51 Marketing Trends found for Agencies / Holding companies

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Recovering Ad Market Lifts WPP Group's Outlook

A return to adspend growth stateside and a better-than-expected first quarter could produce a 2% rise in WPP Group sales and an improvement in margins during 2010. Given the legendary caution of of ceo Sir Martin Sorrell, WPP's guidance for investors suggests that a recession-weary world can look forward to a robust recovery over the eighteen months ahead - assuming always that no-one pricks the Chinese economic bubble!

[Estimated timeframe:2010-onward]

WPP - the planet's largest marketing services company by revenue - had earlier predicted a horizontal performance for the 2010 fiscal year, basing its prediction on an 8.1% dive in like-for-like sales during 2009.

Although organic revenues were flat on 2009’s first quarter at £2.1bn ($3.2bn), growth resumed in March.

Sir Martin said that first-quarter sales in 2010 were 3% ahead of budgets, which had been drawn conservatively after he admitted being “too optimistic on the forecasting” last year.

“Having been once bitten we are twice shy. We are probably going to be a little bit on the pessimistic side this year and that is probably reflected in some of the numbers.”

Key points emerging from WPP's guidance are ...

  • While the US was the group's fastest-shrinking market in 2009, it has registered growth of 4.1% in the first quarter of 2010.
  • A high volume of new business wins has boosted WPP’s GroupM media operations in Europe, with public relations and digital marketing also performing better.
  • Sir Martin is planning a “large number” of acquisitions this year, for which the group has allocated a maximum of  £100m. Ever the master tactician, Sorrell prepared his negotiating battlefield: “Valuations [of potential takeover targets], as others have pointed out, are still quite high, particularly in the United States and particularly in digital,” he said. 
  • While average group headcount remains 10% lower than in the first quarter of 2009, WPP has resumed hiring, with current staffing 1% up on December levels.

Sorrell's base salary remains at a meagre £1 million, consistent with a company-wide pay freeze until January this year. His bonus payments also declined by over 50% in the light of the group's failure to achieve targets for profit and margin growth.

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: FT.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=5167

Global Media Agency Networks Eye Restructure of Local Operations

The major media agency networks are taking steps to reinvent the $5.5 billion local buying process as they seek better leverage and efficiencies in the historically cumbersome market.

WPP, Publicis Groupe and Omnicom Media Group have already created new buying platforms and/or restructured units to address the problem. And now, Interpublic's Mediabrands, which oversees Initiative, Universal McCann and other IPG media assets, is also exploring a number of restructuring alternatives, according to sources.

One option under consideration: combining the agencies' local spot-buying units with Mediabrands' barter trading unit, Orion, to maximize the utility of Orion's sophisticated electronic trading platform. Mediabrands officials declined to comment.

While agency execs have insisted that head count reductions aren't a main driver of the changes, clearly the ranks of local buyers have been trimmed during the recession. The major objectives agency executives have cited for the changes include: a more effective gathering of marketplace intelligence; and the opportunity to utilize new technology platforms that will let buyers spend more time discussing innovative deals with clients and sellers, and less time faxing buy order corrections and discrepancy forms.

The activity is also due to advertisers devoting smaller shares of their budgets to local media in recent years. Universal McCann research shows national advertisers have reduced their share of TV ad spending in local markets by about eight percentage points over the past decade. And according to the Television Bureau of Advertising, local broadcast TV spending was down 27 percent in the first half of 2009.

The next salvo could be Mediabrands' combining of a barter operation -- which typically buys remnant time at bargain rates -- with its regular local buying units. The idea has some buyers buzzing.

"That could change the model completely," said a senior executive at one shop.

A TV sales executive noted sellers would resist if the intent was to drive all spot prices down to levels obtainable through the barter process. "You'd need to set up some kind of fire wall," he said.

This past spring, Publicis Groupe's Starcom MediaVest Group created a buying platform called SMGX, overseen by John Muszynski, chief investment officer at SMG. The idea is to maximize the leverage of the estimated $22 billion in buying clout brought to the marketplace each year by Chicago-based shops Starcom and Spark and New York-based MediaVest with more precise applications of data and marketplace intelligence.

"One of the reasons for all the changes is that it's an incredibly labor-intensive process," said Muszynski, CEO of SMGX, "and it's not real high on most clients' radar. It's an area where a lot of agencies are looking to cut costs and streamline."
Muszynski added that beyond the efficiencies, he believes there's simply a better way to buy local media. "Few clients come to us and say, 'I'm looking for a local TV plan,'" he said. "They want a local plan."

Print, radio and TV are all interrelated at the local level, he noted, and the best plans will put different emphases on each depending on the market and the brand. "We've started looking at it much more holistically and we're getting the local specialists to talk more, share more data and be less siloed," he said. As a result, the local broadcast and print operations at Starcom and sister shop MediaVest now have dual reporting lines into their respective agencies and into Muszynski at the SMGX level.

Last January, Omnicom Media Group brought its OPera media-buying process to its local buying units in the U.S., serving both OMD and PHD. While the shops retain individual buying operations, the OPera unit handles negotiations across TV, radio and other media where appropriate. OPera was initially developed by OMG in Europe. The shop has also introduced a procurement process to the OPera platform to help insure clients are getting the best possible deals.
"I don't think it's dissimilar from what the other groups are trying to accomplish," said Page Thompson, North American CEO at OMG. The procurement expertise, he added, "was to analyze how we go to market and help our buyers look at new approaches."

WPP's GroupM made its move last year, pulling the local broadcast operations out of three major media shops (Mindshare, Mediaedge:cia and MediaCom), and creating two new ones, Motion and Matrix, that sit at the GroupM level. They report to that division's chief investment officer, Rino Scanzoni.

According to Ellen Drury, GroupM's president of local broadcast, the restructuring has enabled GroupM to approach local buying in a more consistent and uniform manner than it did when the operation was at three different shops with three unique cultures. The back office operations have been streamlined and GroupM now executes close to 90 percent of its local TV buys via electronic invoices, she said. Since implementing the new structure, most local buying is now done out of four main offices -- in Atlanta, New York, Chicago and Los Angeles -- down from 10 before the consolidation.

Going forward, said Drury, "we'll continue to refine the product."

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: AdWeek.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4888

Sorrell says web ad spend must mirror consumers' time online

WPP’s CEO Sir Martin Sorrell has called for more parity between advertisers’ online spend and time spent online by consumers. Speaking to New Media Age after the publication of WPP’s third-quarter results, which reported an 8.7% drop in like-for-like revenues across the quarter, Sorrell addressed an estimated 8% lag between investment and online user time.

Claimed Sorrell: “Clients aren’t investing enough in [the online] area to reach the target audience. The current spend from advertisers is between 12% and 13% of total budget. However, the time spent online by consumers is approaching 20%. Clients need to address this shortfall.”

Sorrell pointed to Google as an example of an online brand that was simplifying its offering to advertisers, along with strides taken by online platforms Facebook, MySpace and YouTube in addressing advertisers’ needs.

However, he countered, “That isn’t to say the spend isn’t moving in the right direction, but at the moment there’s still some way to go. Online advertising spend has slowed, but is still growing faster than other areas of the market.”

When asked if digital would be one of the key factors towards a return to the halcyon days of double-digit growth, Sorrell said the media industry was some time away from a return to this kind of revenue gain.

WPP is now predicting an L-shaped recovery for Western Europe, a U-shaped one for North America and a V-shaped one for the BRICs and the ‘Next 11’ countries.
The group said, “The hearts of CEOs and CMOs are becoming increasingly stronger and their minds clearer, but that increased confidence is still not transferring to their cheque writing.”

In September WPP division Group M said global internet ad spend will grow to $65bn (£44.4bn) in 2010, accounting for 15% of all ad spend (www.nma.co.uk/online-ads-to-make-up-15-of-all-spend-in-2010-says-groupm/3004679.article).

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: NMA.co.uk
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4881

Biggest ad markets will see no growth until 2011

The world’s largest media markets will return to growth in 2011, according to the latest advertising spending forecast, but with only a “meagre” recovery as emerging markets take a greater share of global ad budgets.

ZenithOptimedia, the media agency owned by Publicis Groupe, said on Monday that advertising spending in the developed markets of western Europe, North America and Japan would fall by 2.9 per cent next year, growing 1.5 per cent in 2011.

By contrast, developing markets such as India, China, eastern Europe and Africa will grow a “healthy” 7.8 per cent in 2010 and 9.8 per cent the following year, taking their share of global media spending to 35 per cent by 2011.

On a worldwide basis, Zenith now expects advertising spending to plummet 9.9 per cent this year, with growth of just 0.5 per cent in 2010, a gloomier forecast than its July report. Growth of 4.3 per cent in 2011 will still pale in comparison to the 6.3 per cent year-on-year rise the media world experienced in 2007.

However, Zenith said that confidence was improving amid “positive signals from media owners that the downturn is bottoming out”.

“We are still confident that the second half of [2009] will be much less painful for the ad market than the first half, and expect the market to hit bottom before the end of 2009,” its report said.

Of all the media formats, magazines and newspapers are suffering the most, with a “steep decline” this year. Advertising spending in newspapers is expected to fall by 25 per cent between 2007 and 2011, with magazines down 28 per cent from the same peak.

TV, cinema and outdoor advertising will return to growth next year, with TV maintaining its share of spending at around 40 per cent to be the world’s largest medium.

Online advertising is closing in on newspapers to become the world’s second largest advertising format, with 14.9 per cent share by 2011, up from 10.2 per cent last year. Newspapers’ share is expected to fall from 25.3 per cent in 2008 to 21.2 per cent in 2011.

The forecast comes ahead of the third-quarter reporting season for advertising agency groups. On Wednesday Omnicom will be the first to report its figures, while WPP, Publicis and Interpublic all update the market next week.

Last week, Maurice Levy, chief executive of Publicis, said in an interview with Les Echos, the French newspaper, that he expected the advertising market to recover in the second half of 2010.

”We reached a low at the end of June, while the market has continued to fall at least until September,” Mr Levy said.

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: FT.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4835

Havas Preps for Real-Time Ad Bidding via deal with tech firm DataXu

Havas is readying for the launch of real-time bidding exchanges by striking a deal with tech provider DataXu.

Havas will use DataXu's new technology to manage participation in the upcoming launch of the Google's real-time bidding exchange. DataXu's system, developed by MIT engineers, allows ad buyers to set rules for placing bids on units as they appear on ad exchanges and inventory management systems.
Google is expected next week to roll out its real-time bidding exchange, which will allow advertisers to bid on impressions based on data such as audience characteristics. By breaking the ad process down on an impression-by-impression basis, the exchange provides an opportunity for better targeting at lower costs. The end goal is to move display advertising toward the efficiency of search ad systems.
Real-time bidding in theory could turn the online display ad industry on its head, at least the large chunk of it that publishers don't sell directly. Rather than publishers or audience aggregators matching ad impressions with advertisers, the advertisers would make those decisions.
"What's happening is that you as a buyer will have an opportunity to make a decision about which ad impressions are most valuable across a gigantic swathe of impressions," said Nathan Woodman, svp of corporate development at Havas Digital.
Havas has teamed with DataXu, which this spring closed a $6 million round of venture funding, to use the company's Adnetik system, a digital media-trading platform. The firm was created with the idea that, thus far, the technology for managing and improving ad campaigns has existed on the sell side rather than the buy side.
That's hindered the sophistication of display advertising, said Mike Baker (shown above), CEO of DataXu and former CEO of mobile ad network Enpocket.
"It's so woefully inefficient," he said. "These ad exchanges will eventually change how media is bought. A significant portion of the spend will be traded like commodities or stocks."
Agencies are preparing for real-time bidding at various levels. Most holding companies have groups dedicated to piecing together homegrown and outsourced technologies. WPP Group's platform is called B3; Interpublic has Cadreon; Publicis has Vivaki; and Omnicom Media Group Digital has similar capabilities.
"This is the first time we're on the cusp of the buyer being able to take out the impressions they want and reject they don't want on a massive scale," said Woodman. "It should lead to a more efficient media buy."

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: Adweek.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4769

Aegis Denies Progressing Havas Merger Deal With Bollore

There's no truth to talks of a merger between French ad network Havas and the UK's Aegis Group, insisted the latter's recently appointed chairman, John Napier, in a conference call with analysts today.

Industry watchers have long speculated that the two European agency holding companies would get together, and momentum for a deal appeared to grow at the end of last year with the sudden departure of former Aegis CEO Robert Lerwill, who repeatedly opposed Havas' chairman Vincent Bollore's overtures.

But Mr. Napier today said there are no ongoing discussions with respect to a partnership or merger between the two companies. He referred to Aegis' relationship with Mr. Bollore, the French financier who is the largest shareholder of Aegis Group and chairman of Havas, as healthy and respectful. "I find him a professional and constructive person to deal with," Mr. Napier said.

Mr. Napier's comments were made during an earnings call this morning for London-based Aegis, whose business is concentrated in media buying and market research. The company is the parent of agency networks such as Carat, Isobar and Synovate.

The first six months of 2009 were "tougher than we expected," he said. Indeed, Aegis saw organic revenue decline 10.8% to $1.04 billion vs. the same period in 2008. Of that, revenue for Aegis Media, which houses Carat and Isobar among other networks, was $655.9 million, and $382.4 million came from Synovate.

North American gains
The Europe and Middle East region remains the "bedrock" of Aegis Media's business, and this year the poorest performing markets have been Spain, Portugal and Italy.

North America is seeing some traction under new CEO Nigel Morris, with some positive new-business momentum at Carat U.S., which has been one of the gloomiest areas at the company.

At its Synovate arm, custom market research was hardest hit, as clients deferred custom projects from the first half of the year into the second half, Mr. Napier said. Geographically speaking, Spain was also tough, while Africa delivered strong performance, and Latin America was stable.

"The results and outlook are encouraging," Goldman Sachs analyst Rakesh Patel said in a research note. Aegis' performance in the second quarter was somewhat stronger than in the first, but Mr. Napier was careful to manage expectations, stating that, despite the slight uptick, the company is "not, however, predicting an upturn" in the marketplace.

Additionally, Aegis provided some color around its reduced headcount. Last year, the company announced a cost-reduction program to eliminate 5% of its global work force -- some 800 jobs in 40 countries -- and Mr. Napier today said more staffers left than initially anticipated, about 900.

Aegis has seen a slew of management changes in the past 12 months, besides the sudden departure of Mr. Lerwill. Other top executives, such as David Verklin, Mainardo de Nardis and Sarah Fay, also left. More changes lie ahead as Adrian Chedore, global CEO of Synovate, is set to retire. He will be succeeded by current Chief Operating Officer Robert Philpott, effective Sept. 1.

On the conference call, Mr. Napier noted that the company continues to search for a CEO to replace Mr. Lerwill, and that may not happen by the end of 2009.

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: Advertising Age
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4691

Toyota Alarms Agencies With Plan to Launch Marketing Companies

Toyota Motor Co. is in damage-control mode after an announcement suggesting the carmaker will bring its more than $1 billion global advertising account in-house prompted panic and confusion at its U.S. ad agencies. Toyota, which unseated General Motors in 2008 as the biggest carmaker in the world by sales, issued an announcement July 28 out of its Tokyo headquarters detailing the launch of two new marketing companies: one to "handle marketing within Japan" and another company to "carry out and assist global marketing."

[Estimated timeframe:Q3 2009-onward]

The announcement went on to detail plans for the two ventures, saying Toyota intends to staff each with between 100 to 150 employees and capitalize each company with an initial infusion of more than $1 million. Toyota's newly installed president, Akio Toyoda, was tapped to oversee the domestic-marketing company, while former Toyota marketer Hiroshi Takada has been named to lead the company overseeing marketing outside Japan, the announcement said. The carmaker, which is deliberating on names for each of the entities, said its new marketing firms are set to begin operations Jan. 1.

Toyota spokeswoman Ririko Takeuchi told Advertising Age sibling Automotive News the moves were being driven by the Japanese automaker´s desire to make its marketing and advertising operations a free-standing entity empowered to make quicker decisions. She said the new companies will "handle advertising, sales promotion and global marketing strategy" and "focus on marketing issues globally and help create a unified message."

It´s no surprise, then, that many at Toyota´s ad agencies were left scratching their heads about the status of their relationships with the carmaker.

Agency reaction
Several executives at roster agencies told Ad Age they had no information about the motivations behind Toyota's moves, and knew no more about the situation than what was being reported in the press. Adding a layer of concern was that the Toyota announcement followed recent moves by rival Hyundai to bring its advertising in-house. Hyundai shuttled lead U.S. shop Goodby, Silverstein & Partners off its account and is transitioning creative duties to Innocean, the agency owned and controlled by Hyundai's founding family.

Kurt Ritter, CEO of El Segundo, Calif.-based Team One, which handles Toyota´s Lexus brand, said in an internal memo to staffers, "It has been brought to my attention that some of our team members here at Team One are expressing concern relating to a recent online posting stating that Toyota will assume ´in-house´ responsibility for advertising currently created by [Toyota agency Saatchi & Saatchi, Los Angeles]." He went on to say that the announcement from parent Toyota Motor Corp. was being misconstrued. "Please note that neither [Toyota Motor Sales USA] nor its agencies of record are referenced in this press release. I am sharing this information with all of you to alleviate any concerns."

Saatchi and Team One serve as agencies of record for the Toyota and Lexus divisions, respectively, of Toyota Motor Sales USA. They handle creative, digital and media duties for Toyota and Lexus, with the exception of broadcast-buying duties, which are handled by ZenithOptimedia. Toyota is also one of Dentsu America´s biggest clients; the agency handles work for Toyota Motor Corp. North America and the Scion brand. Saatchi, Team One and ZenithOptimedia are part of Publicis Groupe.

A Dentsu America spokesman would say only that the moves had no affect on the agency´s U.S. business, while representatives for Saatchi & Saatchi and ZenithOptimedia referred calls to the marketer.

´Great deal of confusion´
Mike Michels, a spokesman at Toyota Motor Sales USA, conceded that the press release from parent Toyota Motor Corp. is causing a "great deal of confusion."

Mr. Michels said North America has, and will continue to have, more autonomy in terms of making marketing decisions than many of the other 150 markets in which Toyota does business. "Many are smaller and need marketing resources the central group in Japan can offer."

"Reports that all agencies will be fired and the all the work brought in-house are totally off base," said Mr. Michels, who described Toyota´s creation of two marketing companies as "an internal reorganization of the existing global marketing organization."

Whatever that means remains to be seen, as Toyota indicated the two new structures will be up and running in a matter of months. The moves come as the Japanese car giant faces a nearly 35% sales drop in sales amid one of the worst years in the history of the auto industry. Toyota posted its first operating loss in seven decades in December and a loss of $38.7 million in its most recent earnings period.

In the U.S., Toyota Motor Corp. ranks as the No. 2 ad spender behind General Motors Corp., but brand Toyota was the No. 1 spender in 2008, ahead of GM´s Chevrolet. Brand Toyota alone spent nearly $825 million in measured media in 2008, according to Ad Age data.

This should be no surprise to followers of Japanese business practice. The Toyota Production System which sprang full blown from the Kaizen movement introduced by Dr. Deming in 1945 is the backbone of Lean Manufacturing. One of the tenets of Lean Manufacturing is the diminished role of "outsourcing"to allow more finite control of a given practice or process.

On Jan.2, 2008 http://madisonavenew.com/mad172.html published a "what if" article on how Toyota could migrate Lean Manufacturing principles to develop a Lean Advertising process by taking the business in-house. The stated purpose in the article was to devise a means of applying the Toyota culture of "continuous improvement" to the practice of advertising. Apparently someone at Toyota took note. But not someone at Team One.

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: AdAge.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4625

Omnicom Adds Procurement to Media Buying, Planning

After years of complaining that clients' procurement departments have hurt the ad business by treating the buying of media and office supplies in much the same way, could agencies find in the recession a reason to add purchasing experts of their own?

[Estimated timeframe:2009 onward]

One major agency group is trying it out. Just in time for this year's upfront negotiations -- where upward of 75% of TV ad time will be bought -- Omnicom Media Group is providing its negotiating unit, OPera USA, with professional procurement resources, including one former Colgate-Palmolive executive.

Calling it a strategic play that will bring a new dimension to the negotiating process, Page Thompson, CEO-North America of OMG, said two procurement executives will join OPera USA to assist OMG's agencies, which include OMD, PHD, M2M and Prometheus. The execs will help formulate negotiating strategies, including pricing and contractual terms, with vendors; measure the performance of the media buys; and assist in the management of vendor relationships.

Putting pressure on TV
Such a move could help Omnicom put even more downward pressure on a TV business that is already expected to be down by as much as 20% and fetch better deals for marketers.

While it's too soon to know what the impact will be, Mr. Thompson said the move will allow OMG to save money for its clients.

"Procurement will play a role in helping our negotiators figure out ways to save money on media spends," Mr Thompson said. "The rules are no longer the same, and procurement is becoming a bigger part of the process. Managing the investment costs that we oversee for all of our clients is the most important things we do and clearly this is an opportunity to change the rules of the game and bring a new dimension and perspective to our negotiating teams."

"In today's environment, procurement is increasingly at the top of our clients' agenda," Daryl Simm, CEO Omnicom Media Group Worldwide, said in a statement. "By adding procurement professionals to OPera, we'll not only do a better job of meeting client expectations, we'll be investing in our buying teams by providing them with the negotiating resources and training to keep them at the top of their game."

Procurement experts
The two executives joining OPera USA are Craig Glaser, OMG's director of procurement, who will now assume additional responsibilities for procurement initiatives across local broadcast and print, and D.J. Martin, formerly Colgate-Palmolive North America's director of indirect procurement, who will oversee procurement initiatives across national broadcast TV. At Colgate he managed a team of 14 procurement professionals responsible for strategic sourcing of services, including media.

Mr. Thompson said they will help guide OMG agencies' negotiating teams "on how procurement would approach a specific situation and or how a client's procurement unit would perceive things" while applying some of the "procurement practices" they have utilized in the past to the negotiating process. They will also attend client meetings with the agencies, Mr. Thompson said.

OPera was first launched in OMG's Europe, Middle East and Africa region back in 2005 and has since been introduced in 18 other markets across the globe. OPera USA reports directly to Mr. Thompson. He said there are no immediate plans to bring any additional procurement people on board.

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: AdAge.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4055

Coke Pushes Value-Based Agency Compensation Model

Coca-Cola Co. is trying to start an industry-wide movement toward a "value-based" compensation model like one it's adopted that promises agencies nothing more than recouped costs if they don't perform -- but profit margins as high as 30% if their work hits top targets.

[Estimated timeframe:2009-2012]

Usually tight-lipped Coke disclosed its plans at the Association of National Advertisers Financial Management Conference in Phoenix on April 20, saying it wanted to nudge the industry into adopting value-based models as a standard practice. If it succeeds, agencies accustomed to being able to book profits long before they deliver work won't have that sort of certainty anymore.

"We want our agencies to earn their profitability, but it's not guaranteed," said Sarah Armstrong, Coke's director of worldwide media and communication operations, the driver behind the move for Coke, which spends some $3 billion a year on global advertising. "We need them to be profitable and healthy, but they have to earn it through performance."

Coke's shift from paying a flat fee based on hours worked began in five markets last year. The model is rolling out in at least 35 more this year and will encompass all of the company's ad- and media-agency relationships by 2011. The concept of value-based models has been a hot topic in the industry for at least a decade, but few marketers have attempted to apply it. (Procter & Gamble is perhaps the furthest along but uses it on only 12 of its brands.)

Ms. Armstrong took pains to note that the process involved considerable give and take with agencies that were briefed on Coke's plans and were given opportunities to voice concerns. "There were some pointed questions," she said. "But our agencies read the trades, and they know what P&G did. They knew at some point someone would take this path; they just didn't know it would be us."

Put into action
Coke's agencies include some of the most creative in the media and agency worlds, including Wieden & Kennedy, Crispin Porter & Bogusky, Starcom MediaVest Group and Mother, among dozens of others. Some agency executives, speaking privately, said they couldn't argue with the theory behind the shift, but had concerns about how it might work in practice.

"Look, if you're talking about getting paid more because you're adding value to a project, I think that's terrific," said a senior executive at one Coke agency that has yet to switch to the new model. "The tricky part is how you define value."

Traditionally, defining the value of an assignment has been the job of the agency, which tells its client how many people and how much time it'll need to accomplish a given project. Under its new model, Coke will determine the value of assignments based on a range of factors including the work's strategic importance, the talent involved and whether other agencies could duplicate the work -- if they could, it's worth less.

After those factors are used to set the value of a project, the agency's performance and the business results that follow determine what, if anything, the agency deserves to be paid beyond its upfront costs (which, in practice, are sometimes inflated). If all targets are hit, the agency could make as much as 30% on a project; if all targets are missed, the agency won't make any profit at all.

Supporters of the approach acknowledge that it's not a perfect approach to measure the value agencies add, but they call it a massive improvement over a status quo that equates hours spent with value delivered. "I'd rather be approximately right than precisely wrong," said Tim Williams, founder of the agency-compensation consultancy Ignition.

Effort vs. value
Other major marketers present perked up at Ms. Armstrong's presentation. "It got my juices flowing," said Keith Levy, VP-marketing at Anheuser-Busch, which slashed agency fees earlier this year. "We agree with Coke that [agency] effort doesn't necessarily equal value ... but it also shows you how much time and effort it takes to get there."

Though the shift comes amid a brutal economic downturn that has prompted many marketers to slash agency fees to save money, Ms. Armstrong said cost savings had little to do with Coke's move to a new compensation model. It's "ironic," she said, but the shift began in 2006. She declined to comment on whether Coke saw any savings in the five test markets -- Australia, China, Germany, the U.K. and the Philippines -- in which it deployed the new model last year.

However, cost reductions have been a priority at the company of late. Last summer, CEO Muhtar Kent said Coke would look to save between $400 million and $500 million a year by the end of 2011. Marketing was said to be a primary focus. The company also has been looking to optimize its use of agencies, slashing its global roster by more than half in the past 18 months. Despite that, Coke spent $3 billion on advertising globally last year, a $200 million increase from the previous year.

The new model, in theory, ought to better align the quality of Coke's advertising with the size of its budget, but the approach is not without its risks. Will Coke's agencies be willing to take the same creative risks if striking out means they'll see no profit for their trouble? "That has not been a concern," Ms. Armstrong said. "I have a fundamental belief that our agencies are competitive enough that they are going to bring their A-games no matter what."

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

Source: AdAge.com
MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=3932

WPP CEO says confidence improves, not spending | Industries | Technology, Media & Telecommunications | Reuters
WPP CEO says confidence improves, not spending MILAN, June 19 (Reuters) - WPP Group, the world's largest advertising group by revenue, sees confidence returning to the economy, but this has yet to result in new ad spending, Chief Executive Martin Sorrell said in an interview published on Friday. "Compared with three months ago confidence has risen, managers are showing a cha......

WPP CEO says confidence improves, not spending

MILAN, June 19 (Reuters) - WPP Group, the world's largest advertising group by revenue, sees confidence returning to the economy, but this has yet to result in new ad spending, Chief Executive Martin Sorrell said in an interview published on Friday.

"Compared with three months ago confidence has risen, managers are showing a change, but they have not translated that into new investments," he told Italian business daily Il Sole 24 Ore.

"Heart and wallet remain divided," he said.

Sorrell said China was an exception, noting that in April the advertising sector there grew 25 percent thanks to infrastructure investments and fiscal stimulus measures.

He said WPP would continue to invest in internet services.

"12 percent of WPP´s world budget in 2009 is internet. You and I spend 20 percent of our time on the web. In two years´ time up to 20 percent of WPP´s budget will be internet and we will be spending 30 percent of our time surfing (the web)," he said.

(Reporting by Danilo Masoni; editing by Simon Jessop)

All data sources are attributed with links to the original insight. The insight is then summarised and, where appropriate, enhanced with additional information.

MTT insight URL: http://marketingtrendtracker.com/article.aspx?id=4267

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