Marketing Procurement: Three is Company, More is a Crowdor "Benchmarking Marketing Spend Requirements of Different Industries”

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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?

6

because procurement is going to take his suit!!!

$$$

$$$

$$

$$

$

from don draper to donny deutsch:agencies and marketing teamshave learned to play the game

8

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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PRINT

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