Maybe you have heard this adage: “We offer three kinds of service: Good-Cheap-Fast. GOOD service CHEAP won’t be FAST. GOOD service FAST won’t be CHEAP. FAST service CHEAP won’t be GOOD.”
It could be describing the struggles of marketers and ad agencies the last few years.
It’s been a big year for the Canadian ad industry, says Susan Krashinsky, marketing reporter for the Globe and Mail, Marketers under Greater Pressure to Control Costs. But that hasn’t stopped companies from cutting their advertising and marketing investments.
The challenge is agreeing with a client on the measurement of the effectiveness of the marketing and advertising work.
“The chief marketing officer of the world’s second-largest advertiser, Unilever, said that the company is looking for $500-million (U.S.) in savings next year. Part of those savings will come by reducing the company’s marketing staff by 12 percent; moving its advertising dollars out of traditional media and into digital channels; and trying to curb the fees it pays ad agencies,” Krashinsky writes.
You can thank the recession, as well as a sluggish climb out, for this trend. But that isn’t all. There is an over-reaching lack of spending growth in advertising dollars, and marketers are being asked to do more, faster with less. Why? Part of it is because of a basic misunderstand in the C-suite of the value of marketing.
“They’re just not seeing growth, in a lot of industries. They have to cut costs – so you can’t fault them,” Krashinsky quotes David Leonard, president and chief operating officer of DDB Canada, as saying. “The objection I have is where there’s no understanding for the contributions marketing makes to the brand. These people, unfortunately, know the cost of everything and the value of nothing. We as an industry should be fighting to change the compensation model.”
Fighting Back: It’s not About Slashing Prices
To stay alive in this tough climate a lot of marketers were under pressure by procurement reps to deliver results at rock bottom prices. To stay alive, some had to bow to the pressure, accepting extremely low offers for work. But, it inevitably leads to poor quality work and many have felt that it has hurt the industry all around.
It appears the more agencies are starting to fight back, and encouraging others to do that same.
“We’re being more judicious,” Krashinsky quotes Agency TBWA Toronto managing director, George Nguyen. “… It really hurts our businesses when you slash prices … You’re squeezing to hit that margin, to keep people employed. And you end up putting out bad-quality work, or you take a financial loss. Neither of which is good. There needs to be an evolution in the way agencies operate.”
Part of the evolution is taking the focus off the initial cost of marketing and placing it on results. DDB is thinking of putting its reputation where its mouth is, according to Krashinsky. It is looking at experimenting with a system where service would not be by billable hours but instead by the how the client benefits from its advertising.
This takes the pressure off the initial marketing budget – the very thing that is being slashed left and right – and puts it on the end result. The challenge is agreeing with a client on the measurement of the effectiveness of the marketing and advertising work.
It just might work. It all goes back to the impact that marketing and advertising has on a brand. Here’s a stat to take to the bank. According to an IHS Global Insight, Inc., study, the $257 billion U.S. firms purchased in advertising during 2012 drove $5.8 trillion in sales for their products and services.
Possibly shifting the C-suite’s mindset from what marketing services take from the bottom line to what they add to the bottom line will be the new norm for agencies.