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Marketers, make procurement your friend

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Procurement is a task that marketers rarely find fun, yet all realize that it needs to be done. Given the strain that many marketing budgets are under, skillful procurement processes--supply management, demand management, and process management--can actually net an extra 5%+ of current marketing budgets. There are important opportunities for closer collaboration between marketing and procurement groups.

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Marketers, make procurement your friend

  1. 1. Marketers, Make Procurement Your Friend October 22, 2013
  2. 2. The big picture Global Marketing Expenditures account for one-trillion dollars annually. 2 Trillion
  3. 3. How to spend $1 Trillion? - 42 million new cars - 3.6 million homes in CA - 4,000 celebrity divorces - 2,000 space shuttle trips - 1 bail-out of the US economy 2
  4. 4. 15 - 20% of marketing spend can be unlocked. That’s up to $200B! 4
  5. 5. Now is the time! Uncertainty and pressure Increased pressure for growth with less Traditional vehicles less efficient 5 Uncertainty around digital and social Partner networks complex and costly
  6. 6. Dollars sans sense % of CEOs report: ”“Marketers are always asking for more money, but can rarely explain how much incremental business this money will generate.” ” 6 Source: Fournaise, Forbes, July 2011
  7. 7. Show me the money… % of CMOs “expect ROI to be the dominant measure of marketing by 2016” ” 7 Source: Fournaise, Forbes, July 2011
  8. 8. The growth of digital… % of TV spend “expect digital to reach 85% of TV spend from 60% today” ” 8 Source: eMarketer; McKinsey analysis
  9. 9. Impact across industries Telecom Pharma Retail Travel/hospitality Consumer packaged goods Insurance Banking 9 9
  10. 10. What do we mean by procurement principles? 10 Image by Frédéric Bisson 10
  11. 11. Rethinking the fundamentals Incorporating procurement principles into marketing planning and management 1 2 Manage demand 3 11 Know the supply base Improve processes 11
  12. 12. Know your supply base Today… Run RFP processes Consolidate vendors Compare rates across partners Negotiate contracts with optimal terms Emerging Practices Explore new partner options, e.g. venture funds, scouts Selective use of e-auctions for some agency services Increased use of trading desks Decoupling „Clean sheet‟ models to improve transparency 12
  13. 13. Understand the true costs Illustrative savings with clean sheeting approach $ Millions -14% 20 19 22 17 6 5 Current Fees Clean Sheeting Profit Margin 13 Source: McKinsey Analysis Indirect Direct Transparency brings greater efficiency without jeopardizing quality
  14. 14. Manage demand Today… Emerging Practices Greater mix of shorter TV units (i.e. 15‟s) per idea Drive to alternative media plans that achieve same goals Managing production locations and # of spots Rethink how many TV executions make sense Rethink paper stock and unique shapes/sizes of direct mail Manage digital granularly at a keyword level for search and at a package level for display Manage sponsorships; identify ones with low ROI 14 Image by Cameron Russell
  15. 15. Managing digital granularly Search can be over-credited for orders, if credit allocated to last touchpoint 10 In addition: 20-30% of keywords and 1020% of display packages found to have negative contribution margins Poor coordination between agencies managing organic search and paid search • No use of technologies like real-time bidding 60 30 40 30 Last touch Direct 15 • • 30 Source: McKinsey Analysis Multi-touch Display Search
  16. 16. Understanding sponsorship ROI ROI for every dollar spend 2.50 Often find: • • 0.70 0.30 16 2nd quartile Source: McKinsey Analysis Some negative ROI properties serving broader brand purpose • Event revenues impacting ROI of sponsorships 9X difference 1.10 Top quartile Long tail of sponsorships with negative ROI 3rd quartile Bottom quartile
  17. 17. Improve process Today… Create thoughtful, quality briefs. Align stakeholders and deliver Streamline advertising development processes Adhere to a strict agency performance management process 17 Emerging Practices Enabling journalistic approach to content Established social media and content development process Look internally
  18. 18. The „cost‟ of process inefficiency Agency fees paid for similar work $ Million 19% Agency cited: • • 18 Source: McKinsey Analysis Excessive meetings with no discipline on attendance • Company 2 Multiple changes in direction post-first meetings • Company 1 Poor / non-existent briefing Ever-changing schedules and postponed meetings
  19. 19. Agency of the future 19 Image by D.H. Parks 19
  20. 20. Shift in managing ecosystem Digital agency Creative agency CMS provider Company Marketing Analytics & targeting Customer Service Ad networks Procurement Mobile agency Data providers 21 Media agency Insights Sales Portals and platforms v Partner v Platform/Channel Ecommerce platforms Search agency Ecosystem of ideas, content & engagement
  21. 21. Future of content creation SOURCE: Executive Interviews, November-December 2012; Boston Media & Advertising Daily, "Agency of the Year: Digitas," Dec 7, 2012; Washington Post Style “Oreo‟s Tweeted Ad was SuperBowl‟s big winner” Feb 4, 2013 22
  22. 22. I worry about the cooperation among our people. The problem with our people is that the better they are, the less cooperative they are. ~ Sir Martin Sorrell, CEO of WPP Group 23 SOURCE: HBR, April, 2013
  23. 23. Staying connected Kushan Surana, Senior Engagement Manager, McKinsey & Company Kushan_Surana@mckinsey.com Jeff Jacobs, Principal, McKinsey & Company Jeff_Jacobs@mckinsey.com @McK_CMSOForum http://www.slideshare.net/McK_CMSOForum 25