Advertising budgets

The price to pay


There is a not so secret war being waged in the world of advertising, completely oblivious to the common man who breezes past the average ad. The bean counters of procurement divisions from the world’s leading brands are facing off against advertising agency suits who are valiantly trying to defend their budgets and their creative legroom. It’s painful.

As a creative in an ad agency it’s at times hard to understand why the agency just doesn’t get the right resources to create an award winning ad. Collaborating with better production houses or technology partners for example, while the agency focusses on crafting bigger and better interactive ideas. With my recent stint as a senior regional account manager however, the frenzy of the frontlines of finance makes things a little bit more apparent.

In their quest to cut budgets and streamline spending, several major multi-national corporates are trying desperately to put a number to creativity. There are fancy words and equations being bandied about in this name, like any other religious rhetoric you may expect to hear on a cut-throat crusade of this kind. There have always been murmurings of ROI, accountability and the returns on advertising spend. However there is a new found fervour of trying to peg the agency creative output to marketing KPI.   Seems we have come a long way from the old adage of not knowing which part of your advertising investing works, or have we?

Today agencies are being asked to commit their allocated budget spending to key ROI targets. Failure to meet KPI means agencies fail to get paid a certain amount. While procurement teams hope to magically improve creative effectiveness while reducing overall costs on a year by year basis, agencies struggle to meet creative overhead costs. It’s frustrating for the marketing teams of these MNC’s as well as structured marketing campaigns have at the final stages needed to be stripped to leaner versions to compromise. I would argue that when number crunchers need to make key decisions on creative strategy, tactical profits may take point but brand equity unwittingly finds itself in the firing line in the long term.

While MNC brands hope that their agencies deliver more for less, the truth couldn’t be farther from reality. In order to tighten purse strings and run major clients on shoe string budgets the only viable option is to reduce the number of people working on the client. It’s cheaper to have junior talent who are always on and driven to perform on the brand. Senior talent is relegated to an occasional oversight nature rather than being involved in day to day operations. While this leads to the most junior people in advertising (unbeknownst to them) becoming the most powerful people, it also means collective experience working on the campaign plummets. !

If you were a brand manager, how do you hope to ensure your agency comes up with the next award winning campaign for your brand? Procurement tells you that you can’t afford the Creative Director with more than 10 years of prior experience on your brand anymore because of the agency rate card. The resulting work you are going to see from the agency is going to go through multiple iterations compared to the past just because you are working with someone a little less experienced. Cost cutting stifles creativity and can increase lead times. As a marketer this may not be very evident on the bottom line when looking only at budget spends. Agencies don’t win either as the result is that they tend to over burn hours due to the inexperience and puts additional strain on internal resources.

As a procurement person I can only venture to guess that it is hard to put a tangible value to the softer side of marketing efforts. After all you can’t quite hand the agency a blank check just because the next ad campaign could be a hit or miss.  There is no ready formula for a winning marketing campaign. Even if there was, adherence to such formulas would make the brand grow stale. It is a challenging task thus to ensure the brand gets the most for its buck.

Perhaps the solution is more people from procurement teams who have worked in agency finance departments or as account managers. Presently one of the biggest hurdles is explaining the technicalities and time taken to create advertising that works. Most agencies will try to push for a retainer that eliminates the need for constant bickering over man hours and rate cards for each and every job. Yet getting procurement to sign off on retainers becomes even more challenging with a lot of browbeating carried on between both parties at top levels. Once retainers are signed off, the challenge is to ensure that there is no scope creep or shifting goal posts. If achieved though, the agency has some room to breathe as it is protected from seasonal spending by clients and guarantees monthly revenues. Agencies are then in a position to outsource a certain amount of work to ensure that they meet their own cost efficiencies. After all to have having everything in-house negates the very cost effectiveness that the Procurement teams seek. Especially true if the quantum of work done for an MNC clients fails to pay for a dedicated agency team 24/7. Sharing resources between multiple clients is as tricky as it is, without having to deal with shrinking budgets.

At the end of the day it is for the agency and procurement to identify and justify where value is being created and to work hand in hand to find common ground. This is reshaping client agency relationships across the world from large agency networks to smaller boutiques. A more well-armed procurement team hopefully will lead to advertising that is not only more effective and meaningful but keeps the bean counters happy as well.