Marketing Procurement: Three is Company, More is a Crowd or "Benchmarking Marketing Spend Requirements of Different Industries” www.convoagency.com
the new traditional agencyCONVERSATIONWe use evolved thinking to combineeffective, traditional means of reachingconsumers with new, creativetechniques. The more touchpoints in acampaign, the more impactful themessage. We embrace the old andstrategically use it to leverage the new.Every piece of the plan is done in-house– research, strategy, design,development – leaving no restrictions tocreate the best mix of media for eachbrand’s message.Headquartered in New York, with satelliteoffices in Kansas City and Los Angelesconvoagency.com
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a quick story of three people: Banker/Suit Type The Agency, The Marketing Team, and Procurement Question: Why is Don Draper nervous?
because procurement is going to take his suit!!! $$$ $$ $ $$$ $$ 6
from don draper to donny deutsch: agencies and marketing teams have learned to play the game
how? over the years, agencies becamefriends with clients andbrought them along for the party! who doesn’t like a good party? 8
but over the last ten years, this story has gotten more and more interesting.Fragmentation and 28% increase in the DECREASE in net-worthsegmentation of marketing number of agencies of households.Tactics. from 2002-2012. This doesn’t add up. convoagency.com
as much as we hate to admit it,sometimes we all need a friend to tell uswhen enough is enough.(that’s where procurement comes in)
taking a step back, let’s talk about BENCHMARKING
let’s look atBENCHMARKING – BY CATEGORYWe analyzed Fortune 500 companies by industry – comparing and contrastingtheir ad spends relative to revenue, as well as their advertising allocation tactics.CPG INSURANCE/FINANCIAL RETAIL HEALTHCARE TECH
where we are todayBENCHMARKING – TOTAL SPENDwhere were ad dollars spent in 2002?convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
where we are todayBENCHMARKING – TOTAL SPENDwhere were ad dollars spent in 2011?convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
where we are todayBENCHMARKING – BY CATEGORYWe took this a step further and analyzed the breakout of spendacross categories:convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
why do they spendTHE DECISION MAKING CONTINUUMAn easy way to understand why category allocations are slightly different is tolook at the Decision Making Continuum.The Decision Making Continuum is the cognitive process a person goes throughbefore taking an action, and the processes afterwards as they’re on their way tobecoming a repeat buyer, service user and hopefully advocate.These are awareness, education, action, conversion, and ultimately – the holygrail – retention and advocacy.convoagency.com
why do they spendTHE DECISION MAKING CONTINUUMEach step lines up with specific tactics which explains why certain industriesallocate more or less towards different forms or marketing, advertising, andmedia.A CPG company needs to make sure they are top of mind when a customer visitsa store therefore they will spend more on awareness tactics to stay top of mind.In our analysis you’ll see that Healthcare companies spend more on print andoutdoor.For healthcare, these mediums are useful to maintain an even presence so thatwhen a patient needs a service they would recall the brand or locationsubliminally.convoagency.com
why do they spendALIGNING TACTICS WITH OBJECTIVESconvoagency.com
let’s talk aboutBENCHMARKING – BY TACTICWhen analyzing benchmarks by tactic you will see that from 2002-2012 acrossall tactics spending has increased… TV TVconvoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk aboutBENCHMARKING – BY TACTIC PRINT TVconvoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk aboutBENCHMARKING – BY TACTIC DIGITALconvoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk aboutBENCHMARKING – BY TACTIC OUTDOORconvoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk about Except for radio, however radio budgets are now sometimes absorbed into digital due to online and satellite radio so the number is skewed.BENCHMARKING – BY TACTIC RADIOconvoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk aboutBENCHMARKING – BY CATEGORYAdditionally, we analyzed total marketing spends as a percentage of annualrevenue across each category.This is on par with historical data beyond the past ten years.For a Fortune 500 company, the percentage of annual revenue spent on marketinghas always been around 1 to 3%.In this year’s case it’s 1.14% with CPG companies being the highest spenderssince, as we pointed out, they have to edge out competitors in-store which takes abit more effort.Our friends in consumer health being the lowest spenders – because, if you havean ailment in most cases you’re going to be seeking out help so they have an easiergo at it. (see graph on next page)convoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
let’s talk aboutBENCHMARKING – BY CATEGORYhow much do they spend? MARKETING SPEND AS PERCENTAGE OF ANNUAL REVENUEconvoagency.com SOURCE: Analysis of Fortune 500 Annual Reports
what is wrong with this picture?BENCHMARKING – RETURN ON INVESTMENTThere is a disconnect when looking at ROI though:
what is wrong with this picture?BENCHMARKING – RETURN ON INVESTMENTTV has had the highest increase in allocation, but is the least effective. TV MARKETING ALLOCATION additionally...
what else is surprising… 86% of marketers believe successfully integrating multiple channels under a single strategy is critical to long-term success. yet only 29% feel that they effectively integrate these channels.convoagency.com SOURCE: Sitecore/Forrester Research
it’s time to shineprocurement canhelp fix the problem.
three steps to success: Benchmarking should be derived as a percentage of sales; however that percentage should not automatically increase year-to-year if results are not seen or there are no new product launches/initiatives. Seek partners who have demonstrated competencies across multiple channels, that base their campaigns in strategy, can forecast future changes, and adapt effectively to meet goals. Keep us in check (the best agencies will welcome it).convoagency.com
for more info Download our White Paper @ convoagency.com/marketing2020 and view the infographic!
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