8 Ways that Real CMO's Cut Their Budget

I always say that if you gotta' do something, you gotta' do it right. And when it comes to cutting marketing budgets, that rule applies as well. Real CMO's know the question is not to decide how much red ink should be used. They see their challenge in cutting wisely. Reducing marketing spend while keeping sales intact. Ensuring customer loyalty when there's less funds to please the customer. Building the brand when there's no cash to do it.

So when they go to work, they apply 8 principles, and I can only advise you to do the same ...

#1  Do a thorough media-impact analysis
According to a recent McKinsey survey, only 7% of B2B brands and 17% of B2C brands regularly do a quantitative and qualitative analysis of the effectiveness of their marketing spend (i.e. did we actually make some money from all of this?). It takes a bit of analytical effort and budget, but real CMO's use modeling techniques to identify those media and messages which don't contribute to the bottom line. This way they shave 20-30% off their marketing budget without losing a penny in revenues. And as the tools for this have been around for years, they don't pay much attention to the media and agencies which have forgotten to mention them before.

#2 Replace GRP & SOV thinking with Engagement
Traditional shout & sell marketing creates a lot of waste. First, you need to overshoot in GRP's to actually reach anyone. Then you have to accept that the majority of those actually hear your message (from the bathroom?), don't believe your claims. And those who do may not be part of those 8% of shoppers that make up 80% of your sales. Real CMO's invert this logic. Through customer-centric communication planning (also in B2B!) they reach out with messages people want to hear. They engage in conversations. And in the process are prepared to challenge every traditional belief they or their business might have about marketing.

#3 Align Marketing & Sales.
According to a 2008 study by the CMO Council less than 20% of over 500 respondents have got their house in order when it comes to sales & marketing co-operation. The others have relationships which are best described as "intermittent". But when the blind lead the deaf, accidents are bound to happen. Campaigns get launched without sales support. Sales runs into areas which are not prioritised for marketing attention. And funds go out the window. Real CMO's know the answer to this is simple. They put sales and marketing teams in a room and alllow no one leave until every marketing penny is connected to a sales initiative and vice versa. The pennies which don't contribute, get axed. Simple.

#4 Review Your Funnel
And when they're on the topic of sales, Real CMO's also review their funnel. How many customers want to buy their product? How many are ready to become loyal? How many are about to leave? And what is the value of each of them? Most companies lack a real-time view of what is really going on in their business and spend money based on assumptions and competitive benchmarks. Understanding the real shape of your funnel allows real CMO's to rapidly highlight those areas where marketing funds are being wasted, and where - perhaps - they should even spend more. 

#5 Analyse your customer journey
Customers can also help to cut budget. Looking at the customer journey, there are moments of truth and moments where your customer frankly couldn't care less. But when it comes to cutting costs, most companies treat them all the same. As a result they generate bad savings in some areas, while continuing to waste money in others. Real CMO's do a journey analysis which really dives into the insights that drive their customers. This allows them to identify those moments that truly matter. These are the areas they don't cut. But all the others they challenge. Especially as they might find some where their customers are happy the brand stops "marketing to them".

#6 Do a marketing operations audit
While some are exceptionally lean, many marketing departments have eluded the smart purchasing methods and integration we have seen in other business areas. Budgets are fragmented, vendor (read: agency) criteria and briefings are vague, process mapping is limited, the use of technology is virtually non-existant. Real CMO's know that a "hard" audit of their marketing processes, expenditures and vendor/agency relationships can easily generate 10% in savings, if not more. And as it typically simplifies the work they have on their hands, it even frees up their mind for more creative and strategic matters. 

#7 Challenge marketing funds that don't delight your customers
Whether they are called promoters or advocates, or something else "very happy customers are more profitable". In fact, during these hard times, they are the ones that will carry your business through the recession. They buy more, are more loyal, negotiate less and - if you're lucky - bring their friends. That is why real CMO's focus on creating and activating these "very happy customers". And challenge initiatives that do not achieve this. They help sales teams focus on building commercial strategies on delight, and make sure every ounce of customer satisfaction translates into profit.

#8  Challenge marketing tradition
During times of crisis, people are more open to new ideas. Taboos are easier to challenge. That is why real CMO's take a fresh look at the marketing trade and challenge the traditions that have stopped making sense. Use the internet to crowdsource their creative campaigns. Cut out media agencies or even media to set up their own communication channels. Reconsider their channel and retail initiatives (how about a flagship in stead of a pointless billboard campaign?). In short, they relook at what they've always thought made sense, and find better ways to achieve the same at a fraction of the cost.

#BONUS: A structural agency review
Marketing is in a fine mess and part of the problem is the degree to which the profession has industrialised itself. Many agencies are factories that are more geared to produce adverts than make money for their clients. Many media sell what ever they have in stock, rather than look at the audience a brand is trying to reach. Real CMO's understand the difficult predicament their vendors face, when they need to reinvent themselves. That is why they ruthlessly review all aspects of agency and media co-operation. But when it comes to acting, are pragmatic in what they request and even supportive in delivering this. This allows them to slowly turn the marketing ship into the right direction.

And as always, if you have suggestions to make these 8 thoughts better, feel free to comment and amend...

Two Free Reports on the Brand Agency Disconnect

At best, the relationship between most brands and their communication agencies is "strained".  While exceptional agencies and executives exist (some of which writing for this blog), the industry as a whole tends to disappoint its customers.  This needs to change.  After all, while thousands of agency executives are gearing up for another dance on the Titanic in Cannes, clients are seeing billions go to waste.  Especially in our current climate, this is unacceptable.

But rather than join the choir of complaints, we decided to do something about it.  We want to initiate a global conversation on the renaissance of marketing as a whole (coming soon :-) and in specific on the ways brands and agencies interact.

We have bundled our thoughts in two reports we'd like to share with you (thanks to Management Centre Europe for the kind sponsorship!).  They analyse the disconnect that currently exists between brands and the agencies that service them.

• In Reconsidering the Advertising Industry we take the agency perspective, and compare the internal workings of agencies to what their clients need.  We then offer tactical suggestions and structural recommendations that allow agency executives to better equip their organisation for a challenging future.
• In Bridging the Brand-Agency Divide we look at the same data from a brand perspective.  We review what brands are looking for and what they feel agencies are not delivering.  For each disconnect we offer suggestions and tips brand leaders can apply to get their agencies to better deliver what they need.

Both reports, as well as a bonus slideshow are available as a free and instant download on our free publications page.  They're yours to read, use and abuse (cc 2.0 :-).  The only thing we would request is that if you find them of value, you engage in the conversation.

This can simply be done by forwarding them to others.  Or if you're more digitally active, blogging, twittering or commenting on them.  If you have a client-agency relationship which defies all we have written, share it.  If you have ways to make our recommendations better, build on them.  If you believe we've got it all wrong, write a counter-thesis. 

We want to start the debate, so at some point we can all come to conclusions.  This is our first - of many - steps. What is yours?

Walking the Talk in Adland ... A Talk with Brian Fetherstonhaugh

A couple of weeks ago I was invited to a small gathering with Brian Fetherstonhaugh, Chairman and CEO for OgilvyOne Worldwide.  He explained his vision on how Kotler's 4 P's would have to become 4E's and how Ogilvy was getting ready for these new realities.  Even though I'm a sceptic when it comes to Madison Avenue sales talk, I have to say I was impressed.

Brian's presentation had it all: media neutrality, engagement, financial accountability, customer journeys, multi-channel thinking, attention, reputation, even a hint of Chris Andersen's Free mantra could be found. In short, if the world was upside down, I'd have asked him to join Futurelab on the spot :-)  Just to say that it was probably the most complete and sensible story I had heard from a traditional agency in years.

Needless to say I wanted to hear how he ensured that the rubber of all these great concepts also hit the proverbial road.  So with a little help, I managed to corner Brian for a short one-on-one.  We cut straight to the chase.  For readability purposes I have paraphrased him, yet the spirt of his words should be intact.

As a client-side advisor I know that many brands struggle in walking the talk you preach. What do you think is the reason?

The first is a skillset readiness issue.  Most marketing leaders grew up in the traditional model. They did not get promoted by doing a social networking site.  They got into their chairs for different reasons.  Because they launched a few new products.  Because they did television commercials.  Because of their dealings with the trade.

So when they are under pressure they revert to their core skills.  They go with what they know.  That causes overinvestment in traditional channels, while digital channels remain substantially underinvested.

And so far the gap is pretty wide.  What is needed to transform the current situation is a new generation of fully confident, digitally savvy Chief Marketing Officers.  I am starting to see this next generation getting into the top marketing leadership jobs, but it will take years for real change to happen.

The second is a matter of mandate.  Many marketing leaders do not have a 360° mandate.  They don't do the store, even though that's  40% of what people believe about the brand.  Internet is done by an internet department.  Public affairs only talk to the CEO.  They don't do the telemarketing centre either. And employee relations is another part of the business all together.

This means that in many companies, the marketing guy is de facto the ad guy who integrates advertising and direct mail.  I think there are some legacy silo issues on the client side.

So how does this work on the agency side?

The advertising industry has not at all been perfect either.  It has not always provided the measurability, accountability and reconcilability to inspire the confidence it asks for.  I myself started thinking 360° in 1986 when I put up my hand stating that I wanted to manage the American Express account both for O&M advertising as for Ogilvy Direct.

At the time, this got me two business cards.  I got a mid-way office I called Checkpoint Charlie.  I had two phones, two time sheets, two teams.  But we kind of made it work together.  Since that time there has been this growing group of true 360° thinkers at Ogilvy of which our CEO and our creative Vice Chairman are notable examples.

But I'll be straight.  There aren't 5000 people like that in our company or in the industry.  We have been training people, but not everybody is wired this way.  It's like in music, you don't often get people who equally love the piano, the violin, the guitar and the drums.   We need people who  value them all and can bring out the best.

But there is a now a rapidly growing group of people who truly believe that a big television commercial and a big mobile CRM application are equally noble.  We have also have put in the financial and strategic infrastructure to be genuinely agnostic.  Our business model gives us the freedom to follow the customer journey where ever that leads us.  Whether this is gaming, mobile, PR, billboards or TV.

So looking 5 to 7 years ahead, where will it all end?

I think that the ideas economy will continue to exist and clients will be prepared to pay big for big ideas. The implementation piece, on the other hand, is going to become more of a scale business.   In-sourcing, outsourcing and consolidation will be the name of the game.

Also accountability will continue to rise in importance.  When I do search, what happens to store business?  When my stores offer a bad customer experience, what happens to the brand?  When the brand's bad, what happens in social networks.  These are very challenging questions, but they will need to be answered.

All the stuff in the middle will shrink away.  The day-to-day carrying out of a mechanical advertising process of low value added, OK-ish thinking will disappear.  Clients simply won't pay for it.

So the industry will be segmenting itself.  Some enterprises will become a creative boutique.  Some will focus on the analytics arena.  And others again will focus on implementation.

And what about Ogilvy?

We will play on all three fields.  We will go on living the culture of David Ogilvy.  He would have loved these days of accountability, big ideas, measurability.  And we will love them with him.

I strongly believe in our agnostic view.  If someone says search is dead, PR is up, OK, the world has spoken.  If they would outlaw direct mail in china, OK, we'll shift.  We're not beholden.  I don't like being beholden to an execution channel.  I like being beholden to a customer journey and how people want to be engaged with, that's more interesting.

After all, we sell … or else

70% of Print Campaigns (on AOTW) Ignore the Multi-Channel Reality

Imagine you’re a consumer and you leaf through your favourite magazine.  Suddenly you see a brand that interests you.  Hey, maybe it’s that product you always wanted but never thought existed.  Living in the 21^st century, your instant reaction is to go online and find out more about it.  But have you ever noticed that in spite of all the web two-point-naught hubbub, most of the ads you look at don’t carry a URL?

I’m working on a remake of I Am the Media, so I asked one of our bright and diligent researchers to do a count of the last 4 months of print campaigns on Ads of the World.  And the gut feeling was confirmed. 70% of them didn’t contain any URL.

Now what does that say about brands?  Don’t they want us to interact with them?  Are they afraid we might do something drastic and - after a few online clicks - actually buy the product that was advertised.

Or about the agencies?  After all the talk about “being digital”, are they forgetting to advise their customers about the multi-channel reality?  Or have they become so cynical that they assume a print ad is not going to have any effect anyway?

I cannot believe that I’m writing this in AD 2008 but: “A URL on a print advert should be the default option.  Only if it really doesn’t make any sense, it should be removed.”  If you manage to capture a potential customer’s attention, you don’t want to let go.

It does make me wonder though.  Is all this talk about conversations, communities, engagement, … still in the fringes?  Are we just a little in-crowd of believers talking to each other?  Do the customers I deal with live in a parallel universe instead of the real – more traditional – market?

Should I tone down I am the Media 2009, and get back to basics? Any thoughts are welcome.

What Is Your Share of Noise?

I'm usually a soft spoken guy, yet when I read this article in AdWeek a quite profound WTF?? did exit my lips (I'd say Pardon my French, but I am Belgian :-) ).  Carat Aegis is advising its customers that with the economic downturn, they should maintain "share of voice" in their category. 

After all, dropping the ball today, would mean you'd only need to spend more in the future.

TVWeek had more on the story:

Marketers looking to save a few bucks during rainy days also can re-evaluate their media mix. They often can improve efficiencies by moving to less expensive TV dayparts or shifting from expensive media to less costly outlets, Carat said.

In other words "It's OK to buy crap, as long as you spend the same".  Of course, I respectfully disagree.

Don't get me wrong.  I am too of the opinion that the mindless cutting of marketing budgets does more harm than good.  Assuming they are not spent mindlessly.  I further agree with Carat that marketers should engage every channel and focus on the insights.  

But I also think "Share of Voice" should just be removed from every polite form of conversation.  Or at least be replaced with the more accurate "Share of Noise".

"Share of Voice" is not about the customer.  It's about the branded shouting match that annoys us every time a movie gets interrupted.  That makes us flip needless pages to keep reading that article.  That makes us wonder which radio station we're actually listening too, as all commercials sound the same.  
SoV lives in a world where,  "the LOUDER you shout, the better it is".  

In an age where we finally figured out it is about conversations and customer focus, this is simply non-sensical.  There's proof in many markets that the GRP's you buy - or even the awareness you create - often have no influence at all on the sales number.  So the chance that share of voice will have a significant impact, is pretty slim.

That is why I submit we should exchange the concept of "Share of Voice" by the concept of "Share of Conversation".  Which share of conversation does your brand capture in the market place?  Do people "care" enough about you to actually talk about you?  Because we know that if they do talk (well) about you, you will sell more.

I agree with Carat that in the tough times ahead, you shouldn't just stop marketing.  In fact, you should double your efforts.  But I submit you should focus these efforts where they matter.  On your customers and making sure they talk well about you. 

If you can prove that this can be done by maintaining your advertising expenditure, great!  But most of the media plans I've seen don't come near this type of thinking.  Instead, they simply contribute to the maximisation of pointless noise and media commissions.

Stop the Noise, Start the Conversation.

And now I get off my soapbox :-)

PS. I just did a quick Google search on Share of Conversation and apparently I cannot claim the term :-)   Edelman is already going in this direction (see item 3).  They are still just focusing online, but it's a good start.