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Digital advertising procurement building synergies among the triad
 

Digital advertising procurement building synergies among the triad

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Though digital marketing has enhanced customer engagement it has also increased the burden on C-level executives. While CMOs are having a tough time in allocating budgets and measuring effectiveness ...

Though digital marketing has enhanced customer engagement it has also increased the burden on C-level executives. While CMOs are having a tough time in allocating budgets and measuring effectiveness across emerging channels, the CPOs look to consolidate their agency base and bridge the gap between traditional and digital advertising.

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    Digital advertising procurement building synergies among the triad Digital advertising procurement building synergies among the triad Presentation Transcript

    • June 26th , 2013 Abstract: A fluid landscape prevails in the digital advertising industry as there is no winning formula for marketers. The digital advertising industry is evolving at a rapid pace with the evolution of new technologies. Holding companies and digital advertising agencies are competing with each other to win clients. On the other hand, marketers are trying out a trial and error approach to align their digital advertising strategy to their brand strategy. Though digital marketing has enhanced customer engagement it has also increased the burden on C-level executives. While CMOs are having a tough time in allocating budgets and measuring effectiveness across emerging channels, the CPOs look to consolidate their agency base and bridge the gap between traditional and digital advertising. The agencies have the challenging task of meeting the client’s ever increasing digital needs. This article focuses on the road blocks faced by the triad and the procurement road ahead that would help build synergies among them. Digital Advertising Procurement: Building Synergies among the Triad – CPO, CMO & Advertising Agencies. Prashanth S Senior Research Analyst Marketing Services Copyright © Beroe Inc, 2013. All Rights Reserved
    • Key Highlights  Evolution of the Digital Advertising Landscape A fluid landscape prevails in the digital advertising industry as the industry is evolving at a rapid pace while; holding companies and independent digital advertising agencies are struggling to catch up to the market place. In the past digital advertising was viewed as yet another marketing channel that marketers could leverage. The advent of social media, Web 2.0 and core marketing activities like PR turning digital marked the beginning of the digital era. Holding agencies like WPP, Omnicom, Publicis, and Havas have realized that digital advertising will be their future. In the past holding companies outsourced digital activities to niche agencies which led to the emergence of digital advertising agencies in the market. As traditional advertising models became antiquated, holding companies started acquiring digital agencies across regions in order to build their service capabilities. At present, 60% of the CMOs are not satisfied with the quality of digital services provided by holding companies. Holding companies offer digital services in a traditional way. They do not help the client bridge the gap between traditional and digital advertising mediums. Recently a few marketers who had consolidated their advertising spend to one or two holding companies have unbundled their digital activities from holding companies and have engaged with a roster of independent digital agencies. So how will the industry evolve in the future? Holding companies will continue to acquire digital agencies to strengthen their breadth of service offerings and global presence. Most independent agencies would prefer to remain independent and continue to expand their service portfolio. An intense competition is expected between the holding companies and the digital advertising agencies in the near future. Agencies with high adaptability to the evolving technological trends would leverage competitive advantage.
    • Key Highlights Alkylation is a major propylene price driver in the US and it is a factor that is expected to strongly influence the US propylene prices. Key Highlights  The innovative segment of the CMOs leverage the digital channels to aggressively track and evaluate their decisions on 4Ps. While a major segment constituting the followers, still lack the edge to leverage the new dynamics of marketing approach  Fortune 500 companies are in the process of consolidating their supply base to a lead creative agency and a lead digital agency CMO Challenges in the Digital Advertising Industry  Integrated marketing approach: Increasing digital channels & screens to reach the consumers The impact the customers have on the brand is soaring with the advent of digital channels. CEOs and CMOs understand that customer contact is crucial, but the advent of social media is questioning the traditional mass marketing approach and skill sets. CMOs need to follow an integrated marketing approach with the right mix of traditional and digital activities that leverages cross functional relationships, fosters customer engagements and increases brand value. The innovative segment of the CMO’s strategy leverages the digital channels to aggressively track and evaluate their decisions on 4Ps (Promotion, Product, Price, and Place). While a major segment constituting the followers lack the edge to leverage the new dynamics of this marketing approach. Though they understand the market dynamics they have a lot of execution issues in framing an integrated marketing approach. The following digital activities are expected to have a huge demand in the future as these activities have been successful for the innovators. – Social Media & Consumer analytics – CRM & Content management tools – Mobile & tablet applications – Search engine optimization  ROI accountability for digital channels Measuring marketing effectiveness is undergoing rapid changes as there is a need to integrate traditional and digital platforms in measuring overall effectiveness. Nearly 70% of the CMOs feel ROMI (Return on Marketing Investments) would be the primary measure to evaluate marketing effectiveness by 2015. CMOs are unprepared to give hard numbers to prove their investments on digital channels.  Global outsourcing of digital activities Source: eMarketer
    • Many fortune 500 companies feel holding companies are not effective in bridging their gap between traditional and digital activities. As a result they have engaged with a roster of digital agencies across regions. Some of the challenges faced are: – Content duplication : Due to the engagement of different agencies for traditional and digital activities – Preferred digital agency model : Consolidation is a challenge as it is difficult to find a digital agency offering all digital activities and having a global presence  Data explosion: strategic decisions using consumer data The volume of data produced is increasing at ferocious velocities. Navigating through the digital ocean to understand the needs of the customer has become a difficult task. Social media produces huge amounts of consumer data. But this information deals with the sentiments and emotions of the people and cannot be directly fed to the CRM platform. But this data needs to be incorporated to make strategic decisions on 4Ps (Promotion, Product, Price, Place). Nearly 80% of the CMOs feel the marketing complexity would continuously increase for the next five years and 72% of the CMOs feel that data explosion would be their major area of unpreparedness. Advent of digital channels has introduced the concept of the customer centric model. Display ads are losing their importance while behavioral targeting is gaining rapid momentum. CMOs are in need of tools that would help them track and organize data across: – Brands – Geographies – Campaigns – Channels (need to consolidate traditional and digital mediums as an integrated marketing approach is followed) CPO Challenges in the Digital Advertising Industry  Bucketing of digital activities Procurement teams are concerned about bucketing of various digital activities. They are unclear about the digital activities that need to be bundled with the traditional creative activities. Their challenge is to find a single digital agency that would handle all their digital needs and have a presence across geographies.  Bridging the gap of traditional & digital procurement Many Fortune 500 companies are not satisfied with consolidating their digital activities to holding companies. As a result they had to engage with a roster of traditional and digital agencies. The strategy adopted by various industry sectors is provided below:  Framing an effective content supply chain As the number of digital mediums is increasing, procurement teams are concerned about framing an effective content supply chain to avoid content duplication. This being a cost saving opportunity there is a high demand for content supply chain officers. Content for advertising is no longer treated as work outsourced to the advertising agency. CCOs (Chief Content Officer) decide whether content has to be in housed or outsourced. They work on the effective content supply chain across channels to derive maximum creativity and avoid content duplication.  Lack of digital expertise Procurement teams in Fortune 500 companies lack insight on the functionality of various digital channels. In such a fluid landscape the marketing departments need to follow a trial and error approach in order to find the right media mix for the brand. But procurement teams are more concerned with deriving high creative output at low cost. In order to solve this drift in ideologies; companies like L’Oreal are arranging executive training programs for procurement leaders to give them insights on various digital activities.  Centralization vs. decentralization One of the challenges faced by the procurement team is to determine whether to centralize and decentralize various digital activities. Digital advertising activities need to be business centered to derive maximum ROI. But the challenge is to design a global model to track the effectiveness of digital channels across geographies. There is a lack of maturity in decentralizing the activities and splitting responsibilities between global and regional teams. Key Highlights  CMOs are in need of tools that would help them track and organize data across brands, geographies, campaigns and channels  Bridging the gap between traditional and digital procurement in order to frame a effective content supply chain is a major challenge for CPOs  Lack of digital expertise reduces the flexibility and adaptability of procurement teams; which are the major requirements to survive in the fluid digital landscape Key Highlights  CMOs are in need of tools that would help them track and organize data across brands, geographies, campaigns and channels  Bridging the gap between traditional and digital procurement in order to frame a effective content supply chain is a major challenge for CPOs  Lack of digital expertise reduces the flexibility and adaptability of procurement teams; which are the major requirements to survive in the fluid digital landscape
    •  Bridging the gap between procurement & marketing – Marketing procurement team could report to the CMO. This would strike the balance between creative quality and leveraging cost saving opportunities. – Ensure category managers have equal exposure to procurement and marketing functionalities, by serving equal terms in both the departments for the same spend category. – Regular knowledge sharing sessions for digital procurement managers in order to stay updated with the evolving digital industry.  Digital Agency Structure – Marketers need to shift to a preferred agency model from their present roster of digital agencies. – The agency structuring should focus on optimising the content supply chain and achieving maximum creative output  Service Bundling – The digital activities needs to be bundled based on its demand and the strategic importance – Centralisation vs. de-centralisation decisions play a vital role in agency structuring and service bundling  Agency Partners – Marketers need to build strategic relationship with the agencies giving equal weightage for creativity and measurement – They need to help agencies to develop ROMI measuring and tracking tools that would fall in line with their brand strategy  Avoiding Content Duplication – Employ Chief Content Officers who work towards formulating an effective content supply chain for multi-channel marketing to derive maximum creativity and avoid duplication. – Production decoupling: For most of the creative agencies, digital production is not their core competency. Therefore, decoupling the digital production work from creative duties can result in improved quality. In addition, this reduces the budget since the execution of digital production work from offshore and near-shore locations results in a cost savings of 4-5%. – Leverage marketing tools like Digital Asset Management would help in avoiding content duplication Thus building synergies between the triad by understanding the nuances of the supply landscape would help marketers step into a global sourcing approach thereby optimizing the overall marketing supply chain and leverage maximum value benefits Disclaimer: Strictly no photocopying or redistribution is allowed without prior written consent from Beroe Inc. The information contained in this publication was derived from carefully selected sources. Any opinions expressed reflect the current judgment of the author and are subject to change without notice. Beroe Inc accepts no responsibility for any liability arising from use of this document or its contents. For more information, please contact: contactus@beroe-inc.com Beroe’s Take: Building Synergies between the Triad through Effective Procurement