Tag Archives: procurement

iMedia Brand Summit 2010 Closing Keynote Talk.

The brand marketers who attended iMedia  2010 were kind enough to vote this the best presentation of the summit. Where I ran videos in the actual presentation you will find pages with the links to the relevant videos on YouTube and, if Steve J hasn’t changed his mind and taken down the iPhone OS 4 / iAd streaming presentation, at Apple.

My thanks once again to:

Ken Mandel of Yahoo and Agatha Yap of McDonalds who recommended me to Ad Tech / iMedia ; Joe at ComScore who provided data; Tom and Jerry (seriously)of MobileNow, the iPhone, iPad & Android app developers in Shanghai for data, insights and magic; Benjamin and Christoph of Wildfire Asia WOM in Singapore and Shanghai for insights, POV and reference leads; Eddie Chau of Brandtology for the topical case study, other great charts and your vision; Josh Sklar of Heresy in Austin, Texas for your insights, the reference links and 15 years of partnership in digital.

It’s all about the Social Graph in action and you guys helped prove it through your excellent input. Again, Thank you all.

There’s a lot happening out there!

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Why Marketing & Procurement Are On A Collision Course In The Web 2.0 Universe, And Beyond.

The environment for most brands is changing fast. A stream of new opportunities keeps flowing – social media, word-of-mouth & location – based mobile marketing right now – and the means to take advantage of them comes increasingly from start-ups. In this universe being entrepreneurial is key to Marketing success and a well-intentioned but misguided Procurement department can be as great a threat to brands as the competition.

Differentiation is Both Quantitative and Qualitative.

Companies have to differentiate what they produce in a relevant way. That makes them stand out against competitors and makes their brands valuable. Ad agencies often do this through distinctive creative output. When they resort to scam ads it suggests they haven’t grasped the ‘relevance’ issue. What marketing service providers must do is to price the value they add, or the savings they generate, for clients. If they don’t their service may seem generic, inviting client Procurement departments to squeeze them on price.

Most procurement methods originated to reduce production costs by managing how standardized commodities and homogeneous goods and services are bought. They are fundamentally quantitative, which leaves qualitative, ideas-based or creative services particularly vulnerable to being under-priced. Recent trends toward quantitative RFPs submitted online with no Marketing department participation and no qualitative performance measures, are clearly misguided and a cause for grave concern.

Don’t get me wrong,  Procurement management is critical for all forms of production. However, marketing services contain creative problem-solving elements – not just ad ideas – which are not homogeneous, and which even their producers struggle to value accurately. I went into this earlier in the post on Creative Services and the Vicious Cycle of Procurement.

Wisely applied, Procurement is Good.

The thing is, successful supply chain cost management is vital to business success. If a company can produce consistent, sustainable, marketable quality at a lower price than its competitors it will tend to gain market share and benefit from economies of scale, all increasing ROI. Marketing services companies need to become just as savvy about Procurement as their clients and must apply it in their own businesses too. That TBWA recently appointed a global head of Procurement makes an interesting statement. That their competitors responded with a deafening silence does too.

Where problems arise is with the “consistent” and “sustainable” aspects in that previous paragraph, especially producing the specialty services provided in marketing communications. For example, media agencies slicing income to win business volume for larger buying discounts, a process rampant for a decade, is an unsustainable “Race To The Bottom”. I wrote on this in ’03 working at Carat (Media, 23 March).

What happens is this: after winning a new piece of business with a low bid, a media agency can only afford to staff it with cheap, lower quality staff, overseen by an overstretched senior if they’re lucky. Procurement is happy but Marketing soon complain of weak advice, errors and unresponsiveness. When it comes to a head they put the media account up for pitch again. Procurement lends a hand and the account goes to the lowest bidder. Work into a lather. Rinse. Repeat. Soon nobody in Marketing has much hair left and all the media agencies are producing poor service and making no money.

What Happens When It’s A Race To The Top?

Procurement departments not used to valuing and buying marketing services often have unrealistic expectations. Network media and ad agencies with big holding company parents have helped those develop. As a result many believe that if you lean on a marketing services supplier they’ll find a way to drop their price and keep providing the service. The near sweat-shop conditions in some major agencies probably prove their point.

However, real trouble strikes when Procurement meets Entrepreneurs. The company best positioned to offer cutting edge social media and other innovative services needed for a brand, is increasingly a relatively new start-up. These new firms are staffed with very focused people with little knowledge of procurement methods, nor time to learn them while pulling 18 hour days. Critically, they have limited funds.  To survive and prosper they must build their business up to long term health as fast as possible. In pioneering fields, for start-up founders, and their angel investors, it’s really a Race To The Top.

Start-ups need business, but not on destructive terms. They realise that quickly, or die. However, as any entrepreneurial 21st Century marketer knows, you need these specialists and their new services to differentiate, defend and build your brands in these exciting but complex new arenas. Currently it’s social media, search, and location-based mobile marketing. There’ll be something more within a year.

The Procurement Curse/Benefit Analysis For Marketers.

Whether it all ends in success or tears for any given marketer depends on three main drivers:

1. the marketing company’s culture – exploratory & innovative Vs scared & defensive;

2. that company’s senior leadership & vision  – supportive Vs punitive and;

3. how well their  Procurement department is trained and for what purpose – pure cost saving Vs helping brands be as competitive as possible.

In the bigger picture this applies to dealing with long established ad and media agencies just as much as to social media engagement experts and branded app developers.

If Marketing gets only what Procurement lets them pay for, the question facing marketers has to be: “Does our Procurement department have the skills to help us buy these services successfully?”

If they do not, they will compel you to use and become, second best.

Explore the Polls: What Will Replace Ad Agencies?

Yesterday’s “Ad Industry Leaders Storm the Exits & Start Innovative Marketing Communications Companies.” triggered lots of comments, emails and calls. Clearly very topical so let’s explore further.

What do you think will replace the Ad Agency? Several forms of organization are being experimented with. Take the poll. Even suggest your own vision.

Ad Industry Leaders Storm the Exits and Start Innovative Marketing Communications Companies.

Thermal Image LED lamp. ©NatGeo/Tyrone Taylor/WWF

Escape To Entrepreneurship

Increasing numbers of senior people are quitting their ad industry jobs. Some out of sheer frustration or exhaustion, but others are starting innovative new marketing communications firms. This is a critical time for an industry in desperate need of reinvention. By joining & supporting these start-ups we can help build a better industry of Marketing Communications Professional Services.

Nine months ago in “Leadership, Management & The Rising Tide”  I wrote of the 150% jump in already employed people looking for jobs. There were 3 main reasons for the surge:

1. my company is going nowhere and our management is clueless at the helm;

2. our bosses keep beating us up because their bosses keep beating them up;

3. my company retrenched so many colleagues I can’t stand working here.

Most wanted a new job because their managers were too useless, too awful, or had damaged companies too badly for quality people to want to work near them any longer. What had been a growing problem before was magnified by the pressures of the Great Recession. Poor managers had been shown up and quality people wanted out!

Now that the economies of many countries are improving and marketers are increasing their communications budgets, people are on the move as predicted. However, there is now a further and more vital driver of their movement – the Escape To Entrepreneurship.

Talented Leaders Are Quitting, but not Leaving.

In June 2009, Omnicom announced Michael Birkin’s resignation as Vice-Chairman of Omnicom Group Inc and CEO of Omnicom Asia-Pacific. Birkin is no holding company leech. He was global CEO of Interbrand for 8 years, during which he invented their Brand Valuation model. He sold Interbrand to Omnicom, who were so impressed they made him head of Omnicom’s Diversified Agency Services division – half the revenues of the entire holding company, then later, CEO of Omnicom Asia-Pacific.

Last month Birkin launched The Red Peak Group. Brand Strategy & Design, Experiential, CRM, Sponsorship… Their clients? Anheuser-Busch, Intel, McDonald’s, Sony Ericsson… Birkin isn’t just the CEO. He’s hands-on as their Chief Strategist and leader of the Intel relationship. How many other CEOs, Presidents and similarly rewarded heavies can you say that about? Most clock few if any billable hours against paying clients. Ask any agency group CFO.

Last week the two top leaders of JWT North America quit to start their own company. Colleagues in JWT and seniors in WPP expressed surprise; even shock. There was probably envy and shame too.

Recently, self-styled “working class heroes” Iris Nation relocated their founder CEO and several top leaders to Asia. They have made it clear they’re not your average UK- or US-centric network. They know where their future revenues, and retirement funds, will come from and have the independence and wisdom to act on it.

Ad agency leaders feel like they’ve been tossed in a river with their arms and legs bound. They get no respite from holding company strictures, so the best they can hope to achieve is to keep their heads above water and be carried down-stream. It’s soul-destroying and prevents them delivering the service improvements marketers need. Rumours are now circulating of breakaway talks among top mar-comms industry leaders, and those talks are including marketers who are equally frustrated with the situation.

Entrepreneurship To The Rescue

There has always been a healthy trend of entrepreneurship in the marketing communications industry. A steady flow of visionaries, and of the frustrated, leaving to do their own thing. It used to keep the industry fresh, creative and adapted to the changing world, but in recent years too much of that innovative energy has been siphoned off into holding company acquisitions and management service fees.

Many of the best brains in the business work in the holding companies which acquired their businesses. From there they can do little, despite all their talent and skill, to reinvent the industry that made them rich and famous. These are the people who have done it before, know how to succeed, have the money to break away again and are a powerful force for good in starting or helping new ventures in marketing communications.

Rumours are that more of these, like Birkin, are starting to move en masse. If so, that’s great news. It couldn’t come at a better time to save the marketing communications industry.

Critically, marketing communications entrepreneurs must address the 7 pressing issues of:

1. Delivering consulting grade recommendations with fully integrated planning, technology, content management and business building ideas;

2. Getting paid fairly for all that despite the rise of qualitatively illiterate Procurement departments;

3. Tracking and proving the value they add, instead of just winging it old-school style, which will help keep Procurement at bay;

4. Recruiting, training and retaining top quality people including industry outsiders with the new skills needed – content strategy, mobile technology, data analytics and visualization & neuroscientific research included;

5. Rewarding all their people honestly and properly for their efforts;

6. Staffing to the right levels instead of driving their people to exhaustion, stress, despair and depression, none of which produces great thinking, unique ideas or added value and;

7. Resisting the temptation to sell to one of the holding companies as the exit strategy. A good-sized block of stock in a thriving independent will make a much better retirement annuity.

It takes the right people in the right environment with time to think and work things through to deliver a professional service. Pressure, fear and panic give bad advice.

Treat them any other way and quality, professional people simply storm the exits.

How Ad Agencies Could Learn To Stop Worrying And Love Crowdsourcing

Is crowdsourcing a riot that'll wreck ad agencies or an innovation that'll save them?

Mention crowdsourcing over a meal with ad agency pals you’re likely to put them off their food, and you, for some time.

For a creative, liberal, experimental, edgy, fashion-aware, up-to-date industry, it seems advertising is very conservative and defensive about crowdsourcing ideas for their clients.

The most common reaction is “But ideas are OUR business”.  Perhaps. Even if you aren’t getting paid for your ideas because much of the industry is half-way between the old commission model and being hung on the FTE cross by Procurement (see earlier posts on this blog).

Last year Unilever used it, for Peperami in the UK, causing lots of dark muttering in the trade press. They used IdeaBounty (Slogan: “The best ideas get paid“) as lead agency and dumped Lowe from the brand altogether. Another key crowdsourcing player, BootB call themselves “The Borderless Creative Engine”. Their web-site runs in 14 languages including Arabic and Simplified Chinese, proving their point. Check out the clients listed on both web-sites. Big names.

For Peperami it was discovered, once the feathers had been swept away, that the winning ideas were thought up by a copywriter in London and a Creative Director in Munich, both of whom had recently been made redundant. The selected ideas were produced through a specialist agency called Smart Works.

In the USA, Frito-Lay brand Doritos has made a Super Bowl Special out of crowdsourcing. This is the fourth year that they’ve put crowdsourced ideas to work. 4,064 videos were submitted this season and they’re all available on the Doritos “Crash the Super Bowl Contest” site. The landing page features the four winners and two runners-up. The rest are in a 362 page gallery. The Herbert Brothers (two then-unemployed guys from Batesville, Indiana) who created the Doritos big winner for Super Bowl XLIII in 2009, are also featured.

The top 20 commercials aired at Super Bowl XLIV this year include Doritos in 2nd, 11th, 14th and 17th places as ranked by the USA Today AdMeter poll. They also topped the Visible Measures most watched viral videos listing week commencing 1st March 2010.

Marketers turning to crowd-sourcing seems to reflect a combination of 4 things:

1. Frustration with the speed and calibre of ideas from their agencies;

2. Giving their less adventurous ad agencies a firm shove in a new direction;

3. Exploring ways to get more for their money, including better results;

4. Getting their feet wet for educational and publicity reasons. It certainly did the latter for Unilever with Peperami and seems to work well for Doritos where the crowdsourcing idea has become a key brand attribute.

Instead of panicking, perhaps the ad industry should take another look at crowdsourcing but with their innovation hats on. There’s a whole new model for the ad business here and when it takes off …

For those who still don’t want to look too closely, think of it as bringing in free-lances. From the whole world. And you only pay for the ideas you use. The best ones.

There will still need to be a strong ad team at the core representing all disciplines and collaborating closely with clients. Their responsibility, finally, will be the Brand itself. The core idea of the Brand will remain the preserve of that marketer/ad agency team, as will the management of the communication platform. It’s expressions of that core idea that will get “free-lanced”.

I wonder which ad agency will crack first.

Oh, hold on. Goodby, Silverstein & Partners managed the entire “Crash the Super Bowl 2010” process.

OK, then I wonder which holding company will crack first and buy BootB. Anyone care to bet?

5 Ways The Ad Industry Stumbled & 5 Ways To Rebuild It, Only Better.

Yes, you got burned. Now come back stronger!

Reading the trade press one would think the ad industry has suddenly and unexpectedly fallen on hard times.

It hasn’t. The current shake-out has been a long time coming.

Here are 5 industry features which combined to cause the collapse:

1. Miguided creativity. Many Creative Directors and their ad agencies shifted their focus and that of their staff, away from their real purpose.

They used to produce marketing communications to engage consumers, build brands and help drive sales for their clients. Now one would be forgiven for thinking that they prefer making ads for each other. Scam ads and festivals of self-congratulation have put this into sharp focus, making marketers question the professionalism and value of the industry.

Why did it happen? Ego, bad HR practices, poor leadership and forgetting the essential role advertising is supposed to fill in the marketing mix.

2. Laziness, Fear, Maybe Arrogance. Continuing to use Transmission Model thinking. ‘Brand advertising’, like 30 second TVCs. The industry failed to embrace the digital media era and become truly consumer/user centric; listening to them and letting them search for and find marketers doing the right things in the right places. Failing to be idea-focused and media-agnostic. Too many ad types tried to stick to what they were comfy with. Digital, direct, sponsorship, PR and events remained 2nd class colleagues in silos; afterthoughts to be briefed only once the Big (all too often TV) idea had been “cracked”, or were left out of the picture altogether;

3. Failing to add & track value. Trying to perpetuate an archaic revenue and overall business model with little or no value-based or performance-linked component in their remuneration. An approach where the value added is not tracked, recognized and as a result often not rewarded either.

4. Failure to invest. Take a good look at the holding company model. While there have been some benefits of size, have they improved what the ad agencies within them actually do? Not really. In fact, the holding companies have become distractions for agency management and hindrances to progressing the craft. This simply because they siphon profits from front-line companies which need the money to retain and train the best people, conduct research and pilot new techniques to add value to clients’ business (see 3. above);

5. Strategic blindness. Earlier, ad agency groups un-bundled media planning and buying from the development and creation of advertising which everyone seemed to believe was their main business. That divorced media strategy from brand communication strategy and handed over the data & analytics too.

More recently the industry failed to recognize the impact of online advertising and social media. Ad industry leaders are now under immense pressure.  Digital is for them a poorly understood rod with which they are now being beaten. Added to that, marketers made major budget cuts during the downturn, reviewed their approach to marketing and are demanding real results (see Value) whilst Procurement has also become a permanent stakeholder at the table (see earlier post Creative Services & The Vicious Cycle of Procurement). All rather challenging for the old school mentality.

Here’s hope for a brighter future.

Now marketer budgets are slowly rising again. The more sophisticated ones pulled back very little anyway, knowing one cannot cost-cut one’s way to market leadership. The problem for most ad companies now will be how to gain, retain and make money on a share of that re-instated spending because the business has changed substantially.

Here are 5 ways the ad industry can make real changes to evolve into a better professional services sector.

1. Focus on adding, and invest in tracking, the value you create. Ask “how will this improve our client’s business results and how will we track how well it does that?” If you can’t prove a clear connection to improved desirability, higher perceived value or better service perceptions, or to lower costs of achieving the same or better sales and branding scores for your client, think again.

2. Return to deeply understanding the target prospects. If you know them deeply – especially their motivations, communication profiles and online behaviour – and better than your clients, you will be able to lead your clients professionally producing work which truly adds value and justifies a decent margin.

3. Charge, and get paid, for Ideas. Marketers need to pay you on the basis of the ideas you create and implement and the impact of those on their marketing KPIs. Paying you on the basis of the media spend behind your ideas is lazy and unprofessional on both sides. Yes, it has been a long standing tradition that clients get free ideas, but as both sides must finally have noticed by now, the world has changed and the old commission model is broken.

4. Embrace Procurement. Procurement is here to stay in contract negotiations, in getting paid each month and in annual or semi-annual performance reviews. Learn from it and make the most of it. Clients want results, so negotiate with them a data-based way to track your performance on appropriate KPIs and make sure they commit to providing the data needed from their side to do this. Learn, and run your own company with the same degree of attention to supplier costs, results, transparency and fat trimming or frankly, you are doomed.

5. Have fewer, better people who are better paid, better equipped and better led. Yes, there is such a thing as critical mass, but you need to be pragmatic and deal with the realities of your business. Size is not everything. Clients want leadership and service from experienced, quality people and will pay for the value they add. If you don’t have sufficiently skilled, motivated, talented people to deliver on that, you will not succeed, let alone prosper.

Get it right and you will keep the business you have, earn bonuses and better payment terms on it, win yet more business and have future clients and talented potential staff banging on your door.

OK, you may be feeling like you’re sitting in a pile of ashes. Rise from them as something a whole lot better. Good luck.

Creative Services & The Vicious Cycle of Procurement

ouroboros_by_Saki_BlackWing

ouroboros by Saki BlackWing

Creative services aren’t generic.

They are unique. They have to be. Without uniqueness they can’t add value. That goes for content like advertising, design, games, on-line worlds and music. It goes for idea based consulting like branding, communications and media strategy and the plans to implement them.

Their uniqueness depends on the backgrounds, experience, inspiration and leadership of the people creating them. They are creations of unique individuals for unique circumstances.

Experience and the ability to produce high quality, unique creative ideas set salaries for those who create them. The less one is prepared to pay, the lower the quality one should expect.

The increasing role of procurement in buying creative and strategy services from advertising, media planning and branding industries may indeed save marketers some money, but can have undesirable consequences.

Not least the loss of the very thing that makes creative services valuable – their unique ability to add value to the procurer’s business.

The result? As procurement drives down the cost of buying those services it will drive down their value. With that will come dissatisfaction with those services, canceling of contracts and the appointment of the next low cost bidder. The vicious cycle will continue and the problem will worsen.

The solution? Innovations in procurement to correctly value creative services. This is easier in the on-line space where accountability is high. Off-line it may take longer.

At the same time the providers of creative services must improve leadership, innovation and accountability to improve their ability to deliver and value what they do.

Finally, both sides must realize they share  the common goal of adding higher value to brands and their owners through superior creative ideas and innovation.