Marketing Agency State of the Union 2013 Benchmarketing
1. Marketing Procurement: Three is Company, More is a Crowd
or "Benchmarking Marketing Spend Requirements of Different Industries”
www.convoagency.com
2. the new traditional agency
CONVERSATION
We use evolved thinking to combine
effective, traditional means of reaching
consumers with new, creative
techniques. The more touchpoints in a
campaign, the more impactful the
message. We embrace the old and
strategically use it to leverage the new.
Every piece of the plan is done in-house
– research, strategy, design,
development – leaving no restrictions to
create the best mix of media for each
brand’s message.
Headquartered in New York, with satellite
offices in Kansas City and Los Angeles
convoagency.com
7. from don draper to donny deutsch:
agencies and marketing teams
have learned to play the game
8. how?
over the years,
agencies became
friends with clients and
brought them along for
the party! who doesn’t
like a good party?
8
9. but over the last ten years,
this story has gotten more and more interesting.
Fragmentation and 28% increase in the DECREASE in net-worth
segmentation of marketing number of agencies of households.
Tactics. from 2002-2012.
This doesn’t add up.
convoagency.com
10. as much as we hate to admit it,
sometimes we all need a friend to tell us
when enough is enough.
(that’s where procurement comes in)
12. let’s look at
BENCHMARKING – BY CATEGORY
We analyzed Fortune 500 companies by industry – comparing and contrasting
their ad spends relative to revenue, as well as their advertising allocation tactics.
CPG INSURANCE/FINANCIAL RETAIL HEALTHCARE TECH
13. where we are today
BENCHMARKING – TOTAL SPEND
where were ad dollars spent in 2002?
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
14. where we are today
BENCHMARKING – TOTAL SPEND
where were ad dollars spent in 2011?
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
15. where we are today
BENCHMARKING – BY CATEGORY
We took this a step further and analyzed the breakout of spend
across categories:
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
16. why do they spend
THE DECISION MAKING CONTINUUM
An easy way to understand why category allocations are slightly different is to
look at the Decision Making Continuum.
The Decision Making Continuum is the cognitive process a person goes through
before taking an action, and the processes afterwards as they’re on their way to
becoming a repeat buyer, service user and hopefully advocate.
These are awareness, education, action, conversion, and ultimately – the holy
grail – retention and advocacy.
convoagency.com
17. why do they spend
THE DECISION MAKING CONTINUUM
Each step lines up with specific tactics which explains why certain industries
allocate more or less towards different forms or marketing, advertising, and
media.
A CPG company needs to make sure they are top of mind when a customer visits
a store therefore they will spend more on awareness tactics to stay top of mind.
In our analysis you’ll see that Healthcare companies spend more on print and
outdoor.
For healthcare, these mediums are useful to maintain an even presence so that
when a patient needs a service they would recall the brand or location
subliminally.
convoagency.com
18. why do they spend
ALIGNING TACTICS WITH OBJECTIVES
convoagency.com
19. let’s talk about
BENCHMARKING – BY TACTIC
When analyzing benchmarks by tactic you will see that from 2002-2012 across
all tactics spending has increased…
TV
TV
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
23. let’s talk about
Except for radio, however radio budgets are now
sometimes absorbed into digital due to online and
satellite radio so the number is skewed.
BENCHMARKING – BY TACTIC
RADIO
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
24. let’s talk about
BENCHMARKING – BY CATEGORY
Additionally, we analyzed total marketing spends as a percentage of annual
revenue across each category.
This is on par with historical data beyond the past ten years.
For a Fortune 500 company, the percentage of annual revenue spent on marketing
has always been around 1 to 3%.
In this year’s case it’s 1.14% with CPG companies being the highest spenders
since, as we pointed out, they have to edge out competitors in-store which takes a
bit more effort.
Our friends in consumer health being the lowest spenders – because, if you have
an ailment in most cases you’re going to be seeking out help so they have an easier
go at it.
(see graph on next page)
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
25. let’s talk about
BENCHMARKING – BY CATEGORY
how much do they spend?
MARKETING SPEND AS
PERCENTAGE OF ANNUAL
REVENUE
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
26. what is wrong with this picture?
BENCHMARKING – RETURN ON INVESTMENT
There is a disconnect when looking at ROI though:
27. what is wrong with this picture?
BENCHMARKING – RETURN ON INVESTMENT
TV has had the highest increase in allocation, but is the least effective.
TV MARKETING ALLOCATION
additionally...
28. what else is surprising…
86%
of marketers believe successfully
integrating multiple channels under a single
strategy is critical to long-term success.
yet only
29% feel that they
effectively integrate these channels.
convoagency.com SOURCE: Sitecore/Forrester Research
30. over the last ten years Over the last ten years the existing model has
failed marketers and is a bit like fitting a three
pronged plug in a two pronged hole.
31. where we’ve been
BENCHMARKING
Total number of U.S. Agencies has grown by 28% over the past decade
which serves the agencies but not the clients.
SOURCE: Census of Service Industries
33. what does this mean to procurement and marketing?
An increase in costs
• support teams
• back office overhead
• duplicate resources
• BIGGER PARTIES!!!
but it doesn’t solve any problems.
34. what does the party look like now?
convoagency.com or more visually…
37. it’s time to shine
procurement can
help fix the problem.
38. three steps to success:
Benchmarking should be derived as a percentage of sales; however
that percentage should not automatically increase year-to-year if
results are not seen or there are no new product launches/initiatives.
Seek partners who have demonstrated competencies across
multiple channels, that base their campaigns in strategy, can
forecast future changes, and adapt effectively to meet goals.
Keep us in check (the best agencies will welcome it).
convoagency.com
39. for more info
Download our White Paper @
convoagency.com/marketing2020
and view the infographic!
40. Download our White Paper @
convoagency.com/marketing2020
thank you
frank.obrien@convoagency.com
212.389.9782
917.583.4207
917.591.5479
convoagency.com
18 west 23rd st penthouse new york ny 10010
Editor's Notes
(2)Thank you _________. We appreciate the time and are excited to talk about benchmarking as well as providing some context in what we call “three is company, more is a crowd.”
(3)First things first, a quick overview of Conversation. We are a five year old full service agency built from the ground up with in-house teams for all elements of a marketing plan from research, strategy and planning to creative design, development, production, media buying and execution. We call this the new traditional agency model that delivers marketing campaigns in a truly integrated fashion the way they were meant to be delivered and the way they are most effective.
(3)Herewe have a quick snapshot of a partial client roster and recent recognition. For those who are fans of AMC you may have seen us on their show the pitch where we won the popchips account. Recently we were named to the Inc 500 which lists the country’s fastest growing companies and picked up a number of awards this year for everything from creativity and design to marketing effectiveness and analytics.
(2)Before we begin, I know there are some agency folks in the room so please forgive us for lifting up the curtain a bit but we figured this conference is about alignment and thought this was a good forum to not just talk about benchmarking but about why the current benchmarks exist, particularly why they have risen over the last ten years, and how we can become more efficient. Let’s get into it.
(1)Why does Don look nervous when procurement comes to the table?
(1)It’s because agency folks have been trained to look at procurement as the “bad guys”, or put more frankly – procurement is going to take Don’s suit!
(1)So how did Don Draper adapt to fend off procurement?
(3)Well, in a lot of cases he looped in his clients, spending not just on suits but dinners, tickets to sporting events, gifts – all of which come out of the marketing budget. And we’ve been taught to spend spend spend each year otherwise the budget won’t be there the next year.It’s not an effective way to operate.
(2)What’s even more interesting is if you look at the fragmentation of marketing tactics over the last ten years, the increase in the number of agencies you have serving you, all the while net worth of households has gone down. This doesn’t line up.
(1)And as much as Don would hate to admit it, sometimes we all need a friend to tell us when enough is enough.
(1)Before we go any further with this story, let’s take a step back and look at what we’re here to talk about: benchmarking.
(1)We put our research team to work and analyzed marketing spends across five different categories which you see listed here.
(1)In 2002, this is what the splits looked like – TV and Print taking the lion share of the budget with Digital just coming into the fold.
(1)Ten years later, TV spends have increased, print spending has gone down, and digital, radio, and outdoor have increased marginally.
(1)By category you can see that the allocation varies, sometimes dramatically, from industry to industry. Why is that?
(3)It all has to do with something we call the Decision Making Continuum. The Decision Making Continuum is the cognitive process a person goes through before taking an action, and the processes afterwards as they’re on their way to becoming a repeat buyer, service user and hopefully advocate. These are awareness, education, action, conversion, and ultimately – the holy grail – retention and advocacy.
(3)It all has to do with something we call the Decision Making Continuum. The Decision Making Continuum is the cognitive process a person goes through before taking an action, and the processes afterwards as they’re on their way to becoming a repeat buyer, service user and hopefully advocate. These are awareness, education, action, conversion, and ultimately – the holy grail – retention and advocacy.
(4)Each step lines up with specific tactics which explains why certain industries allocate more or less towards different forms or marketing, advertising, and media. A CPG company needs to make sure they are top of mind when a customer visits a store therefore they will spend more on awareness tactics to stay top of mind. In our analysis you’ll see that Healthcare companies spend more on print and outdoor. For healthcare, these mediums are useful to maintain an even presence so that when a patient needs a service they would recall the brand or location subliminally.
(1)We took our analysis a bit deeper and in addition to breaking out allocations by industry, we also broke them out by tactic.
(1)And what’s interesting here is that you’ll notice in most cases, allocation has increased dramatically.
(2)Except when it comes to radio. And truthfully, radio allocation has shifted from terrestrial radio to online radio, so this budget in a lot of cases has gotten rolled up into the digital budget.
(5)Additionally, we analyzed total marketing spends as a percentage of annual revenue across each category. This is on par with historical data beyond the past ten years. For a Fortune 500 company, the percentage of annual revenue spent on marketing has always been around 1 to 3%. In this year’s case it’s 1.14% with CPG companies being the highest spenders since, as we pointed out, they have to edge out competitors in-store which takes a bit more effort. Our friends in consumer health being the lowest spenders – because, if you have an ailment in most cases you’re going to be seeking out help so they have an easier go at it.
(5)Additionally, we analyzed total marketing spends as a percentage of annual revenue across each category. This is on par with historical data beyond the past ten years. For a Fortune 500 company, the percentage of annual revenue spent on marketing has always been around 1 to 3%. In this year’s case it’s 1.14% with CPG companies being the highest spenders since, as we pointed out, they have to edge out competitors in-store which takes a bit more effort. Our friends in consumer health being the lowest spenders – because, if you have an ailment in most cases you’re going to be seeking out help so they have an easier go at it.
(1)We also analyzed return on investment and if you remember back to one of our first graphs, found something very interesting.
(1)Over the last ten years the marketing allocation for TV has increased 7%.
(1)While only 29% feel that they effectively integrate these channels.
(1)So how did we get here and what can we do to fix things?
(3)Well, while we can look at benchmarking allocations all day in order to move forward we need to look at the marketing services landscape over the last ten years. While the ways to reach consumers have increased and agencies have increase, customer net worth has gone down. Traditional agencies are still focusing dollars on TV since it’s what has kept them going but it’s a bit like fitting a three pronged plug in a two pronged hole.
(2)And why haveagencies increased? Because it’s a way for the traditional agency model to keep the party going.
(1)Historically, old regimes are resistant to change and have flanked procurement by increasing the number of agencies.
(2)But this doesn’t serve the marketer or businesses needs. Instead it leads to an increase in costs (and agency margins) coming from more support teams, agency back office overhead, a duplication of resources, and bigger parties!
(2)So today’s client/agency landscape looks like this. Or more visually.
(1)Like this.
(1)So what’s next?
(1)We believe it’s time for procurement professionals to shine, and if not put an end to the agency party at least help police it a little better.
(1)Three steps to success in doing this are.
(1)All of this information is available in a handout which will be circulated or via our Marketing 2020 Whitepaper which is available for download at convoagency.com/marketing2020.
(1)Thank you for your time, now go forth and conquer!
