ANA Marketing Maestros

Value Based Compensation

By Barbara Bacci Mirque

At the recent 2009 ANA Agency Relations Forum, Sarah Armstrong from The Coca Cola Company updated the audience about Coke’s journey with value based compensation. You may recall that Coke first spoke publicly about this at the ANA’s 2009 Advertising Financial Management Conference because they wanted to socialize the marketing community to this new agency compensation model with the hopes of more widespread adoption of a construct that has been discussed for the past several years with little action taken against it. They wanted to expose their learning so that as more advertisers utilized VBC they would add to the body of knowledge on how to generate maximum results, thus benefiting all advertisers including Coke. Coke has rolled their VBC plan to many markets and expects full implementation by 2011. 
Along the way they have made some refinements but the central tenet still remains the same–Coke believes that there is no correlation between the amount of hours an agency works and the value it provides. It is not about cost cutting Sarah emphasizes, it is about focusing on the components of business growth. But Coke feels very strongly she adds, that they are no longer going to guarantee their agencies’ profits if the agency performance does not meet up to certain predetermined standards. An agency can make up to a 30% profit if it meets a set of prearranged goals–or none at all. The importance is that agencies are being measured on results–not on hours worked. There is no doubt that for marketers, labor based compensation was an advancement over fixed rate commissions. But spending hours and hours constructing and tracking labor based compensation does not move the business ahead nor does it work well in an era of integrated marketing. Advertisers generally agreed that although progress had been made, labor based compensation was not the end game. But not much progress had been made on moving forward. The groundbreaking work of The Coca Cola Company certainly adds to the debate–and knowledge–on improving agency compensation. The discussion will no doubt continue for years to come.

ANA members interested in participating and sharing their agency compensation learnings should consider joining the ANA’s Advertising Financial Management committee.       

Agency Performance Evaluations Are A Good Thing!

By Bill Duggan

We are living in an era of marketing accountability.  So it’s a little hard to believe that one-fifth of marketers do NOT conduct formal evaluations of their advertising and other communication agencies.  That’s one of the findings from a new ANA survey.

It’s no surprise that “traditional” creative and media agencies are the types of shops most likely to be evaluated.  Evaluations are less likely to be done for other types of agencies including digital, direct marketing, public relations and multicultural agencies.  ANA encourages evaluations of ALL types of agencies.

Agency performance evaluations are an aid to maintaining and then enhancing client/agency relations. 97% of marketers believe that evaluations are effective in maintaining the client/agency relationship.  So agencies should not be afraid of evaluations or think that such evaluations will be used to “ding” them when overall evaluations are a positive tool.

Best practices identified from the survey include:
• All marketers (even those with smaller budgets) should conduct formal agency performance evaluations on a regular basis.
• Assign a trusted, neutral point person (could be internal – for example procurement – or an outside consultant) to keep focused on objectives and metrics vs. personalities.
• Consider having a more informal “mid-term review” to avoid surprises at the end of the year.
• Use a consistent format for all agencies, although specific questions can be varied for different agency types.
• Use technology to facilitate adoption, ease of implementation, and analytics.
• Consider 360-degree evaluations to get the perspective of the agency.
• Present results in person.
• Have clear corrective action plans with due dates and owners.

Full survey results will be presented at the ANA Agency/Client Forum September 24 in New York.  View the press release here.

Procter & Gamble Creates an Agency/Client Relationship of the Future

By Barbara Bacci Mirque

My blog about The Coca Cola Company’s journey into value based compensation as discussed at the ANA’s recent Advertising Financial Management Conference has generated several comments.  The last day of the conference we also heard about another interesting methodology from the Procter & Gamble Company.  P&G’s Rich Delcore described how they have been working to refine agency structure in a world of fragmented media and the need for more integrated communications.  Their former agency structures were created in a world of one dominant communications medium and a very specific communications funnel. Today we live in a word where the communications flow to consumers is generated from multiple touch points and consumers move through decision making processes very differently from the past. So Procter is now planning for integration from the start and in the process hoping to build marketers and agency personnel who are flexible, adaptable and comfortable with different communications vehicles. They are moving from decentralized agency planning in which there were 300 pay points, duplication and overlapping responsibilities as each brand undertook its own master planning and non advertising agencies were rarely involved from the start, to a model in which they have a Brand Agency Leader. This huge organizational cultural change is all about understanding the needs of the consumer – not their own internal needs. Under BAL there is a single point of contact per brand and a person and an agency leads an integrated agency team and manages the work of each member agency. The benefits they have realized are holistic communications, more efficient spending, a reduction in time and touches and the number one benefit – more integrated marketing. They find that every area of expertise is on the same issue from the start and all agency types have an equal seat at the table. When market opportunities arise, they can be quickly addressed and they all win and lose together. They acknowledge this approach may not work for every company but at Procter they have begun to reap the benefits.

Assumed Constraints in History

By Kaitlin Villanova

I was recently skimming through an advertising and marketing copy handbook (trying to advance my skills because as my boss and Marketing Maestros contributor Will Waugh reminds us, content is king) when I came across a brilliant section on assumed constraints, recalling some of the most famous in history:

"Airplanes are interesting toys but of no military value." Ferdinand Foch, commander of Allied Armies in World War 1.

"Stocks have reached what looks like a permanently high plateau."  Irving Fisher, professor of economics, Yale University, 1929.

"I think there is a world market for maybe five computers." Thomas Watson Sr., president of IBM, 1943.

"So we went to Atari and said 'Hey we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said 'No.' " This was related by Stephen Jobs, Apple Computer co-founder, on his attempts in the mid-1970s to get Atari interested in his and Steve Wozniak's personal computer.

"A cookie store is a bad idea. Besides, the market research report says America likes crispy cookies, not soft and chewy cookies like you make."  In response to Debbi Fields' idea of starting Mrs. Fields Cookies.

And last but not least, my favorite... "640K ought to be enough for anybody." Bill Gates, Microsoft founder, 1981.

All to often in advertising and marketing we assume constraints that aren't really there. We create limits to a product or an idea restricting the advertiser and the agency from unleashing the full creative potential. Next time you find yourself thinking an idea sounds a little too wild for your product or service, remember these examples of assumed constraints!

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Top Advertising Blogs

I am a big fan of lists provided by sites like Beyond Madison Avenue because it helps blogosphere newbies learn about great websites quickly. One I found to be clever and well thought out was American Copywriter. This post in particular gives advertisers an idea of what agency creative types think about on their way to the lake.