Many large advertisers have well-trained, sophisticated full time people on their Procurement staff to work with the Chief Marketing Officer. They assure that maximum cost controls are in place during all phases of the marketing and advertising process. It is basically designed to reduced costs and manage profitability at “Best Practice” levels. Procurement is not a revenue generating, business building responsibility that often requires investment. That is usually the domain of the CMO.
While both the CMO and CPO should work together and serve a vital purpose in the company, many mid-size marketing organizations do not have the resources to engage an in-house Procurement staff. Drexler/Fajen & Partners can be a valuable asset to that organization.
DFP has built a ten-step assessment model to develop, monitor and audit the marketing initiatives of mid-level companies to drive them to “Best Practice” levels. It was created to manage costs, reduce waste and identify best practices emanating from our work with many clients. Each of the principals, Mike Drexler and Steve Fajen, have more than 40 years of experience with advertisers, agencies and media companies.
Here is how we examine the procurement function and would work with mid-size advertisers:
1. Diagnostics – Disciplined insight interviews with relevant executives at client and agency organizations
Support – “On average, 30% of an agency’s effort is wasted due to poor briefing”
– Association of National Advertisers in the preface to the 2011 ANA Financial Management Conference May 2011.
2. Relationship Monitor – Collaborative evaluation tools measuring client and agency performance against benchmarks
Support – “78% of major advertisers monitor their agency’s performance”
– ANA Survey 2010.
3. Target Evaluation – Efficacy analysis of targets selected for advertising in terms of demographics, psychographics, geography and timing
Support - “The biggest cost of advertising is paying for ineffective campaigns. My estimate is that’s 35% of advertising dollars is wasted due to miss-targeted, miss- scheduled and miss-timed commercials.”
– Erwin Ephron: lifetime achievement award winner from Advertising Research Foundation.
4. Media Delivery and Efficiency (Quantitative) – Benchmarking of pricing for all major media types, traditional and digital, against marketplace norms
Support – “Right selection could save up to 30% on digital media”
– Double Verify
5. Media Content (Qualitative) – Evaluation of buying specifications to create parameters for type of buy in all major media types Support – “Right selection could save up to 15% on traditional media”
6. Agency Staffing Assessment – Evaluation of Full-Time-Employees assigned to the client based on scope of work for specific deliverables.
Support- “Unless the scope of work is clearly defined it is impossible for anagency to accurately staff and resource the business to the client’s needs. This could save at least one agency FTE and probably much more. One FTE is worth about $200,000+”
- Mike Farmer, Farmer & Co.
7. Media Agency Compensation Benchmarking (Economics) – Assessment of compensation arrangement with media agency against marketplace norms
Support – “Avoiding the use of hourly rates can save a client more than 25% in compensation costs.”
– Steve Fajen, SFC
8. Incentive Compensation Evaluation – Assessment of potential incentive plan between client and agency
Support – “63% of clients say incentives improve agency performance”
–Association of National Advertisers & Jones, Lundin, Beals
9. Identification of improvements – Summation of elements that could be improved and their monetization
Support – “Today, the average client/agency relationship lasts less than four years wasting enormous amounts of time and money.”
– Association of National Advertisers and American Association of Advertising Agencies statistic.
10. Recommendations – Final report
Assessment period: Usually three months
Cost: Generally less than the price of a thirty second prime time commercial
Questions That Will Be Answered:
1. Do we have a best practice process in place?
2. Is our relationship with our agency productive by marketplace standards?
3. Are we targeting the right consumers, optimizing our return on investment (ROI)?
4. Are we paying media prices that beat marketplace norms?
5. Are the media buys we make of the highest quality?
6. Are we paying our agency a fair price or too much?
7. Should we be incentivizing the agency?
8. Has the agency staffed our business properly, with the necessary transparency, to
make an acceptable profit?
9. What improvements could we make?
10. What additional recommendations should be made?