Table Stakes

By Steve Fajen

Your chair at the poker table has four legs and they are all broken. Some players are inexperienced or don’t know all the rules and nuances of the game.  Here are four pieces of expert testimony describing the traps present during an agency review, relationship repair or compensation assessment, three of the most high stakes games in our business.

1. THE ANTE – Poor Briefings:

“On average, 30% of an agency’s effort is wasted due to poor briefing” – quote from Association of National Advertisers in the preface to the 2011 ANA Financial Management Conference May 2011.

2. THE OPENING BET – Misguided Strategies:

“The biggest cost of advertising is paying for ineffective campaigns. My estimate is that’s 35% of advertising dollars are wasted due to mis-targeted, mis-scheduled commercials.” – quote from Erwin Ephron: lifetime achievement award winner from Advertising Research Foundation after evaluating dozens of marketing models.

3. STAYING IN – Wasted Delivery:

With an aggregated investment of over $1 billion in media modeling: “37% of advertising budgets are wasted.” – What Sticks by Rex Briggs and Greg Stuart

4. THE FINAL WAGER – On and Off-line Monitoring:

“The right media selection could save up to 15% on traditional media and 30% on digital “ – M-IQ and Double Verify

These statements are astonishing and when taken together on a compounded basis reflect a combined waste of 75% of the marketing investment.  Any one problem alone is intolerable especially given today’s unstable economic environment.  At a time when procurement is charged with driving the best possible deal for the most value, these statements are very disturbing.  How can a marketer run a review, repair or compensation assessment without the proper experience and resources and still feel that they’re safeguarding their investment with the best possible insurance? It’s not just about auditing the past, especially in media.  That money has already been spent.  It’s about knowing what the right strategy is for the present and the future.  Consulting is different than auditing.

Yet, the trend of the last several years has been for marketers to save money by running reviews, repairs and compensation assessments themselves (sometimes with an auditor), bypassing expert assistance from qualified consultants who have the experience to avoid the four traps, which are all strategic in nature.  We consultants have not been vocal enough about our value for fear of being misunderstood as devaluing client procurement and marketing.  That’s nonsense.  The consultants I know have the highest regard for our client marketing and procurement colleagues.  But, it’s time we consultants speak out in our own behalf because we know much more about these critical issues than clients and auditors do. It costs so little to protect the marketing investment by using a consultant and it cannot only save but make so much more of that investment. Here’s a hypothetical example.

“Arithmetic is not an opinion.” – Italian proverb

Sales

$100.00

Advertising

$   5.00

Agency compensation

$      .50

Compensation savings

$      .05

Sales increase

$   1.00

Consulting Fees

$     .005

This client has $100 in sales and spends 5% on advertising ($5).  10% of that goes to the agency (50 cents).  If the consultant saves the marketer 10% on compensation during a review or repair, that’s a nickel (5 cents).  If the right agency selection or repair increases sales by just 1%, that’s a $1.  Finally, if the consultant returns just ten times their fee in agency compensation savings alone, that’s a fee of one-half a penny (.oo5).  Half penny consulting fee, five dollar return.

In the real world, this translates to a $2B brand, with $21M return in savings and incremental revenue and a consulting fee of $100k.

That’s a return of two hundred and ten times the consulting fee.

So my question is this – Who among us would not invest a half a penny to win the jack-pot and a secure future?  Would you really rather save the half penny (not hire a consultant) and risk going to the table alone, probably not as knowledgeable about the game, its rules, traps, bluffs and nuances?

Use a consultant for a review, repair or assessment.  You will be glad you did.

 

 

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