Over the past couple of weeks, the average age of the W+K office has dropped sharply, due to a series of educational visits from various corners of the world.
We hosted students from the Universities Oklahoma and Delaware and West Herts College, Watford, who stopped by to check out our offices and get a feel for the ins and outs of adland, thanks to presentations by creative Jason & Joris and Mark & Paddy.
To top it all off, our ECDs Tony and Kim gave a talk for the D&AD New Blood festival, allowing soon-to-be ad grads to lap up a little of what life is like here at W+K.
Students from West Herts with our Vikki and our Guy.
We were delighted to receive a rave review from the University of Watford, who wrote on their ad course blog:
“There were lots of treats at the agency on Friday. Guy Featherstone, self-confessed skate boarding sneaker head and soon to be Head of Design at W&K Portland, treated us all to a talk about his design philosophies. Amazing stuff it was too. Vikki Kottler treated us all to breakfast. […] As always, the W+K experience was truly different, immensely inspiring and hugely enjoyable."
Aw, shucks. The pleasure was ours!
These days, we spend more and more time negotiating terms of business with the Procurement departments of clients and potential clients. These negotiations are more protracted and more contentious than used to be the case in my experience.
Increasingly, Marketing is disconnected from conversations about terms of business and Procurement seeks to impose standard terms across all suppliers and to bring any agency that seeks different terms into line. A prevalent approach is simply to say that these terms are ‘company policy’ and not open to negotiation. This can lead to discussions lasting for months, often long after work has started, or even finished.
This is no doubt part of the reason why the IPA and ISBA have been meeting recently (at The Performance Adaptathon) to discuss whether and how to remunerate agencies for value creation. As observed by Claire Beale in Campaign, “Let’s hope that, while they’re at it, they make a fresh stab at positioning marketing as an investment rather than a cost.”
This the heart of the issue – not just positioning marketing as an investment, but agreeing remuneration terms that are based on that principle.
How to avoid the Marketing Procurement dilemma
In the interests of understanding both sides of the debate, this week I have been reading ‘Buying less for less. How to avoid the Marketing Procurement dilemma’ by Gerry Preece and Russel Wohlwerth.
Authored by Gerry Preece, ex-head of marketing procurement for the world’s largest advertiser and by Russel Wohlwerth, an ex-agency executive who is now one of the industry’s most respected consultants, this book hits the “marketing procurement dilemma” head on. Preece and Wohlwerth deliver a punchy, concise, clear-minded assessment of the problem and offer straightforward solutions. If you’re an agency leader, a CMO, or a brand marketer, this book will empower you to influence how procurement approaches the space, thus enabling you to deliver better marketing work. And if you’re a Chief Procurement Officer or a marketing procurement professional, you’ll discover a powerful road map that will maximize your bottom line performance and results.
One of the Amazon reviewers commented, “If there was a "beach read" for Procurement within the marketing space, this would be it.” So I took the book on holiday with me and can now offer you this summary to help you decide whether it’s your sort of a beach read or not.
(Good news: it's a much slimmer volume than Donna Tartt’s The Goldfinch and much easier to read than Edmund Gosse’s Father And Son, my other summer 2014 ‘beach read’ selections.)
The background to the current situation, say the authors, is Procurement’s success in the 1980s and 1990s in buying marketing materials like printed materials. They were able to deliver measurable savings. So, over time, Procurement began to get involved with other marketing spend areas: telemarketing services, mailing lists and, bit by bit, Procurement started to deal with agencies, and areas in which not all value arrived in the form of price. This is where conflict started to develop. Marketers accused Procurement of failing to understand marketing and undermining creative relationships, Procurement accused marketers of feeling threatened by their superior buying skills, and accused agencies of fearing accountability. Agencies accused Procurement of heavy-handed fee-slashing that made it hard to do the job properly and profitably.
Well, yes, that does all sound pretty familiar.
Cutting agency costs may reduce the value of the services being purchased
But, say the authors, these complaints about procurement not understanding marketing and agencies being overpaid and complacent are not getting to the root of the problem, which is this:
“Marketing dollars are limited. They are finite. There is a broad, universal need for every CMO to become increasingly efficient with the limited resources that are available, and that translates into an undending pressure to do more with less. The real problem is that we have to increase marketing ROI.”
This, I think, is the “marketing procurement dilemma” referred to in the book’s title: the problem caused when Procurement wants to buy more marketing services for less, but – because they’re focusing on price, not ROI - they end up getting less for less. Because, if agencies are forced to cut costs, they can do so, but the ways in which they do so will affect the value delivered – putting cheaper, less experienced people on the client’s business, spending less time thinking about strategy, cutting creative development time, presenting fewer options, attending fewer research groups, reducing the number of face-to-face meetings, etc. In this ‘less for less’ scenario everyone loses.
Why marketing is different
The reason for the dilemma is that marketing is different from the other goods and services purchased by Procurement. The authors cite several reasons for this. They include:
- Marketing is an investment not a cost. (Nothing is easier than cutting marketing costs – if you don't believe it’s adding value, just stop spending.) Nobody makes an investment decision based solely on price. (Who buys a share in Microsoft because it’s cheaper than a share in Coca-Cola?) Marketing Procurement should not be about minimising costs, it should be about maximising the value of the investment.
- Specifications are fluid and quality is variable. £1m worth of campaign A is not worth the same as £1m worth of campaign B.
- Because of this variation in quality, the consequences of choosing one apparently comparable proposal over another may be substantial. Good marketing can drive significant uplifts in profits. Bad marketing can lead to a decline in profits.
- Agency differentiation lies in people and processes, not equipment and technology. Obviously, it’s hard to benchmark the talent of one agency against that of another.
- Measuring Procurement performance in marketing is imperfect and complicated. If you’re buying materials, you can quantify volume, quality and cost paid and benchmark this against what was spent before. But in marketing, specifications are hard to quantify and no two proposals are of the same value, so cost saving alone is not a relevant metric.
How do you get more for less?
Okay, marketing is different. Now, how do you get more for less?
Preece and Russel Wohlwerth suggest that this can be done by following four principles. On your Procurement team you need:
1. people with the right mindset (maximisation of value, not cost-cutting)
2. measured by the right metrics (value-add, not savings. Marketing and Marketing Procurement should be tasked with the same metrics.)
3. applying the right skills (strategic sourcing and good interpersonal, trust-building skills)
4. in the right assignments (long-term, ongoing assignments that enable people to learn the area and build trust)
Some companies do employ procurement people who fit this description, and we’ve been lucky to work with them. But not all do.
Putting this into practice
The book suggests four steps when sitting down with Chief Procurement Officer / financial decision-maker:
1. Confirm mutual understanding that marketing is a good investment
2. Explain in detail why marketing is different (as seen above)
3. Describe the implications (right mindset, metrics, skills and assignments)
4. get agreement and get going
Sounds simple. And the book is definitely a concise, clear and well-argued case for the basics of how to solve ‘the dilemma’, which makes it a useful beach read, but a less entertaining one than ‘The Goldfinch’.
The lesson for agencies is that we need more than ever to be focused on accountability for what we do, so that we can prove the value we are providing. We must do this in close partnership with client marketers, who share our interest in accountability. Without this, the debate will only ever be about cost.
A little while ago, Wired invited us to contribute to a special section they were running featuring thoughts and letters from ten years into the future, 2024, alongside contributions from writers like Cory Doctorow and Margaret Atwood.
Wired’s introduction to the feature foreshadows the death of print: “It’s hard to believe, but back in 2014 people still read paper magazines. As an exercise in nostalgia, we asked some of our favourite writers, artists and photographers to convey 2024 news in ‘the format we used to love'."Our Creative Directors, Dan Norris and Ray Shaughnessy and Head of Emerging Platforms, Luke Tipping came up with the idea for an ad that promotes real-life ad blocking retinal technology, which replaces OOH advertising with images a user wants to see.We highly recommend getting your hands on the July copy of Wired for this fascinating speculation on the future of advertising and tech.
Keep watching this space!
Our week at Cannes was rounded off on a nice metallic note, with a grand total of eight Lions. Following Monday’s Creative Effectiveness Lion for Lurpak Weave Your Magic, Saturday’s Film and Film Craft ceremony saw two more campaigns pick up awards.
Honda Hands won a silver Lion for visual effects and sound design in Film Craft, and a bronze for corporate image in Film.
Lurpak Adventure Awaits was awarded three Gold Lions for direction, cinematography and sound design in the Film Craft jury, and a bronze Lion for savoury foods in Film. The campaign was also picked by Ian Armstrong of Jaguar as one of his three great ads he admires but has nothing to do with. Ian said ‘what Lurpak are doing for me right now is they’re recognising there’s an elegance to their brand.’
It’s equally nice to know that we played a part in the UK’s overall success in the Film Craft category. Collectively, UK agencies picked up 17 Film Craft Lions, over half of those they were shortlisted for.
When Neil Christie, MD of Wieden and Kennedy, was asked to speak at ProcureCon Marketing, a conference aimed at procurement professionals, our Finance Director Bronwen Hemming thought it was a great opportunity to go and listen to what those Procurement types were really saying about our Industry and Agency compensation models.
It got off to a shaky start when the first speaker, talking about “Developing open relationships with creative agencies for a win-win mindset”, recounted a story in which he was extremely pleased to report that the incumbent global agency had won a re-pitch. My instant thought was, why put an agency through that if you have an open relationship? To drive the price down by the threat of losing the business is the reason that came to mind. Not exactly win-win.
But then something startling happened. It began gently with a great working example where a procurement team, in a large retail business, deployed a new asset management system that focused on reducing POS wastage. Now that’s a sensible way to save costs. Do less and maximise its potential. Nice one.
Then talk by talk, it started gaining momentum - measuring and maximising value. This is where you, the budding procurement professional need to step up and up-skill. Stop focusing on cost reduction and work out how to improve Marketing ROI. The speech by Gerry Preece, former P&G Global Procurement Director, was really quite inspiring and echoed what we agency folk have been thinking for many years. Your spend with us is an Investment, not a cost. You need to work with us as a partner, not a supplier. Basing your procurement KPIs cost savings is not going to get you to the best work. Your KPI metrics should be based on measuring and maximising value. Gerry was so passionate about this, he even had a new job title for everyone in the room. Stop calling yourself Marketing Procurement Manager and start calling yourself Marketing Investment Manager. I almost stood up and applauded at that point.
It felt like a sea change. Is this really where procurement is now finally headed? Will I be engaged in conversations now about the value of outputs, instead of continually justifying rate cards and being asked to knock off a few bob, so procurement can hit their savings KPIs?
But how do you measure “value”? This is where things became a little unclear.
Payment By Results (PBR) mechanisms were the keen favourite remuneration mechanic, dividing into subjective (evaluation of agency performance) and objective (sales, share, tracking) measures. It definitely helps to define success and have a clear sense of shared accountability for activity. However, from my experience, it is often hard to isolate the effect of advertising on sales and commercial goals, leading to protracted negotiations and excessively complex schemes. It can actually end up being demotivating for agencies – PFA showed that only 1/3 of agencies on PBR schemes earned even 50% of their maximum PBR entitlement. As Neil Christie mentioned in his speech “I’ve had a client openly tell me, in a year where he agreed we had smashed the targets, “We can’t pay you 100% or you’ll have no incentive to improve next year.” If large sums of money are at stake, there can be an incentive for marketers to ‘save’ by marking down agency performance. From an agency viewpoint, it often feels like agencies are the only ones carrying the risk in these remuneration models, especially when we have agreed to risk some of our margin to the PBR scheme. If they are truly developed with a framework based on treating the Agency as a partner, to be able to share in rewards (above our normal margins), then let’s work harder together, Agencies, Marketing and Procurement to find fair and rewarding measurements on Value.
So what else can procurement, or the newly appointed “Marketing Investment Manager” do to maximise the return on marketing spend? There were some frank suggestions from the Agency speakers: have a clear scope of work, come to us already aligned with your marketing department on strategy, look internally at your own processes in addition to focusing on agency efficiency/price reductions, be up front about what money you have to spend, have an understanding that cheap will not get you the best talent/value and lastly, let us work collaboratively to solve your business problems.
After two days of procurement talks, it felt positive that there was a change from a pure cost reduction focus to investment and managing that investment. But, the reality is though, in that room of procurement professionals who all genuinely seemed to be supportive of this new focus, when a hands up poll was done of, “Are your KPIs based on savings targets?” the overwhelming response was still, “Yes”.
Our Cannes correspondent, Marta, is still in Cannes. And she's still standing. She writes:
It's been a busy few days at the Palais, with most chat revolving arout the goldmine awaiting brands in Brazil, wearable tech (yep, still) and the secrets to brand storytelling on mobile platforms (most of which seems to boil down to "tiny screen, huge potential"). Out on the roasting pavements of the Croisette, the rainbow of wristbands is starting to pile up and the rest of Soho is about to descend any minute now.
So, with that in mind, today's post is going to a brief one.
Five things I learned in the first few days in Cannes:
1. Darth Vader is just misunderstood
He's just as football mad as the next guy. He even has a tricked out data room to prove it, created by the brains over at Twitter. Real time monitoring with a distinctly sci fi vibe.
2. It takes a village military
At the aforementioned Twitter event, a military drone pilot was brought in to fly a selfie-taking octocopter, due to a risky mix of emailing-whilst-walking punters and rosé-dazed lunchers. Technology will save us, but there's also a good chance it will decapitate us.
3. Forget peak beard, we've reached peak swag bag
There are more tote bags being dished out than a small country could make use of in a lifetime. One particular swag bag was filled with yet more (empty) swag bags, like a set of heavily sponsorsed nesting dolls. Let's think outside the beige bag, people.
4. Yeah, yeah, 'Ye
Kanye West isn't god, however much he wishes he was. But you'd be forgiven for thinking the messiah was here, with all the commotion.
5. Darth Vader is a social whizz.
And he's following me on Twitter. Uh oh.
Our Cannes correspondent Marta is reporting from the riviera this week. She writes:
Already, after a day-and-a-half, I think I get Cannes. I'll admit, I was a little suspicious of what had been described to me as a "rosé-fuelled Soho-on-the-beach circus". Why go all the way to France to mingle with our peers, when London is in the thick of the ad world? But, as soon as I rolled into the festival's namesake city in a decidedly unglamorous swamp-green people-mover, everything became clear. It's not about the headliners (The Hoff, Kanye) or the oneupmanship of party venues (yachts, bubble houses), it's exactly what it says on the tin: a festival of creativity.
[picture of people taking pictures of people... outside the Palais, with a DeLorean. A somewhat heavy handed metaphor for going back to the future of advertising, or something]
My background doesn't lie in traditional advertising. With that comes a certain degree of scepticism of an industry cloaked in clichés, but also an incurable curiosity about how the magic is made. I've always been in awe of those who use brand storytelling in a way that captures the imagination of millions of people, those who seem to have found the magic formula to creating inspiring work that leaves an indelible mark on culture. And here I am, surrounded by them, all decked out in linen, lanyards around their necks and branded tote bags in hand. It's impossible to remain sceptical.
Most people back home think Cannes is just an awards show with a bit of hob-nobbing on the side to keep things sweet. In fact, there's a head-spinning week of official events for delegates to get stuck into, with over 200 speaker sessions, workshops and panels scheduled for the curious masses that flock here to learn what's new and what's next in our industry, and those wanting to get a little closer to nailing that magic formula. Add to that more fringe events than you can shake a pristine white yacht at, and you have an action packed festival that seems to make a lot more sense.
The first panel I attended was "She Says - Why 80% of Your Advertising Budget is Currently Being Wasted" – a discussion led by Laura Jordan Bambach, President of D&AD and founder of She Says, with CEO of Havas, Russ Lidstone, founder of women's adventure wear brand Bowndling (and ex W+K planner) Collyn Ahart, and founder of the 3% conference, Kat Gordon, sharing the stage. With women accounting for upwards of 80% of all purchases in every consumer category (not to mention being early adopters of tech and drivers of social media) brands seem to be failing to speak to a demographic projected to control over 60% of the US wealth in less than a decade. Just imagine those numbers globally. When asked if they think advertisers understand them, a shocking 90% of these women say no.
At the aforementioned parties, there's been a lot of chat about women in advertising. Not only about how brands speak to women, but what we as agencies can do to address issues facing women in the industry. If all that's been achieved is the start of a conversation about how we can change things, we've come a long way already, one day in.
Oh, and doesn't hurt that on the first night, we took home a Creative Effectiveness award for a campaign we're incredibly proud of, Lurpak 'Weave Your Magic'.
Stay tuned for more.
This category recognises a previously awarded creative campaign that has achieved a measurable impact on the client’s business. Judging is based upon idea, strategy, and results and effectiveness.
In his announcement of Lurpak’s win, Jury President David Sable, Global CEO of Y&R, said the ‘truly inspiring’ campaign has turned butter from an ingredient into something to be celebrated, and in doing so, has changed the category, setting the bar high for all future food advertising.