Global Marketing
Management Consultants
Global Marketing
Management Consultants
mobile-logo
Global Marketing
Management Consultants
Top

Managing Marketing Costs for 2020

Marketing costs 2020

This post is by Nathan HodgesTrinityP3‘s Managing Director ANZ. Nathan applies his knowledge and creativity to the specific challenges of marketing management, with a particular focus on team dynamics and behavioural change.

In lockdown, everyone suddenly seems to have an opinion. LinkedIn is replete every day with shouty marketing posts with titles like ‘7 essential leadership shifts to power out of the pandemic’, or ‘5 things a trombone can teach us about Covid-19’, or ‘Why uncertain times call for a stovepipe hat’.

I really don’t want to add to this steaming pile of prognosis.

So I’ll try and be very direct. I’m writing about managing marketing costs for this year and beyond. And I’ll stick simply to what we’re seeing at the moment at TrinityP3, and to what we know works and doesn’t work any more.

Let’s be clear. It’s going to be a tough few years. Marketing budgets are not just going to be smaller. They are also going to be far more important. They will become even more central to the success of a business, and getting the most out of them will be critical. And they will become endangered – subject to the ebbs and flows of the very company fortunes to which they are so vital.

And yet, as the economy slowly starts to come back, many marketers are already simply asking their agencies – yet again – to take a 30% cut in fees to do the same work. As Michael Farmer has written so well, it has been the same story in the industry for 10 years since the GFC. This time around it’s hard to see where the cuts are left to be made.

This thinking has not only all but destroyed the business model of the agency world. It has also taken the spirit.

Marketers need to take control.

Because there’s a better approach, of course. One that protects and maximises valuable marketing budget, improves marketing outcomes, and rewards talent, experience and innovation in an agency roster. There is genuine competitive advantage to be gained here. But it requires some brutal and honest thinking upfront – as in right now – from the marketing team.

The way we see it, there are three steps for a marketing team to take, and there is one requirement to make it all work.

Step One – Prioritise your scope of work.

Self-evidently, not all marketing tasks are equal. Some deliver on immediate ROI, others on strategic or brand measures, others on internal stakeholder satisfaction. Some aim to deliver short-term results, while others work against long-term objectives. So it makes sense to allocate more resources and effort to the tasks that offer the greatest return to the business.

Obvious, isn’t it?

But despite being such an obvious thing to do, the prioritisation of tasks by so many marketing teams is typically haphazard, subjective and qualitative. (That’s if it is actually being done at all, beyond a quick discussion during annual planning.) And if a marketing team has any agencies on retainer, or has an in-house production capability, then the process tends to be even worse – everything has to be done, and everything is equally important.

In tough times, when resource is scarce, this just won’t cut it.

A simple prioritisation matrix, tailored to your business will allow your team and stakeholders rapidly to allocate every potential marketing task into one of three activity tiers.

Whether you use a matrix or not, you’ll need some kind of methodology to rank potential initiatives by their ability to deliver against objectives.

Once you’ve done this, you’re ready for step two.

Step Two – Price on the basis of output, not input.

Once you have a prioritisation of initiatives by delivery against objectives, you need to price each output accordingly – not by the cost of executing those outputs, but according to the value they produce for the business.

Moving from an input-based cost model (where the cost of an initiative is determined by the head hours and resource employed to create and execute it) to an output-based model (where cost is determined by the business benefit of the initiative) is liberating for both marketer and agency partner alike.

Where we have introduced this model in Australia (it is commonplace in the US and increasingly normal in Europe) the result has been a far greater focus on effectiveness and ROI for the marketer, and a far more predictable revenue and profit picture for the agency. It encourages responsibility, focus and innovation on both sides.

In other words, exactly what is required in a post-lockdown world.

It is not that hard to build or implement. We find we can draw from our tiered benchmarks for around 4500 typical marketing outputs to draft a tailored output-based model for most marketers in 3-4 weeks. It then usually takes a couple of weeks to get the teams across how to work it.

While that’s finishing off, you can start on step three.

Step Three – Focus your agency roster.

In good times as well as tough, most marketers have too many agencies on their rosters. Typically – especially if the marketing team is decentralised – the actual number won’t be known. If a marketing team says it has 4 or 5, we usually discover 9 or 10. A few years ago a client engaged us to help manage a roster assumed to be 30 agencies – we stopped counting at 2500.

Our benchmarks tell us that each additional agency added to a roster typically creates a 10-15% inefficiency. This doesn’t take into account the additional time the marketing team spends in briefing, debriefing and management. Nor does it take into account the opportunity cost of consolidating work into an agency so that it can invest in resources, tech and skillsets to deliver more effectively and efficiently.

Be relentless.

Consolidate your agencies by activity tier, discipline and role, so that the ones remaining are focused, motivated, well-paid for what they do and committed to your success.

Then manage the agencies.

That means not just asking them to ‘go away and collaborate’ or expecting them to compete with each other for budget or pitch for work. It means proper governance: a working roster model, clear responsibilities and a remuneration model that rewards success handsomely and penalises under-delivery. It’s not just set-and-forget. Especially now.

One Requirement – be honest with yourself.

When discussing this approach with marketers before the pandemic, plenty would say things like ‘we’re kind of doing some of that already.’ We’d usually find they weren’t. Not in any consistent way that made a difference, anyway.

Facing the challenge of the next few years, marketers can no longer afford to be so vague about how they are approaching the management of their discipline and their partners.

If you’ve got a robust way of prioritising tasks, an output-based pricing model, and a focused roster with proper governance – then in our experience you are well set to get the most out of your marketing budgets and agency partners.

If not, then you’ll need to ask your agency for that 30% reduction in fees.

And the really bad news for you – the agency will probably say yes.

Our Strategic Supplier Alignment service helps you to untangle your supplier roster and understand its strengths and weaknesses to improve your performance. Learn more here

Want more articles like this? Subscribe to our newsletter:

Fill out my online form.

As TrinityP3′s General Manager, Nathan applies his knowledge and creativity to the specific challenges of marketing management, with a particular focus on team dynamics and behavioural change. He is an HBDI Practitioner and an experienced facilitator and coach. Read Nathan's bio here or email nathan@trinityp3.com

We're Listening

Have something to say about this article?
Share it with us on Twitter, Facebook or LinkedIn

Tweet
Share
Share
Buffer
Pin