2014 ANA Advertising Financial Management Conference – a comprehensive review

This post is by Darren Woolley, Founder of TrinityP3With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.

For the past 5 years I have made the annual pilgrimage across the Pacific to attend the Association of National Advertisers Advertising Financial Management Conference. Although the focus is clearly US, with the majority of attendees US based, it is by far the best marketing procurement event in the world. This year more than 635+ procurement, marketing, agency and consultant professional gathered at the Ritz Carlton Naples, Florida for three days to discuss all things advertising financial management.

This year was an exceptional year with some really outstanding presentations and many worthwhile discussions. But although it was certainly three full days of presentations, there are still several major issues left to be addressed. Hopefully next year, but I want to highlight them here to add them clearly to the industry agenda. But first let me review the content from this year, in the hope that more marketing procurement professionals and those with an interest in advertising financial management in APAC will join me next year for the journey across the Pacific Ocean.

Day 1 – Sunday May 4, 2014 

Agency Relationship Management

The pre-conference kicked off with the traditional session on Sunday afternoon with the Co-Chair for the conference, Terri Burns, Manager, Marketing Procurement, Aflac presenting her approach to Agency Relationship Management.

Terri was very clear that the scorecard process where the marketing team scores the agency performance was condescending and counterproductive to building high-performance, collaborative relationships. She recommended that the relationship assessment process should be two ways with the agency providing feedback on the marketing team as well.

But when asked about measuring and managing collaboration and performance between agencies, she admitted that this represented the next evolution in agency relationship management. When put to the audience, only Mark Hudson, Advertising Procurement Management, BP had implemented this process. Clearly the others in the room had not heard of used Evalu8ing.

AgencyRelationship

Terri championed the implementation of the process, telling the audience that the most important thing is to have the discipline and determination to deliver the results. There is nothing more futile than undertaking an evaluation, without providing feedback and agreeing steps to address issues and improve performance, then measuring the results again.

And when it comes to not having enough budget or any budget, Terri was clear that it is possible to implement a very successful process without a consultant. An interesting start considering many of the sponsors of the event each year are consultants.

Day 2 – Monday May 5, 2014

State of the Union

The conference kicked off early on Monday morning, with the greeting from the major sponsors and then Bob Liodice, President and CEO, ANA does his ‘State of the Union’ address, where he frames the topics of the year.

IncreasingSpend

This year he identified the fact that the advertising category is growing, not just in spend, but the continued increase in advertising opportunities. This is certainly exciting times for marketers, but also challenging ones.

But he also highlighted that as the spend increases this means that marketers were leaving more on the table due to the lack of transparency in the media value chain and the corresponding erosion of value.

DigitalMediaErosion

One of the key areas of value erosion he identified was digital media, where the complexity and large number of stakeholders means that of the marketers total investment, only a smaller proportion gets to the actual publisher and these transactions are often not made transparent.

Bob called on the industry, led by the ANA, to set up an authority to establish consistent guidelines and methodologies for measuring media performance and value.

Economic Keynote

Next was the Economic Keynote by Michael Santoli, Senior Columnist, Yahoo Finance. He had mixed news for the audience regarding the economic recovery. For while business fundamentals had been strong, this had not quickly translated to jobs.

Yahoo_Finance

 

This meant that many consumers felt that the US economy had not recovered and was still languishing in recession. This appears to be due to the fact that US CEOs have been delivering increased profits by investing in labor saving technology at the expense of workers.

But the big prediction, which the next day came true, was on the Publicis Omnicom merger.

CMO Keynote

This was followed by the CMO Keynote by Matthew Jauchius, Executive Vice President, CMO, Nationwide on why it is important for marketing and procurement to work together.

Now Matt is an interesting character in that he is a CPA, who has worked as a Kinsey management consultant, so he takes quite an analytical approach to marketing.

He sees this background as an advantage in his role as CMO.

As the seventh largest spender in the category, he identified it was important to maximise the value and effectiveness of the marketing budget.

Procurement_Marketing_Process

He did this by firstly eliminating waste on both the agency and the marketing side and engaging the agencies in this process.

The role of procurement was not simply to reduce costs, but to assist in identifying and eliminating waste.

One of the steps to removing waste is to manage the scope of work (SOW) to eliminate duplication of work across agencies. This duplication, driven by the complexity of the marketing mix, is a key area of waste.

Matt was very clear that this is not an overnight process. He provided the outline of his three year journey or plan that included firstly establishing a common set of criteria and terms of reference, then becoming more sophisticated in the application and management of scope of work and finally used consolidation to remove duplication and to allow reinvestment into more effective solutions.

The procurement team is an important part of the process as Matt sees the two working complementary side by side in the process of delivering efficiency and effectiveness.

Future Trends

There is an excellent interview with Matt here in the Insurance Journal. This was followed by a look at the major trends that could affect the future, with a presentation on “Future Trends” by Sheryl Connelly, Global Head, Trends and Futuring, Ford Motor Company.

Global_Trends Sheryl took the audience on a whirlwind presentation through the social, technological, economic, environmental and political trends facing the world in the next 20 years. She was clear to differentiate between a fad (short term) and a trend (longer term sustainable). The main trends to influence the marketing and advertising industry were:

The growing talent shortage and why it exists.

The challenges of population growth.

The importance of customisation.

And the myth of multitasking.

But the big trend for the coming year is the fact that the Fear Of Missing Out (FOMO) is being replaced by the Joy Of Missing Out (JOMO) as more people want to disconnect in the face of overwhelming information.

Agency Selection Briefing Guidance

Then it was time to get back to basics with Agency Selection Briefing Guidance from the ANA and 4As and a panel that included:

The actual guidelines can been seen here on the 4As’ site.

Search_Select

But on the day the most interest was not in the actual guidelines, but the insights from the panel around the cost of pitches.

Especially when pitches are seen to be used too frequently.           

Also the fact that the traditional RFP and speculative creative is basically flawed.

In fact the traditional pitch process is seen as counter to the purpose.  

But the final piece of advice of the session goes to Debbie Morrison who recommended the ISBA / IPA Good Pitch site.

Driving Value and Innovation

After the lunch break, Lowell Turner, Global Procurement Director, Marketing, Kimberly Clark Corporation talked about Driving Value and Innovation. Lowell was addressing the important issue of aligning procurement objectives to marketing goals.

KCC

What is holding procurement out of alignment with marketing is the focus on cost. But Lowell has a view of procurement pursuing cost reductions in marketing.

Ideally both marketing and procurement focus on the two part of the same goal, which is value creation. In this way each can work together yet focus on their specific tasks.

This is especially important in the face of increased complexity, which is leading to increased cost and wastage.

Finding the path to pricing excellence

This was followed by Finding the path to pricing excellence by Frank Bilstein, Partner, AT Kearney

ATKearney

This cartoon really struck a chord with the audience. But his presentation was about the role of pricing generally and more specifically for agency compensation.

This is the basis of output based remuneration or value based compensation as discussed by Jon Manning of Sans Prix, more than a year ago.  

Performance Incentive Compensation

This set up the next session of the day, which was the presentation of 4A research into Performance Incentive Compensation with a discussion between:

Performance_Incentives

The topic lead to a spirited debate between the two presenters on stage.

While the ANA Agency Compensation Research shows many advertisers are using Performance Based Compensation, the research from the 4A’s here, shows that many agencies are skeptical about the approach.

In fact it was stated that performance based incentives contribute just 2% of agency revenue.

Performance_MetricsThe problem is the rewards are too small, compared to the risk, to act as a real incentive.

ANA Speed Networking

At the end of the day was a Speed Networking event organised by the ANA.

Speed_Networking

Day 3, Tuesday May 6, 2014

Technology Keynote

The day started with the Technology Keynote by Rishad Tobaccowala, Chair DigitasLBi and Razorfish on the Future of Advertising. An entertaining and thought provoking speaker, Rishad captured the audience with his view of the future and generated a huge amount of Tweets of which these are a select few..

The digital and analogue interface is brands telling stories in a digital world.

That data is so abundant now, it is no longer about owning it but having access to it to extract the insights you need to drive value.

He reminded the audience that marketing is growing rapidly, but that we are now competing with the tech companies for that talent available.

The problem is that advertising and advertising professionals are often reluctant to change or to change they way they do business.

And in this environment the biggest challenge for marketing is to attract and secure the best talent available.

Deborah Malone of the Internationalist later interviewed Rishad on this topic and that interview appears here.

Evolution of value based compensation

Next we had the third update and the Evolution of value based compensation by Sarah Armstrong, Director, Worldwide Agency Operations, Coca-Cola Company The presentation was a fast and furious gallop through the VBC model, which has undergone a third iteration (3.0) but remains focused on investing in the best.

But the increased complexity of the marketing process means there are new challenges the marketing process must address.

This includes making sure the compensation model does not discourage innovation, which is one of the issues of a value based model.  

But ultimately the results speak for themselves, with the ultimate measure of value increasing over the past 5 years the VBC model has been in place.

Coke_Share_Price

But there was also some scepticism in the audience regarding some of the aspects of the Coca-Cola VBC model and its presentation.

The incredible detail and complicated charts in the presentation.

The speed of the presentation, which made it difficult to either take note of follow in some places.

And the lack of agency representation from the Coke roster.

 The law and the financial bottom line

In the USA there are a number of regulatory issues facing the industry, addressed by Dan Jaffe, Group EVP, Government Relations, ANA in The law and the financial bottom line. The first worrying issue is the move by Congress to remove the tax deductibility of advertising costs, making advertising a real cost to business and destroying investment.

Data privacy is a big issue for Government and is linked with security so it is under government scrutiny.  

And finally the need to make the online advertising marketplace more accountable and transparent.

Optimising the procurement / marketing relationship

This was followed by Terri Burns and Sal Vitale, Co-Chairs ANA Procurement Task Force presenting the latest findings from the ANA Marketing Procurement Survey titled Optimising the procurement / marketing relationship.

SalVitaleProcurementValueThe general trend is that marketing and procurement are working more collaboratively and co-operatively together since the last survey and the relationship between the two continues to improve.

But while the relationship is improving, many believe that too many CPOs continue to pursue cost reductions and savings rather than process efficiencies and performance improvements.

But there are opportunities on both sides, with marketers also needing to be more open to embracing process improvement and efficiencies.

Data driven content marketing

Now the stage is set for data driven content marketing which explored the opportunities of combining data and programmatic buying with content, this panel including:

While it is logical that using data available through programmatic buying to identify the audience most engaged with your content and then to use this insight to develop more engaging content, thereby attracting a larger audience, deeper engagement and move them to being customers, it appears there are some issues.

And what kind of offspring would that union produce?

Data_And_Content

But the opportunities look promising if  organisations and agencies can bring the two together.

And this is where procurement can help marketers.

New CFO/CMO research study highlights

Heading towards the end of the second full day of the conference was the New CFO/CMO research study highlights presented by:

Just as the earlier presentation on procurement and marketing showed that the two were becoming more aligned. The CFO and CMO are just starting on this journey.

But that the opportunity is the same, that by sharing common metrics or goals they will be able to align and co-operate faster.

Myths, challenges and best practice in digital/social agency compensation

Finally for the day was Myths, challenges and best practice in digital/social agency compensation by David Beals, President and CEO and Greg Paul, Principal and Founder R3:JLB David and Greg presented their findings based on the surveys they run and their consulting experience and found there was a normalisation of the  rates being charged by digital agencies.

The biggest concern continues to be the competition for talent, which puts pressure on digital salaries and drives up rates.

Plus there is a trend towards US advertisers moving away from digital project fees and now increasingly retaining them and realising the reduction offered by agencies in return for the guaranteed cash flow.

Day 4, Wednesday May 7, 2014

The power of social media content

The final day (or half day, technically) started on a high, with The power of social media content by Peter Friedman, Chairman & CEO, LiveWorld. Peter is a passionate believer in social media, except when it is not social at all. Unfortunately many brands make the mistake of using it as a broadcast media.

And while there is a place for brand and category content in social media, he recommends thinking of it as a party, which is much more social and less about you the brand as he illustrated below.

SocialTopicMixBut used effectively, a social media strategy can build engagement with your customers and create a community.

But it is important to ensure your social strategy is built from your business goals and objectives and measured against these metrics when evaluating the results.

It also requires commitment and dedication. A social strategy is not something you try out today and drop it tomorrow. It requires resources and commitment to deliver the results.

The 4A’s perspective on conflicts

The 4A’s perspective on conflicts by Lauren Crampsie, World-wide Chief Marketing Officer, Ogilvy & Mather. With increased Holding Company consolidation and a growing number of global brands, the issue of managing conflicting business continues to concern agencies and brands alike.

The solution offered by the day was to take a more granular view of conflict, rather than the broad category brush-strokes currently used.

But the one issue that was only indirectly addressed was the issue of talent. While Lauren pointed to the concept of building a speciality.

ConflictVersusSpecilist

But the emotional and therefore powerful concern many advertisers have when working in a conflict situation is the thought they are getting the B Team and not the A Team was not addressed. Perhaps next time.

Advertising transparency crisis

Finally for the last session on the final day the elephant in the room was addressed – Advertising transparency crisis. To the credit of the ANA, they took a two prong approach with a global view and a domestic view. The global industry debate on media transparency was presented from a global, UK and Canadian perspective by:

While a more domestic view of media transparency issues and the role of marketing procurement was presented by:

From a global perspective, the issues were common across the markets.

WFA_Media_SatisfactionSo while it is clearly an issue in almost all markets, there are some things that procurement and marketing can do to address the issues regarding transparency and media value.

Colgate_Media_Transparency

And that as they say is the end of that

Hopefully from this overview you can see the depth and breadth of the marketing, procurement and marketing procurement topics discussed and calibre of the speakers. For anyone interested in marketing procurement, marketers, procurement, agencies and consultants like me, it is well worth the time and cost. Best summed up here.

And I wholeheartedly agree. As for the topics I think need more exploration, discussion and focus:

  1. We have only just scratched the surface of media value and transparency, so this needs further exploration.
  2. This leads on to the next topic, which is how do we get to measuring advertising and marketing value?
  3. Finally, is there a more sustainable and robust way of identifying, managing and rewarding talent at all parts of the marketing and advertising value chain?

But that is just my list. I’d really appreciate hearing yours. I am sure Bill and his team at the ANA would appreciate it too as they begin to develop next years program.

 

On a personal note I would like to thank the ANA for organising this event each year, especially Bill Duggan and his team for all their hard work, plus the speakers this year who were outstanding. But most of all I want to thank my fellow social media mavens tweeting the event. You are represented in the post here, with your tweets and the photos you took, and I want you to know you bring an extra dimension of engagement and enjoyment to the conference. Thank you. 

About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 – Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren’s Bio Here Email: darren@trinityp3.com

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