this seems like a nonsensical question, advertiser indifference toward independent contract compliance, financial management and performance auditing of their agency partners might suggest an answer that would surprise you.

According to The CMO Survey conducted by Deloitte, Duke University’s Fuqua School of Business and the American Marketing Association in February of 2018, companies surveyed spent on average 10.3% of their annual sales on marketing. This would certainly qualify as a “material” expense in our book, particularly when one considers that this investment is being made to build brand equity, establish customer loyalty and to drive demand generation.

So why do so many advertisers take a laissez-faire (French term that translates as “leave alone”) attitude toward basic governance and assurance practices related to their marketing spend?

Is it the belief that a tight client-agency agreement provides the requisite safeguards and controls? Perhaps it is because of an unyielding level of trust in one’s agency partners, intermediaries and third-party vendors exhibited by an organization’s C-suite.

Based upon our experience over two decades of providing contract compliance support to some of the world’s leading advertisers we know that this is not the case. Marketers recognize that the industry is fluid and that the breadth and rapidity of change is such that contract language needs to be reviewed and updated on a frequent basis. Similarly, while advertisers certainly trust their agencies, there is also a core belief in the concept of “trust but verify.”

No, we believe that the reason for the laissez-faire approach to marketing accountability is the fact that no one function “owns” this task organizationally.

In our experience, few marketing departments willingly invite independent scrutiny of their marketing and advertising practices, controls and or the performance of their agency networks. If such examination is not mandated corporately, it will likely not be initiated by marketing. Similarly, the procurement organization is typically focused on screening, vetting and contracting with current and potential marketing vendors. Many procurement teams recognize the value of periodic agency audits, but as “support” departments they rarely have the budget to self-fund such accountability initiatives. The same is true of Internal Audit and their ability to underwrite the cost of audit projects in this area.

In many instances, procurement and internal audit leaders will approach marketing and ask for their participation in and funding for a governance and assurance initiative, but too often this is proffered on a voluntary basis. Unfortunately, this scenario rarely leads to a marketing accountability and transparency review. Thus, in the end, if an organization doesn’t mandate periodic examinations or the ongoing monitoring of its marketing investment or provide funding for such an initiative to its procurement and internal audit team(s) than it may be “flying blind” when it comes to safeguarding its marketing investment.

The irony, as progressive marketing organizations have learned, is that a formal governance and assurance program, which includes marketing, provides financial returns that more than pay for the cost of the attendant independent examinations. Further, the resulting improvements in contract language and process related learnings yield efficiency gains for clients and agencies alike and the resulting transparency gains can serve as the impetus for improving the level of trust and ultimately the relationship between these partners.

With an admitted “pro audit” bias, we can state unequivocally that our experience over the course of two plus decades of providing contract compliance and financial management audit support to advertisers, our belief in the old saying; “In god we trust, all others we audit” has never been stronger.

 

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