Post on 20-Jan-2015
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Marketing Procurement: Three is Company, More is a Crowdor "Benchmarking Marketing Spend Requirements of Different Industries”
www.convoagency.com
the new traditional agency
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
CONVERSATION
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partial client list
Total Ad Spends
recent recognition
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BEHIND OUR WALLS
lifting the curtain
a quick story of three people:
and Procurement
Banker/SuitType
The Agency, The Marketing Team,
Question: Why is Don Draper nervous?
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because procurement is going to take his suit!!!
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from don draper to donny deutsch:agencies and marketing teamshave learned to play the game
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agencies became friends with clients and brought them along for the party! who doesn’t
like a good party?
how?over the years,
but over the last ten years,this story has gotten more and more interesting.
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Fragmentation and segmentation of marketing Tactics.
28% increase in the number of agencies from 2002-2012.
DECREASE in net-worthof households.
This doesn’t add up.
sometimes we all need a friend to tell us when enough is enough.(that’s where procurement comes in)
as much as we hate to admit it,
BENCHMARKING
taking a step back,let’s talk about
let’s look at
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
BENCHMARKING – BY CATEGORY
where were ad dollars spent in 2002?Total Ad Spends
where we are todayBENCHMARKING – TOTAL SPEND
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
where were ad dollars spent in 2011?Total Ad Spends
where we are todayBENCHMARKING – TOTAL SPEND
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
2002
where we are todayBENCHMARKING – BY CATEGORY
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
We took this a step further and analyzed the breakout of spend across categories:
why do they spendTHE DECISION MAKING CONTINUUM
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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.
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.
why do they spendTHE DECISION MAKING CONTINUUM
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why do they spendALIGNING TACTICS WITH OBJECTIVES
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let’s talk about BENCHMARKING – BY TACTIC
TV
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TV
SOURCE: Analysis of Fortune 500 Annual Reports
When analyzing benchmarks by tactic you will see that from 2002-2012 across all tactics spending has increased…
let’s talk about BENCHMARKING – BY TACTIC
TV
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SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk about BENCHMARKING – BY TACTIC
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DIGITAL
SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk about BENCHMARKING – BY TACTIC
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OUTDOOR
SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk about BENCHMARKING – BY TACTIC
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RADIO
SOURCE: Analysis of Fortune 500 Annual Reports
Except for radio, however radio budgets are now sometimes absorbed into digital due to online and satellite radio so the number is skewed.
let’s talk about BENCHMARKING – BY CATEGORY
convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
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)
let’s talk about
how much do they spend?
BENCHMARKING – BY CATEGORY
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MARKETING SPEND AS PERCENTAGE OF ANNUAL
REVENUE
SOURCE: Analysis of Fortune 500 Annual Reports
what is wrong with this picture?BENCHMARKING – RETURN ON INVESTMENT
2002
There is a disconnect when looking at ROI though:
what is wrong with this picture?BENCHMARKING – RETURN ON INVESTMENT
2002TV MARKETING ALLOCATION
TV has had the highest increase in allocation, but is the least effective.
additionally...
what else is surprising…
of marketers believe successfully integrating multiple channels under a single strategy is critical to long-term success. 86%
feel that theyeffectively integrate these channels.
yet only
29%
SOURCE: Sitecore/Forrester Research convoagency.com
WHAT CAN WE DO?
how did we get here?
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.
where we’ve beenBENCHMARKING
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
old regimes resistant to change have flanked you.they have found a way to protect their model.
why?
An increase in costs
what does this mean to procurement and marketing?
but it doesn’t solve any problems.
• support teams
• back office overhead
• duplicate resources
• BIGGER PARTIES!!!
what does the party look like now?
convoagency.com or more visually…
YOUR MOVE
moving forward
it’s time to shineprocurement can help fix the problem.
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.
three steps to success:
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).
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for more info
Download our White Paper @ convoagency.com/marketing2020
and view the infographic!
thank youfrank.obrien@convoagency.com212.389.9782917.583.4207917.591.5479
convoagency.com 18 west 23rd st penthouse new york ny 10010
Download our White Paper @ convoagency.com/marketing2020