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welcome to knowledge at Wharton for this interview with harish image and he is a
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principal in the Chicago office of the boston consulting group and we're going
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to talk about a challenge that a lot of big companies face in an age of global advertising and global marketing and
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that is if you're a big company operating across 50 or 100 or more countries and perhaps dealing with a
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thousand or more outside agencies how do you harmonize all that how do you make sure that you're getting the most
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efficiencies out of your spend and also in getting the clearest message across to your customers so harish thank you
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for joining us it's my pleasure thanks and starting from that context any time
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a company works with hundreds of suppliers or even thousands of suppliers it's inevitable I would think that some
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inefficiencies are going to creep into the supply chain so there's no reason
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that marketing or advertising would be different it's just a service rather than ordering parts for widgets so could
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you give me an idea i know you've looked at this problem closely and worked with
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companies give us an overview of what the problem is and and and ways to think about improving the situation yeah
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absolutely so this has certainly been a topic top of mind for a lot of senior executives across especially the
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consumer products areas but also other industries as well but within consumer products themselves the challenge has
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become that the marketing budgets themselves have become you know upwards of ten percent of revenues for a lot of
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big companies so you're talking billions of dollars of spend and within that more
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and more in the analyst calls investors are actually pushing to make sure that companies are getting value for that
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scale but the challenge comes in that with that scale comes complexity and lack of transparency in terms of what's
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actually going on because you're going from an environment where you had you
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know single market single brand kind of businesses to 50-plus global markets managing multi-brand portfolios so the
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ability for you to be able to actually manage that as a CMO is really really challenging and the procurement function
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is in the role to be able to help them actually some of that spin and so the companies
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that we've worked with you know we've worked with many many lot of the largest
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consumer products companies in the world you know over 50 billion dollars in size
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and some of the key themes that we've heard that you know people are under more pressure to be able to deliver
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value and to show that they're improving and some of the biggest sources of inefficiency that we've seen around
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really three areas so you talked about the agency proliferation the number of agencies that they're working within the
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rapid expansion of that so being able to help manage some of that the second is getting an understanding of what value
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they're getting for what they're spending with those agencies so are they
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actually getting market competitive rates are they actually getting you know the right service levels that they need
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to be able to deliver the highest quality product and finally and actually the most valuable but most challenging
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is the fundamental approach to brand building so we call it ways of working and what did what are the actual
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approaches in terms of the efficiencies and ways in which the marketers operate to be able to actually root out the core
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inefficiencies could you give us an example of what this looks like on the ground in real life the kind of problems
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that accompanies facing yeah absolutely so one simple example is the agency briefing process and so you would think
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being able to inform a company about how they're going to do the marketing campaign what they're looking for for
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say a TV ad we've heard examples from people on the agency side that sometimes
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they'll get a call from a marketer who's on the subway for a million-dollar ad
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campaign giving them the brief and you know it generates a week's worth of work
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and then they come back and then they realize oh that's not exactly what I was
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looking for so lack of clarity not only increases cost for the agency but it also increases frustration for your
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ability to actually get the best talent from the agency itself and so you found that within different agency teams or
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within the different brand teams within it for the consumer product side that companies sometimes don't actually have
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consistency in terms of how they're actually briefing the agencies so by being able to have greater consistency
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in terms of how you actually produce the agency so what information are you trying to
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capture what are the metrics are going to use being very clear around what those components are you can actually
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eliminate a lot of the inefficiency and a lot of the cost why are companies getting questions from analysts now
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about this hasn't this always been a problem we've had globalized advertising
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for some time it's not brand new they've been spending lots of money what why the
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sudden notice for this issue yeah i think the total dollars of spend has continued to increase so on an absolute
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basis it continues to grow and the second piece around it is that with the proliferation fragmentation of media has
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resulted in actually proliferation of the agencies that people are using and so you know the agency rosters have
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drastically expanded over the years to be able to have you know specific types of agencies for each type of media and
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as a result you're actually getting less and less clarity in terms of who you're
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operating with who you're working with and more brand handoffs over time and so
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this big bucket of spend around advertising and marketing it's become a big deal because there's basically an
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arms race in consumer products companies of who can get their message more in front of the consumer than anyone else
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and one of the key things and metrics that we typically look at is around working to non working span so working
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is the dollars of marketing that you spend that gets in front of consumers versus the non-working side which is the
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money that you're spending to create those advertising and so as a result of
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that what we're seeing is that analysts and investors are becoming more attuned
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and more astute about those different components of it and are pressuring companies to make sure that they're
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actually getting their brands in front of consumers more because if you're not
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your competitors are to what extent is the digital world driving this or how big of a part is it if it's not driving
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it yeah it's probably increasingly important so for some large companies digital can compose twenty to
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twenty-five percent of their total marketing budgets but it's not actually the biggest driver the biggest driver is
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still traditional media and traditional television that's where the dollars are
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but as digital becomes an increasingly large component of the business those working to non-working
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ratios actually four digital typically look a little bit worse because the CPM rates are not all that high for a lot of
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those different online properties versus the cost it tastes to actually produce the content so it actually makes it even
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more important for a company to be diligent in terms of how they manage that spin so that they can actually
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continue to make sure that they're getting what they need as well within the capabilities for what they need in
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the agencies initially the belief was that you had to go through these boutique agencies to be able to get
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those niche specific digital capabilities that may or may not be the case anymore where do you find the
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biggest inefficiencies it's certainly at its core in the marketing processes of
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the organization so being able to set brand strategies in a consistent way making sure you're very diligent about
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who has the decision rights to do advertising copy the briefing process which we had talked about and then more
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simply around the agency engagement process so who can actually sign up an agency and who has the authority to be
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able to actually do that so decision rights and I'll dive in a little bit around the piece around ad copy so one
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of the biggest spends is around ad production and advertising copy so that's really what drives a lot of that
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and so being able to be smart about what is the size of the business that you need what is the size of the potential
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media that you're going to spend against it and how does that inform the budget
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you need to have to be able to create the copy so if you're a brand manager in
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a small market you know your incentive is to want to create the best possible ad copy and you want to get awards for
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and you want to go to Cannes and be part of that festivity because you created the best ad which is a great goal but
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from a business standpoint and may or may not actually make sense because the size of the market needs to dictate what
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the value is and how much you spend for that and so there are times where maybe you should create new ads if you're in a
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major market or if it's going to be cutting across markets versus there are times maybe they ran an
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ad in an adjacent country that you could potentially adapt to be able to actually
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apply on your own to save cause when we talk about saving cost how much are we talking about in potential savings yeah
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absolutely so in terms of resetting agency negotiations and through consolidation we've seen upwards of ten
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to twenty percent of the advertising agency expense costs from the broader changing marketing ways of working it's
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upwards of twenty percent of the non-working spend so it's actually very very material what are the potential
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pitfalls what do people have to be careful about when they sort of lift the hood and start messing with something
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that's working to some degree but you know of course you're saying that it can
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be improved quite a bit yeah absolutely i think when we've done this with other
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companies before the key learning that i have had is that the key to success is actually getting senior management
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buy-in and being able to make it cross-functional so the efforts where it was procurement led where people had the
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perception that there's a procurement hammer coming to try to hammer out the
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best rates those are the ones that were actually the least effective that's the
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traditional way people have thought about it and we've really innovated in terms of how we have to think about that
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approach because by being able to make it a marketing lead effort with the engagement and support of procurement
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you actually change that dynamic quite a bit and being able to actually get the right people in the room and be able to
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have the people who are going to be owning the business long term helping to drive some of those changes those are
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some of the biggest value pieces that we've seen so part of the aim is to consolidate the number of agencies
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you're working with you gain efficiencies by doing that what are the most important factors for success in
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this consolidation process so being able to be very clear in terms of having transparency of
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who you work with and getting a baseline for that first so you'd be surprised how
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many companies that we've met that actually don't have visibility to how
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many agencies are even working with and so the first step is actually getting transparency to that creating a roster
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and then from there actually as a senior leadership team in the marketing function being able to work with
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procurement and finance to understand who are actually the priority agencies we want to work with what are the key
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capabilities that we actually need going forward and how do we actually be able to focus our efforts to be able to get
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those to those agencies right and it's certainly an emotional process because a
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lot of times there are specific people who may have affinity with a specific agency for type of work but ultimately
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what we found is that the places that are most affected being able to do this actually do it in a very fact-based way
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and see in terms of what are the results that they need to get what are the teams
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that are going to be able to deliver that and then being able to extract from kind of the emotional side of it to be
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able to actually make sure that you're aligning people in the process to get to
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the results what metrics do you find most valuable as you go through this process sometimes the first simple one
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is this working to non-working ratio and so getting an understanding of what percent of your marketing spend is going
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in front of consumer advertising so things like buying the media or if you're sponsoring sports teams and
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getting your brand's actually in front of consumers and we typically expect that to be about eighty percent of what
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consumer companies are spending it varies based on the type of media's that you use but you know that's generally a
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rough rule of thumb and and then the remaining twenty percent around the non-working side so you've got your
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agency expenses and all your data needs and things like that to be able to support the business so being using that
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as a first cut to be able to understand are we being efficient with terms of how
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we're spending that money is usually the first metric that we use to be able to
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understand what that is the second is a simple one of how many agencies are we actually working with and
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what are we spending with them to be able to get an assessment of like do we believe that this is actually the right
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number for our organization because ultimately we will mirror our suppliers and so if we have a highly fragmented
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supplier base which is you know taking up a lot of our time our marketer is going to be spend more time managing the
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suppliers and they are actually managing the brands which companies benefit most
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by looking at the non-working spend it's really any company that has a material
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marketing spend so the companies that have been really at the forefront of this are very much on the consumer
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product side so they're the ones who have been really pushing and you can see
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in a lot of the investor relations and public reports of CEOs and CFOs of big global consumer products companies
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talking about this this specific issue but that being said in the past probably six months to nine months we've been
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getting more and more calls from clients in the pharmaceutical space from financial services from retail as they
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start to think about you know we are really spending a lot of money in this and the procurement functions
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particularly in a place like financial services have not historically been as robust particularly around the A&M side
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and so being able to get people to start thinking about this to get better efficiency has certainly been a big
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opportunity in terms of for them to unlock value overall what's the best way
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for companies to think about this problem and how to begin to tackle it it's a good question i think the
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playbook that i would probably think about for most companies would be around really three levers the first is getting
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a very clear assessment of the agencies that you work with and what that roster looks like and making very strategic
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choices around who you want to work with and what that supplier profile should look like the second is around what
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you're actually paying and the race that you're getting for those agencies so
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over time the rates that you're paying most of these agencies can actually deviate from benchmark and best-in-class
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and so how do you actually make sure you're resetting it to get the value that you'd expect and third it's really
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the biggest value driver is by taking a very clear approach to your ways of working in marketing itself to root out
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the inefficiencies that drive cost so being very disciplined in terms of creating a set of approaches on how you
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want to operate as a marketing organization clear decision rights and how that operates and being able to have
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a single approach to how you do brand building within an organization which can unlock upwards of twenty percent of
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savings okay thank you very much great thank you you