Marketing Procurement

ANA Advertising Financial Management conference: key takeaways and actionable insights

Monitoring budgets

“Monitor the level of the media budget that is allocated to inventory deals on a monthly or quarterly basis so that you have no surprises late in the budget year when it comes to non-transparency”

We have now all made it back from the sunny side of Phoenix, Arizona after three and a half days of wonderful insights, discussion and networking among industry leaders, peers, and partners. Top client-side members from all parts of the industry met up with marketing partner sand agency folks to discuss key topics that we as an industry need to be better at driving forward:

1. Diversity, Equity & Inclusion
2. Agency Compensation
3. Transparency

Diversity needs to improve now.

A few speakers spoke about DE&I and sustainability. On opening day, Chris Kenna, the founder of Brand Advance Group, a leader in creativity, media and research for DE&I efforts, spoke about how we can make immediate change in our industry by updating the pitch/ RFP documentation to ask the right questions, contracting better, improve reporting and invite diverse players to bid on all projects, not just DE&I projects. 

The Billion Dollar Roundtable was created in 2001 to recognize and celebrate corporations that achieve annual spending of at least $1 billion with minority and woman-owned suppliers. The roundtable has 32 members, including Procter & Gamble, Apple, AT&T, the Home Depot, Bank of America, Honda, Meta, Microsoft and IBM among others. Jennifer McLachlan, VP Brand Building Purchases at Procter & Gamble and Sharon Patterson, President and CEO of the Billion Dollar Roundtable shared their approach to DE&I.

DE&I is a force for growth so that we can do more good. Growing our business allows us to invest more in good. If people understand why we are involved in DE&I, we will all contribute more. Diversity in marketing procurement is different than other procurement categories. In 1998, McLachlan was asked a question from her boss that changed her focus for good (pun intended). For people who are new to DE&I, a great resource is the ANA.

AIMM, (the Alliance for Inclusive and Multicultural Marketing), was established in 2016 by the ANA with a mission to help CMOs and their teams rise above the most pressing challenges blocking them from realizing their full multicultural market growth potential. This initiative also has a list of diversity-led companies. It is also great to network with other companies who has a large DE&I spend to learn from them.

At P&G, McLachlan uses data to educate and influence marketers. Over the last ten years, all the US population growth has come from diverse segments of the populations. Her team looks at each brand and business to identify what the brand share gap is with the diverse segment of the population. As a result, they have identified the value of the opportunity. This has been implemented in the integrated marketing strategy. McLachlan’s advice for beginners in this space is to ask yourself “why not” as opposed to “why”. This work is incredibly rewarding both as an individual and as a corporate leader.

Another great company with a long-standing DE&I practice – HP Inc. – was one of the original supporters of the US government’s Supplier Diversity efforts which started in 1968. That same determination for equal opportunity exists today and is central to HP’s 2030 vision of becoming the world’s most sustainable and just technology company. Tara J. Agen, Global Head and VP, Marketing Effectiveness, Operations, MarTech at HP, explains how this board-directed company-wide mission extends to marketing supplier diversity, the internal and external DE&I factors considered when identifying new agency suppliers, and how this effort has exceeded its goals thanks to a strong partnership with global indirect procurement, CFO/marketing finance, and HP marketers.

For Agen and HP, it has been a four-year journey to drive the DE&I and sustainable impact to new levels within and outside the corporation. At HP, marketing realized that they were doing business with certain groups, but not all of us. For HP, ESG is the last critical mile of business performance. They aim to be the world’s most sustainable and just technology company. In order to drive towards this goal, HP has engineered three strategic pillars to lead with purpose and impact business performance. These are 1) climate action, 2) human rights and 3) digital equity.

HP learned along the way that their procurement onboarding process was cumbersome and took this feedback, too, to understand how to have more ease of entry into HP as a supplier. AI also helped with purchase selection. HP created HP agency marketplace, an AI driven platform that not only guided more purchases to diverse owned agencies, but also elevated their work and capabilities to HP Marketers.

Marketing procurement and finance and agency CFOs need be the catalyst for purchasing change. These functions determine and drive purchasing power for the brands and business. “If not our industry, then where; if not us, then who, if not now, then why not!” said Agen in a compelling ask for the marketing/advertising industry to be the change.

We can implement different and better suited agency compensation models across our eco-system of marketing partners.

In terms of agency compensation, the thinking around how to come up with models that work for different types of agency partners, Denis Budnieski from Verizon delivered a compelling and actionable framework for how to set up and implement successful compensation models. 

Each brand and company will first have to decide how it prefers to compensate its agency partners. Other key criteria will be the seniority and location of staff required by the brand. Are you looking to have the senior agency leaders work on your business, or are you looking for more of a tactical implementation of your work? Is your brand operating on a global level or local geographic level?

Before any discussion of compensation model, the starting point is your talent model. At Verizon, it is imperative to work with the senior innovators and brand leaders that each agency offers, and individual star performers play a key role in marketing of Verizon. Therefore, Verizon opted for adopting a loose federation of agencies where people are the most important key to success.

We see a lot of research and insights that marketing procurement can deliver to their internal and external stakeholders. A strong analysis to identify what the brands requires will help marketing procurement identify the best agency compensation for each brand under their purview.

As a minority (women) owned business, I have spent the last week to immerse myself in what works and what does not work when doing business with large corporations. It has been a difficult, impractical, frustrating few days. I think I have come up with a way of modernizing this – stay tuned for more updates on this important issue.

Understanding and Transparency will improve trust.

Keri S. Bruce is a partner in Reed Smith’s entertainment and media industry group. Bruce has experience in working inside advertising agencies before becoming a lawyer. She is also a legal advisor to the ANA.

While at the ANA AFM, Bruce spoke about the rise of agency principal buying of media. It goes by names such as proprietary media, value-based solutions, inventory media, and opt-in services. Agencies have invested more in these services over the past few years because of cost pressure and economic instability. These services are typically offered on a flat-fee basis, involve media inventory and are sometimes bundled with data, involve the agency and/or their affiliates making a, undisclosed mark-up on the service, and require the advertiser to give up some sort of transparency such as through limitation of any audit rights, fee reconciliation rights, lack of insight on any markup added by the agency, and ownership or rights to associated data.

As a client, you need to ask questions and seldom give up your right to follow the money. Always question if there is a conflict of interest in selling you these products.

While this might feel like a dark road to go down, there are things you as marketing procurement can do to ensure the best execution of these programs.

The most important advice is to develop a disciplined, and reliable process to approve exceptions on a case-by-case basis.

If you don’t have this process in place, this is a key area for marketing procurement to show value to marketing. Often the finance partners in your company can help! It is imperative to have language around this process in the agency master service agreement (MSA). Also, make sure that they client-side people who oversee approvals for these deals are educated to make the required decisions. It is important to gather all information to understand the actual loss of risk, review the fine prints in any IOs, media authorizations, RFPs and other agency documentation.

You should always ask for representation (proof) that the media in question was actually purchased at risk. Monitor the level of the media budget that is allocated to inventory deals on a monthly or quarterly basis so that you have no surprises late in the budget year when it comes to non-transparency.

Finally, ask the agency to help explain these services. How did they come up with this service for you as a client and how does it benefit you as a client?

Many other sessions were exceptional in content, openness, and insight. Please read our RAUS ANA AFM Recap Newsletter for more on the individual sessions at ANA.

Congratulations to ANA for a job well done!

About the author

Christine Moore is Managing Partner at RAUS Global.  

A full debrief by Christine Moore will be released on the RUAS website from May 16th