It’s probably an understatement to say that over the past few decades, the advertising industry has become increasingly complex. As technology has given us digital ad trading, marketing has become more customer-focused and data-driven. Advertisers now have the tools to reach customers in the right places, with the right messages at the right times and to track with needlepoint precision the success of their marketing tactics. In the ongoing battle for attention, this has been critical.
Under pressure from intense competition, marketers today are required to do more with less. To make truly informed decisions, stakeholders need clearer cost information so they can show return on investment.
The obstacle: statements of work – or scopes – that are articulated poorly, with different entities using different taxonomies (or classifications) to describe work, throw in the insistence on measuring by the hour rather than output, and it quickly becomes near impossible to reconcile estimates with what was actually spent.
The smartest advertisers at the forefront of the market have realized it’s crucial to baseline and track the cost of deliverables, informed by industry benchmarks and protocols. Doing so creates clearer ROIs that allow for a more informed tactical campaign assessment. It also creates clearer communication channels with procurement, finance and agency partners/vendors. Coca-Cola, American Express and Microsoft were exploring this shift as far back as the early 2000s, and they’ve been joined in this mindset in recent years by the likes of Diageo, Jet Blue, Barclays and Nestle, to name a few.
Tools Drive Efficiency:
Adtech tools have brought efficiencies that have helped fuel steady increases in marketing budgets over the last five years. Budgets rose from an average of 6.6 percent of company revenue in 2015 to 9.8 percent in 2019, according to a CMO Survey by Deloitte. The impact of COVID-19 in 2020 has resulted in budgets leaping again to an all-time high of 11.4 percent. Thus, with greater transparency about ROI to fund aggressive growth targets, it’s more important than ever for marketing and procurement departments to work together to ensure they’re receiving the right deliverables at a price that matches their value.
Inconsistent Scope of Work:
Scopes of work are still, for the most part, alarmingly inconsistent. They’re often written in spreadsheets where silos of information can’t connect to give a bigger data picture. Add in the differences in knowledge, version mismanagement and good ol’ human error, and you see how very likely that the same marketing deliverables could be priced differently at separate times even when purchased from the same agency.
Because marketing services have historically been bought by the hour, there hasn’t been an industry-wide benchmark of deliverables or a shared language to enable marketers to compare and analyze what they’re getting for their buck. It’s only when you know exactly how well a piece of marketing or a tactic has performed can you know what you truly spent. If estimates are talking about hours, rates and people, it becomes extremely difficult to quantify.
The solution: develop baselines and analyze them, not hours and resources. It’s not only individual talent that matters when assessing costs, it’s about the whole idea and how it all comes together. That’s the difference between hours, roles and rates versus the deliverable, the output, the actual tactic. The agency knows the best team to put on the work, that’s their role for the client. It shouldn’t be a selling point, or even up for discussion with the advertiser.
Ultimately, when CMOs are able to buy deliverables instead of hours, KPIs can be agreed upon, expectations can be managed, and performance can be evaluated more fairly and accurately. Deliverable-based scoping allows for more flexible, agile working so that when new business priorities emerge, redundant work can be replaced with new allowing marketers to quickly pivot in a way that is more organized and less wasteful. Better marketing procurement in turn leads to greater ROI and more efficient budgets, which ultimately leads to re-investment into ongoing brand growth – a win-win for ad agencies and brand marketing teams.
Tracey Shirtcliff is the Founder of The Virtu Group, London, developers of SCOPE, a SaaS platform where agencies, marketers and procurement teams can collaborate and work together for a win/win on value-based outcomes.