Comment Central

charles kirchner

Whether the recession is as bad as we feared, is bottoming out, or has much worse to offer, one thing is assured, most brands are financially challenged right now and looking for ways to stay profitable and deliver some good news to share holders. What happens over the next few months, and probably the next year or so, will be of critical interest to senior marketers, chief planning and financial officers, and chief executives.

Obviously, cost control will be high on the agenda for most brands and rather than making false savings that erode the brand the savviest players will be keeping up their marketing spend to become the eventual winners in the Recession Derby. But are they spending too much? Is it possible to have exactly the same marketing output for less investment?

The answer to both of these questions is a resounding yes. One thing that was learned from the last big recession in the 90’s was that controlling cost is a skill as important as great creative delivery and visionary pricing strategies. However, despite this key learning a great number of brands are currently overlooking a ‘holy grail’ solution that will save them money, one that is to be found within their own organisations.

Before I continue it’s best to have a way to describe the two main areas involved in marketing. In my view it neatly breaks down into a distinction that I started using some five years ago - “Magic” and “Logic”.

‘Magic’ is defined as the production of brilliant ideas that grow brands and businesses while ‘Logic’ is defined as project management, financial management, and other ”Supply Chain” processes that support the innovation effort and the "magic" it produces.

Our case studies show that the key to saving hundreds of thousands and possibly much more, and yet still being able to market your products with no creative delivery and brand engagement sacrifice, lies within “Logic” arena.

My advice to all ‘c suite’ executives and senior marketers is to undertake a thorough review of the brand’s marketing cost base, taking the range, scale and delivery of activities as a given and assuming that quality standards and speed to market are sacrosanct. This activity will take 8-12 weeks and can be achieved either solus with a brand’s internal procurement team or with the help of outside experts.

Following this process most brands will be able to isolate circa 30% of non working spend that is normally dedicated to campaign delivery such as a new above the line initiative or a new direct marketing thrust.

Next comes the key question of whether the 30% is capable of being broken down sufficiently to make it meaningful? For most companies the ways of assessing spend in this area are opaque to say the least, and in most instances the process for evaluating spend have not been updated for 15 years or more.

Actual agency fees will be an area that has been pored over and can safely be set aside in most cases, but paradoxically the opposite is true of the performance related elements of agency remuneration (especially media) which have been grossly neglected, poorly managed and can provide a very rich return in comparison to the efforts needed to unlock their potential “cash back” value. Here we are entering dark and largely unexplored territory of ‘Logic’ which often turns out to be the costliest link in any big brands marketing supply chain .

In addition, the areas of advertising production and the whole range of marketing materials from POS to “trinkets and trash” provide a ripe target for money saving particularly when third parties, primarily agency partners, are an integral part of the marketing supply chain.

As drivers of the relationship between itself and its suppliers, agencies will have their own methodology and rationale for billing, usually visible to the client but arcane enough to cost serious amounts of money. Simply ‘decoupling’ these relationships with billing and reporting direct to the client will often save huge amoubts of money.

How do you bring about these savings?

Usually it means improving the way that marketing procurement work together. Procurement needs to be brought up in the mix to be responsible for supplier engagement from a cost assessment and reporting point of view, in other words the ‘Logic’, leaving the marketing team to deal with the ‘Magic’ actually delivering the creative campaigns that will sell your products. All it takes is a little extra effort for the brand marketing and procurement teams to deliver huge savings on the bottom line.

The process of refining and redefining your relationships with suppliers and also changing or fine tuning the dynamics and responsibilities for marketing and procurement within your organisation will take time and may need the help of advisors who have been through the process before.

In general it will be possible to claw back between 5-6% of the overall marketing budget through streamlining non-working operational elements and in recessionary times this can mean the difference between success and failure for some brands. Just think what an extra 5% discretionary spend can do for your brand at the moment.

Surely it’s the logical step to take?

Charles Kirchner is Chairman of Marketing Supply Chain Ltd