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welcome to knowledge at Wharton for this
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interview with harish image and he is a
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principal in the Chicago office of the
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boston consulting group and we're going
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to talk about a challenge that a lot of
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big companies face in an age of global
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advertising and global marketing and
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that is if you're a big company
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operating across 50 or 100 or more
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countries and perhaps dealing with a
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thousand or more outside agencies how do
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you harmonize all that how do you make
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sure that you're getting the most
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efficiencies out of your spend and also
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in getting the clearest message across
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to your customers so harish thank you
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for joining us it's my pleasure thanks
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and starting from that context any time
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a company works with hundreds of
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suppliers or even thousands of suppliers
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it's inevitable I would think that some
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inefficiencies are going to creep into
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the supply chain so there's no reason
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that marketing or advertising would be
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different it's just a service rather
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than ordering parts for widgets so could
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you give me an idea i know you've looked
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at this problem closely and worked with
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companies give us an overview of what
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the problem is and and and ways to think
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about improving the situation yeah
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absolutely so this has certainly been a
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topic top of mind for a lot of senior
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executives across especially the
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consumer products areas but also other
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industries as well but within consumer
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products themselves the challenge has
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become that the marketing budgets
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themselves have become you know upwards
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of ten percent of revenues for a lot of
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big companies so you're talking billions
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of dollars of spend and within that more
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and more in the analyst calls investors
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are actually pushing to make sure that
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companies are getting value for that
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scale but the challenge comes in that
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with that scale comes complexity and
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lack of transparency in terms of what's
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actually going on because you're going
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from an environment where you had you
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know single market single brand kind of
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businesses to 50-plus global markets
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managing multi-brand portfolios so the
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ability for you to be able to actually
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manage that as a CMO is really really
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challenging and the procurement function
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is in the role to be able to help them
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actually
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some of that spin and so the companies
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that we've worked with you know we've
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worked with many many lot of the largest
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consumer products companies in the world
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you know over 50 billion dollars in size
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and some of the key themes that we've
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heard that you know people are under
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more pressure to be able to deliver
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value and to show that they're improving
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and some of the biggest sources of
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inefficiency that we've seen around
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really three areas so you talked about
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the agency proliferation the number of
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agencies that they're working within the
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rapid expansion of that so being able to
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help manage some of that the second is
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getting an understanding of what value
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they're getting for what they're
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spending with those agencies so are they
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actually getting market competitive
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rates are they actually getting you know
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the right service levels that they need
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to be able to deliver the highest
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quality product and finally and actually
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the most valuable but most challenging
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is the fundamental approach to brand
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building so we call it ways of working
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and what did what are the actual
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approaches in terms of the efficiencies
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and ways in which the marketers operate
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to be able to actually root out the core
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inefficiencies could you give us an
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example of what this looks like on the
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ground in real life the kind of problems
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that accompanies facing yeah absolutely
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so one simple example is the agency
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briefing process and so you would think
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being able to inform a company about how
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they're going to do the marketing
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campaign what they're looking for for
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say a TV ad we've heard examples from
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people on the agency side that sometimes
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they'll get a call from a marketer who's
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on the subway for a million-dollar ad
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campaign giving them the brief and you
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know it generates a week's worth of work
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and then they come back and then they
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realize oh that's not exactly what I was
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looking for so lack of clarity not only
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increases cost for the agency but it
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also increases frustration for your
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ability to actually get the best talent
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from the agency itself and so you found
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that within different agency teams or
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within the different brand teams within
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it for the consumer product side that
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companies sometimes don't actually have
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consistency in terms of how they're
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actually briefing the agencies so by
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being able to have greater consistency
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in terms of how you actually produce the
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agency so what information are you
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trying to
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capture what are the metrics are going
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to use being very clear around what
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those components are you can actually
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eliminate a lot of the inefficiency and
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a lot of the cost why are companies
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getting questions from analysts now
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about this hasn't this always been a
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problem we've had globalized advertising
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for some time it's not brand new they've
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been spending lots of money what why the
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sudden notice for this issue yeah i
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think the total dollars of spend has
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continued to increase so on an absolute
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basis it continues to grow and the
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second piece around it is that with the
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proliferation fragmentation of media has
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resulted in actually proliferation of
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the agencies that people are using and
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so you know the agency rosters have
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drastically expanded over the years to
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be able to have you know specific types
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of agencies for each type of media and
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as a result you're actually getting less
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and less clarity in terms of who you're
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operating with who you're working with
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and more brand handoffs over time and so
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this big bucket of spend around
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advertising and marketing it's become a
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big deal because there's basically an
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arms race in consumer products companies
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of who can get their message more in
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front of the consumer than anyone else
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and one of the key things and metrics
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that we typically look at is around
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working to non working span so working
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is the dollars of marketing that you
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spend that gets in front of consumers
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versus the non-working side which is the
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money that you're spending to create
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those advertising and so as a result of
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that what we're seeing is that analysts
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and investors are becoming more attuned
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and more astute about those different
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components of it and are pressuring
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companies to make sure that they're
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actually getting their brands in front
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of consumers more because if you're not
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your competitors are to what extent is
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the digital world driving this or how
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big of a part is it if it's not driving
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it yeah it's probably increasingly
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important so for some large companies
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digital can compose twenty to
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twenty-five percent of their total
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marketing budgets but it's not actually
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the biggest driver the biggest driver is
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still traditional media and traditional
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television that's where the dollars are
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but as digital becomes an
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increasingly large component of the
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business those working to non-working
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ratios actually four digital typically
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look a little bit worse because the CPM
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rates are not all that high for a lot of
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those different online properties versus
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the cost it tastes to actually produce
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the content so it actually makes it even
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more important for a company to be
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diligent in terms of how they manage
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that spin so that they can actually
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continue to make sure that they're
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getting what they need as well within
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the capabilities for what they need in
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the agencies initially the belief was
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that you had to go through these
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boutique agencies to be able to get
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those niche specific digital
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capabilities that may or may not be the
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case anymore where do you find the
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biggest inefficiencies it's certainly at
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its core in the marketing processes of
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the organization so being able to set
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brand strategies in a consistent way
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making sure you're very diligent about
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who has the decision rights to do
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advertising copy the briefing process
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which we had talked about and then more
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simply around the agency engagement
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process so who can actually sign up an
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agency and who has the authority to be
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able to actually do that so decision
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rights and I'll dive in a little bit
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around the piece around ad copy so one
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of the biggest spends is around ad
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production and advertising copy so
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that's really what drives a lot of that
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and so being able to be smart about what
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is the size of the business that you
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need what is the size of the potential
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media that you're going to spend against
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it and how does that inform the budget
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you need to have to be able to create
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the copy so if you're a brand manager in
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a small market you know your incentive
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is to want to create the best possible
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ad copy and you want to get awards for
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and you want to go to Cannes and be part
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of that festivity because you created
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the best ad which is a great goal but
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from a business standpoint and may or
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may not actually make sense because the
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size of the market needs to dictate what
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the value is and how much you spend for
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that and so there are times where maybe
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you should create new ads if you're in a
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major market or if it's
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going to be cutting across markets
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versus there are times maybe they ran an
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ad in an adjacent country that you could
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potentially adapt to be able to actually
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apply on your own to save cause when we
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talk about saving cost how much are we
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talking about in potential savings yeah
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absolutely so in terms of resetting
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agency negotiations and through
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consolidation we've seen upwards of ten
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to twenty percent of the advertising
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agency expense costs from the broader
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changing marketing ways of working it's
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upwards of twenty percent of the
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non-working spend so it's actually very
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very material what are the potential
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pitfalls what do people have to be
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careful about when they sort of lift the
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hood and start messing with something
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that's working to some degree but you
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know of course you're saying that it can
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be improved quite a bit yeah absolutely
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i think when we've done this with other
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companies before the key learning that i
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have had is that the key to success is
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actually getting senior management
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buy-in and being able to make it
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cross-functional so the efforts where it
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was procurement led where people had the
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perception that there's a procurement
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hammer coming to try to hammer out the
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best rates those are the ones that were
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actually the least effective that's the
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traditional way people have thought
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about it and we've really innovated in
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terms of how we have to think about that
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approach because by being able to make
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it a marketing lead effort with the
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engagement and support of procurement
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you actually change that dynamic quite a
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bit and being able to actually get the
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right people in the room and be able to
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have the people who are going to be
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owning the business long term helping to
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drive some of those changes those are
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some of the biggest value pieces that
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we've seen so part of the aim is to
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consolidate the number of agencies
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you're working with you gain
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efficiencies by doing that what are the
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most important factors for success in
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this consolidation process so being able
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to be very clear in terms of having
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transparency of
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who you work with and getting a baseline
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for that first so you'd be surprised how
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many companies that we've met that
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actually don't have visibility to how
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many agencies are even working with and
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so the first step is actually getting
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transparency to that creating a roster
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and then from there actually as a senior
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leadership team in the marketing
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function being able to work with
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procurement and finance to understand
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who are actually the priority agencies
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we want to work with what are the key
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capabilities that we actually need going
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forward and how do we actually be able
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to focus our efforts to be able to get
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those to those agencies right and it's
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certainly an emotional process because a
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lot of times there are specific people
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who may have affinity with a specific
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agency for type of work but ultimately
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what we found is that the places that
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are most affected being able to do this
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actually do it in a very fact-based way
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and see in terms of what are the results
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that they need to get what are the teams
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that are going to be able to deliver
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that and then being able to extract from
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kind of the emotional side of it to be
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able to actually make sure that you're
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aligning people in the process to get to
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the results what metrics do you find
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most valuable as you go through this
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process sometimes the first simple one
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is this working to non-working ratio and
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so getting an understanding of what
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percent of your marketing spend is going
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in front of consumer advertising so
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things like buying the media or if
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you're sponsoring sports teams and
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getting your brand's actually in front
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of consumers and we typically expect
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that to be about eighty percent of what
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consumer companies are spending it
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varies based on the type of media's that
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you use but you know that's generally a
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rough rule of thumb and and then the
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remaining twenty percent around the
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non-working side so you've got your
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agency expenses and all your data needs
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and things like that to be able to
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support the business so being using that
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as a first cut to be able to understand
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are we being efficient with terms of how
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we're spending that money is usually the
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first metric that we use to be able to
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understand what that is the second is a
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simple one of how many agencies are we
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actually working with and
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what are we spending with them to be
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able to get an assessment of like do we
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believe that this is actually the right
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number for our organization because
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ultimately we will mirror our suppliers
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and so if we have a highly fragmented
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supplier base which is you know taking
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up a lot of our time our marketer is
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going to be spend more time managing the
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suppliers and they are actually managing
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the brands which companies benefit most
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by looking at the non-working spend it's
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really any company that has a material
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marketing spend so the companies that
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have been really at the forefront of
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this are very much on the consumer
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product side so they're the ones who
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have been really pushing and you can see
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in a lot of the investor relations and
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public reports of CEOs and CFOs of big
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global consumer products companies
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talking about this this specific issue
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but that being said in the past probably
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six months to nine months we've been
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getting more and more calls from clients
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in the pharmaceutical space from
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financial services from retail as they
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start to think about you know we are
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really spending a lot of money in this
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and the procurement functions
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particularly in a place like financial
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services have not historically been as
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robust particularly around the A&M side
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and so being able to get people to start
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thinking about this to get better
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efficiency has certainly been a big
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opportunity in terms of for them to
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unlock value overall what's the best way
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for companies to think about this
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problem and how to begin to tackle it
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it's a good question i think the
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playbook that i would probably think
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about for most companies would be around
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really three levers the first is getting
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a very clear assessment of the agencies
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that you work with and what that roster
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looks like and making very strategic
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choices around who you want to work with
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and what that supplier profile should
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look like the second is around what
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you're actually paying and the race that
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you're getting for those agencies so
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over time the rates that you're paying
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most of these agencies can actually
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deviate from benchmark and best-in-class
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and so how do you actually make sure
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you're resetting it to get the value
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that you'd expect and third it's really
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the biggest value driver is by taking a
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very clear approach to your ways of
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working in marketing itself to root out
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the inefficiencies that drive cost so
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being very disciplined in terms of
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creating a set of approaches on how you
00:16:03
want to operate as a marketing
00:16:05
organization clear decision rights and
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how that operates and being able to have
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a single approach to how you do brand
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building within an organization which
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can unlock upwards of twenty percent of
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savings okay thank you very much great
00:16:20
thank you
00:16:37
you
