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.       

Magazine Bleed Charges - Why Do They STILL Exist?

By Bill Duggan

I’d like to share a letter I wrote to the editor of Ad Age, printed in the September 28th issue:

 

Publishers should cut ‘bleed’ fees

Regarding "Condé Nast Execs to make Big Cuts, Insiders Say" (AdAge.com, Sept. 14): It would be terrific if McKinsey's analysis went beyond cost controls and also included a review of Condé Nast's pricing policies to ensure those policies are in alignment with marketplace realities. One such policy under scrutiny from   advertisers is charging an incremental fee for bleed ads. Once upon a time, publishers may have had real costs associated with the production of bleed ads. But today's printing and production technologies no longer require the press stoppages and plate changes that resulted int hose real costs. Condé Nast is one of the few remaining major publishers (Hearst is another) that has not eliminated these obsolete bleed charges, and ANA strongly suggests that the time has come to do so (end of letter to the editor).

 

More on bleed charges in the one page white paper – Are Magazine Bleed Charges Legitimate? ANA and 4A’s have reached out to Condé Nast on this issue numerous times since we published this white paper in January and all those requests have been completely ignored. Not even the courtesy of any response or acknowledgment. Meanwhile, Hearst’s response has been, “At the advice of our counsel, we will not discuss pricing policies in a group setting. So, we will take a pass on this.” 

 

We encourage advertisers and their agencies to discuss bleed charges with these respective publishers (and any others that have such fees). Not only are bleed charges no longer justified, but they actually cost advertisers additional money as sometimes two versions of creative are prepared (bleed and non-bleed) and the agency time and resources spent developing that extra creative and negotiating reduction/elimination of the bleed fees leads to higher agency compensation costs to advertisers. Finally, if publishers have a legitimate reason to charge for bleed, let’s hear it—after all this is a blog and the dialogue would be appreciated.

Procurement – Perspective from Europe

By: Bill Duggan

I am blogging from Paris where I just attended the WFA Global COMPAQ committee meeting.  WFA – World Federation of Advertisers – is a sister trade association to ANA … really our European counterpart.  WFA has a committee system similar to ours.  COMPAQ is an acronym for Communications Purchasing Action Group.  It provides a forum for marketing procurement practitioners to share knowledge, ideas and working methods to help optimize their strategic sourcing.  In many ways it is similar to the ANA Advertising Financial Management Committee.

Orange (the France Telecom Group) hosted the meeting and attendees were from companies including Henkel, InBev, Johnson & Johnson, Kraft, Mars, Nokia, Orkla, Philips, Renault, and Unilever.

One of the highlights of the meeting was a roundtable discussion on the relationship that procurement has with internal stakeholders and ways to optimize stakeholder engagement, and integrate procurement into the marketing communications process.  Some notes from this discussion follow.

One attendee talked about how a simple template contributed to integrating procurement into the marketing communication process.  The template helps formalize a regular status meeting between procurement and marketing at this company and provides an update on key projects and deliverables.  While informal processes can work, some formal processes are indeed needed.

Another attendee has a process that works well too.  There are quarterly meetings that provide “sign-offs” on budgets.  These meetings are attended by marketing, sales, finance, and procurement.  This provides procurement a true seat at the table and helps solidify the integration of procurement into the marketing communication process.

There was a brief debate about the term “procurement” versus “sourcing.”  There was a perspective from a few individuals that procurement is more tactical and sourcing is more strategic.  I have heard the same argument in the U.S.

Senior management support of procurement (or sourcing!) is critical.  One attendee expressed some shock upon hearing their management refer to procurement’s role as “cutting costs and increasing cash flow.”  This was an organization where the marketing procurement function has been in existence for only two years.  In such cases, change management – to change the perception of the role of procurement – is a key challenge.  Another attendee stated that there’s a business mandate from the board to fully involve procurement.

One attendee felt strongly that procurement should not sell itself based on cost savings.  Rather, procurement should speak the same language as marketing and refer to its contribution in terms such as ROI and brand building.  This same attendee noted that getting invitations and a seat at the table of appropriate meetings is very important.

There’s a frustration that marketers do not stay long in any one job.  Often, just when procurement has built trust and a relationship with a marketer, that person moves on to another job and the process of building a new relationship begins.

There are lots of similarities between the role of procurement in Europe and the U.S. Perhaps the biggest difference is the fact that procurement in Europe manages multiple local (i.e., various countries) sourcing structures.  And that adds another layer of complexity to an already complicated job.

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