Archive for April, 2009

Can an ad agency recommend budget cuts to a client?

The names of the not-so-innocent have been disguised in this post.  So if you recognize your company in here, it’s probably more because of the truth of the situation than that it’s your agency.

I was have a coffee (actually I was drinking seltzer and he was drinking coffee) with the former head of branding and advertising at a technology company.  We were indulging in some nostalgia.  I asked about the advertising agency that they had used.  From my perspective the company and the agency had a very close relationship.  My friend turned very serious.  A shadow came over his face.  

He then went into a story about the  long-standing relationship he had with one of those large ad agencies that is part of one of those larger holding companies.  In restructuring the way the company went to market, he led a project to redesign their entire communications to be more effective and save money.  A by-product is that there was no budget for the large ad agency.  It was not because the ad agency had done poorly — in fact the advertising was quite brilliant.  But the customers had moved on, had changed their habits.  In short, customers were no longer using the traditional media.

After delivering the news to the large ad agency, he never heard from them again.  Not a call.  Not an email.  More than a year went by.  Nothing.  

My friend said that the ad agency was only friendly when there was a big budget.  And they almost always came in with a recommendation for more media spending.  “They have all of these self-serving studies showing how increasing advertising in a downturn has long term benefits,” he said.  

Why don’t ad agencies come to clients with ways to shave off 10%, 20% of costs?  

In today’s economic pancake, companies are looking for ways to cut costs without losing the effectiveness of their marketing.  A really brilliant advertising agency would bring to that client a plan or method for cutting budgets by 20% to 30%.

My friend is skeptical.  What agency would recommend that they should have lower revenue?  The interests of clients and their agencies are not always aligned.

Being Enfatico!

“What’ss an Enfatico?” you might ask.

It’s the custom, built-to-order  global advertising agency that WPP created and dedicated to servicing all of the needs of Dell.

The big marketing news today?  The agreement is being unwound and Enfatico is becoming part of Y&R.

When Enfatico was first announced many people applauded it as the future of advertising.  It was going to solve the problems of turf wars between agencies, duplication of work and lack of coordination.  Not to mention offering cost savings. In retrospect it represented a “Back to the Future” model where most companies had their own internal advertising departments (some still do). 

If coordination of multi-platform branding is the big challenge for companies now, then using one agency which integrates across all media should solve the problem easily.  Enfatico.  Problem solved! 

Turns out that the promise of Enfatico seems to have been more promising than the reality.  

Our own research study into CMOs (conducted by Forrester) gives us a different perspective into the story.   Only 16% of CMOs are seeking a single agency partner to handle all of their advertising needs.  The complete, end-to-end, fully integrated advertising agency is simply not what companies desire.  It’s good for the agencies — greater share of the CMO’s wallet.  But it takes away the flexibility that CMOs need.  It locks them into a rigid structure when they are looking for new ideas anywhere they can be found, from any agency who can provide them.

This is the new reality.  Or as Kotler/Caslione’s book Chaotics calls it, “the new normal”.  Marketing in these turbulent times requires new techniques, new approaches, and new perspectives.  The risk of moving to a new model of marketing is now lower then the risk of doing business as usual.

So Dell and WPP are to be applauded for making a bold experiment to solve the problems that CMOs are facing today.  They took a risk.  Learn the right lessons from the failure.  We can only hope that they will continue to experiment and continue to take risks until a new way, a better way, is created.  

The tensions of global branding

You can make a lot of analogies between a company and a family.  I’ve had clients say to me, “We are like a disfunctional family”.  Or, “This company is like a traditional family.  When the father speaks everyone falls into line.” [Note: It was an Asian company.  Not many American families follow that credo!].  

The analogy is useful to understand the tensions between local countries, product divisions, regional operations and corporate headquarters.  This is important because successful global branding requires alignment between these different groups.  

Sometimes the family runs smoothly with everyone recognizing and playing their assigned role.  

But more often the local companies are like rebellious teenagers.  They know they are part of the family but at the same time need some freedom for street cred.  As anyone who has been in the local level knows, there are local competitors who are not playing by the same rules as your company and it puts you at a disadvantage. You need all of the tools possible to win, including branding.

Corporate is like the family matriarch/patriarch (I believe in gender neutrality on who heads up the family).  They have the perspective that is unique, looking out over all of the areas.  And they have the wisdom of seeing what has worked and what has failed in different parts of the company.  They also want everyone in the family to be well-behaved and respectful.  At the same time corporate is several steps away from the day-to-day realities.  While this gives them perspective, it can also create blind spots.

If Corporate has strong control over the purse-strings, then they have a lot of authority.  If the local countries have local budgets, then they have the freedom to do what they see as necessary.

In truth, both are right.  There will always be a seesaw between the centralized control and the local control.  It is instructive to see how the subjective truth changes quickly when then the head of local marketing is promoted into corporate marketing.  

A little tension is inevitable and perhaps even a healthy competition within the company.  When there is too much tension, then the company needs to make some changes.  The tension is a symptom, not a cause.  It signals that something is not working well.

The first step is to openly acknowledge that these tensions exist.  By examining them honestly the company may actually uncover new opportunities.  For instance, the tension might be the result of an external change in the marketplace which corporate has not fully recognized but the local marketers see very clearly.  There are many things this tension might signal — too many for a single posting.  

To sum up, a little tension in the family is normal.  When the tension grows too great, it’s time to get some help!

Is it a Value brand or just Cheap?

There’s a wonderful phrase in economics called the “Utility Curve”.  It’s how economists explain why you’ll pay extra to buy a diet coke at the corner deli when you could save fifty cents by walking two blocks to the Gristede’s supermarket.  The marginal utility of not walking 2 blocks is equal to the marginal utility of the closer soda.  Or some such mumbo-jumbo. 

Basically it’s a fancy term for making our irrational choices fit neatly into economic formulas.  One of my professors called it the Finagle Factor — the way to wiggle around the stuff you can’t figure out.

Well, those utility curves are on the march, in many cases downwards.  Our Utility is walking a bit further to save money.  We all want to be seen spending our dollars wisely.  And if you look at advertising, suddenly the word “Value” is cropping up everywhere.  Value brands.  Value stores.  Value segments.

I think we are all fooling ourselves into thinking value is somehow calculated in people’s minds with an equation related to quality and price.  Value means cheap. So why not just say it straight?  Cheap brands.  Cheap stores. Cheap segments In these days, being cheap is a good thing.  

The word cheap used to have a much more positive connotation.  It meant getting a great bargain.  It was a sign of being clever. There was even a best selling book called Cheaper By The Dozen back in the late 40s.  Cheaper by the Dozen

I get the feeling that the people who are really most comfortable using phrases like “Value Brands” are the advertising agency folks.  Working on a “Cheap Brand” just doesn’t have the portfolio cachet of “Luxury Brands”.  Which would you rather have on your resume — Bergdorf’s or Walmart?

On the other hand, the vast majority of people in this country really just want to know the cheapest place they can buy what they need.  Because the Utility of convenience doesn’t mean much when your job has evaporated and you have all the time in the world.

The Utility Curve has shifted.  Now it’s time to shift the language.  Cheap is in.  Cheap is cool. Cheap is smart. We are entering the era of Cheap Chic! Just ask MTV.

What is a Chaotics?

One of the wonderful things about Philip Kotler is that he never gets stuck in the past.  His openness to new ideas and new ways of thinking about marketing are remarkable.  Most of us learn one way in our 20s and stick to it for the rest of our lives.  Not Phil.  His curiosity about the world is undiminished.

Evidence of this is in his new book — co-written with John Caslione.  I love the title of this book.  “Chaotics”


Cover of Kotler/Caslione's new book

Cover of Kotler/Caslione's new book

The book is being published in the next couple of weeks.  Very timely, given the current flat-tire economy.  It’s a book that everyone senior manager should read through.  

It doesn’t have the answers to all of the problems companies are facing.  Instead it gives a thoughtful framework for getting to the answers that are right for your company.

Bloomsday and global branding

What is Bloomsday?

It is June 16th!  Because James Joyce’s novel Ulysses takes place during the course of a single day, June 16th.  Fans of Joyce gather in Dublin and other places around the world to read the work aloud.  Here in NYC there’s Bloomsday on Broadway up at Symphony space. I first discovered it when I was a getting my MFA in fiction writing up at Columbia.  Hours and hours of listing to actors, musicians and poets reading from Joyce.  Much easier than having to actually read it myself!

Boring, right?  No!  Remember —  the book was banned for many years as pornography, particularly for Molly Bloom’s Soliloquy which ends the novel and is the moment when Bloomsday readings reach their dramatic climax. For decades it was a crime to buy or sell or even possess Ulysses here in the land of freedom.

On this Bloomsday I would like to invite you to a slightly different kind of event in NYC.  The NY AMA is holding a panel discussion  on global branding.  The panelists will include Nigel Hollis, author of the book “Global Brands“, the wonderful Dr. Joseph Plummer of Columbia University’s B-School and Susan Jurevics, the VP of Corporate Marketing at Sony.  I’ll be acting as the referee…uh…moderator during the discussion and Q&A periods.

Some of the questions the panel will explore:  What does it mean for a brand to be global?  How do local cultures influence a global brand?  What is the role of country of origin?  For instance, is a global brand a citizen of the world or is it an American brand (Nike) or German brand (Mercedes) or Japanese brand (Sony) that is globally known?  How do companies navigate through the tensions between the centralized corporate role and the local geographies?  

You can learn more about the event from the NYAMA website.  And I’ll post additional details as we get closer to the day.

Who knows, we might even end the evening with a little reading from Joyce’s Ulysses…

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