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1、Marketing Procurement Trends 2023Prepared by R3February Serving the Now,Investing in the New,Saving for Whats NextRecent years have been a hard and fast lesson in agility for marketing and procurement leaders.The urgent transition to a distanced and digital-first economy,then the threat of economic
2、slowdown and political instability and their impact on supply chains and talent,have kept key decision-makers at the edge of their seats.Through this challenging time,the worlds most successful advertisers have steered their brands through uncertainty using a combination of data,strong brand vision
3、and clear strategy.Now the call for marketing procurement teams is to be the bridge between wider business cost-efficiency targets demanded by investors and corporate stakeholders,and the need for marketing to invest in current and future consumers.This years marketing procurement trends identified
4、by R3 reflect the need for marketing procurement teams to find efficiencies in a landscape that offers greater possibilities and flexibility.From aligning the marketing organization to serve current and future ambitions,to capitalizing on new offerings and services from Holding Groups,consultancies
5、and independent agencies,the race is on to increase effectiveness and efficiency in operations and spend.DRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESMarketing Procurement Trends 2023Unlock Value in The Marketing OrganizationOptimize roles and footprint in a post-pandemic landscape.Optimize te
6、am structures through new resourcing options and affirm spend using agency fee benchmarking.Uncover Efficiencies Within The Agency EcosystemTake advantage of the agility and offerings of next generation partnership models and agencies.Identify potential savings while aligning current needs and futur
7、e ambition.Mine For Ways to Optimize Media SpendStrengthen the connection between finance,marketing and media.Explore media investments that are most meaningful to business performance and develop CFO buy-in.Nurture Partnerships Through ContractsBecome the client on agencies wish lists.Nurture relat
8、ionships and encourage performance and accountability through mutually beneficial contractual terms and performance KPIs.31Unlock Value in theMarketing OrganizationDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESCompany RestructuringCompanies Are Streamlining,Should Marketing Follow?Unlock value
9、in the marketing organization5Corporate restructures are reflections of changes in the business and consumer landscape,and it is significant that companies like ExxonMobil,Kelloggs,Disney,Ford,and Novartis have all announced realignment of their businesses within the past 18 months to meet operation
10、al needs and grow new pipelines of revenue.What does this mean for Marketing?Invitation to review the current marketing organization to reflect wider changes in the businessOpportunities for integration of services and technology vendorsRevisit the needs of brand and performance marketingOpportunity
11、 to look at how marketing operates as a service within the entire organization;i.e.,data capability and location/in-housingWhat does this mean for Marketing Procurement?Finding efficiencies in departmental designExploring ideas of offshoring and in-housingTalent modelingInnovative Medicines U.S.Inno
12、vative Medicines INTStrategy&GrowthCombined corporate strategy,R&D portfolio strategy,and business developmentOperationsCombined technical operations and customer and technology solutionsGlobal SnacksPlant BasedNorth America CerealFord BlueFord Model EUpstreamProduct SolutionsLow Carbon SolutionsTec
13、h and EngineeringGlobal Operations and SustainabilityGlobal ProjectsGlobal Services and Corporate FunctionsDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESFord,Investing in EV Customer Experience That SellsCompany restructure leads to realignment in marketing focus6PILLAR FOURDIGITAL EXPERIENCESG
14、lobal partner for creative and brand strategy;previously innovation partner(2018);assumed U.S.creative(2020)U.S.CRM;previously global creative agency(2018)AGENCY PARTNERSHIPS“We spend$500 to$600 per vehicle on public advertising.Get rid of all of it If you ever see Ford Motor Co.doing a Super Bowl a
15、d on our electric vehicles,sell the stock.”“Our models messed upWe spend nothing post-warranty on the customer experience.”Jim Farley,CEO,Ford2022WPP(75-year partnership);GTB,still handles media buying,planning,and activationsRestructured into 2 units:Ford Blue(traditional gas/diesel),Ford Model E(e
16、lectric)Catch up to competitors.In 2021,global plug-in electric sales were led by Tesla,Volkswagen Group,BYD,General Motors and Stellantis.All electric future in Europe by 2035.Downsizing as a result.Switching to an agency direct-sales model under which Ford invoices customers directly and dealershi
17、ps receive a fixed fee for sale.Hired ex-Cheil U.K.CEO Peter Zillig in 2020 as director of marketing for Europe.Case Study:P IL L A R ONETRAININGP IL L A R TW OCHARGINGP IL L A R THREEE-COMMERCE Transparent,non-negotiable pricing Single entry and exit point Greatest customer satisfaction opportunity
18、P IL L A R FOURDIGITAL EXPERIENCES Remote Delivery offered to all Model E customers Pick up and Delivery offered with a loaner to all Model E customers P IL L A R FIVEDIGITAL EXPERIENCES Software and subscription opportunities Customer engagement when new features/feature updates become available5 P
19、ILLARS OF FORD MODEL EPrior to 2023,Ford invested 35%to 40%of its marketing budget on digital channelsnow its more like 70%across platforms including Google and TikTok.-AdAge,2023MEDIA SPEND40%70%Spend on digital platformsDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESCompany RestructuringMake I
20、t More Than A Cost-Cutting ExerciseTighten efficiencies without risk to critical areas7 Reduce costs in line with fluctuations in market demand or changes in supply chain Define and accelerate operations and finance Position for future growth(i.e.,customer service,new products and services,productio
21、n,supply chain,working capital)Ready to bounce back on economy recovers and/or stabilizesForego strategic analysis for top-slice approach(cut a percentage of costs from every department)Removal of critical areas that support future sales and growthNeeds analysisStakeholder communicationMotivate exis
22、ting/remaining teamsAlign timing and expected outcomesPURPOSE OF RESTRUCTURERestructuring will reduce 3.6%of its global workforceSavings of$5.5 billion in costsProvide greater authority to its creative leaders and increase accountability on content performanceCreatives teams are responsible for what
23、 content is made,how it is distributed and monetized,and how it gets marketedManaging costs,maximizing revenue,and driving growth from the content being produced will be the Creative teams responsibility.Disney EntertainmentESPNDisney Parks,Experiences and ProductsBob Iger,CEO,Disney2022RISKSBEST PR
24、ACTICE2Discover SavingsWithin the Agency EcosystemDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESCompanies that have consolidated their rostersDoes Your Agency Model Reflect Whats Possible?Uncover efficiencies within the agency ecosystem 9Identified$26m in value creation on current Agency Model.
25、A global CPG company worked with the same custom-built holding company agency for over 10 years.A global automotive company wanted to create the most effective and efficient agency model possible to support their future business and marketing objectives and consolidate their market leading position.
26、$35m in Value and Cost improvement,and a future-fit Agency Roster.17%saved on content production in the first year(2017);30%saved by 2018Unilever halved the number of agencies it used from 3,000 to 1,500.The CPG company also brought some of the content production work in-house.In 2016,P&G cut its ag
27、ency roster by 50%over three years,scaling down its ecosystem from 6,000 agency partners to 3,000.$620m saved,which has been reinvested in media and sampling.CPGAUTOMore isnt more.Marketers are realizing that managing a large number of agency partners leads to less integration and higher risk in cos
28、t and time inefficiencies.As a result,more marketers are exploring consolidating the number of agencies in their roster but pursuing new agency models and creating bespoke partnership structures.What does this mean for Marketing?Improvement in go-to-market models,SOW templates,integrated marketing c
29、ommunications processes,media and digital toolkits and other marketing operational working processesAgency capabilities that reflect brand and performance goalsHybrid structure if in-housing is establishedWhat does this mean for Marketing Procurement?Savings in agency feesStreamlining vendor managem
30、entIncreased visibility and transparency across the marketing ecosystemClearer view on data management and ownershipDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESAirbnb,Powering Its Brand from the InsideA Hybrid model where Creative is in-housed10Global creative agency(2020)AGENCY PARTNERSHIPS“
31、Im a firm believer that creative should be at the table with products,with designers,engineers,marketers,all working from the same insight.”Hiroki Asai,Head of Global Marketing2022Global creative agency(2017 2019)Aim to increase consistency between brand marketing and brand experience.Bringing creat
32、ive in-house(“inbound”)allows for advertising and marketing creatives to be involved at the product development stage(“outbound”).In-house creative team is now in the“hundreds.”Keeps strategy,planning.and production in-house but keeps media buying external as that requires scale and connections.Hire
33、d Edward Vince(previously of Facebook and Apple)in 2019 to lead its Creative in-house team in EMEA-then International in 9+markets.Media agencySamaraIn-house design agencyIn-house creative agencySources:Fast Company,Digiday(2022)AGENCY SUPPORT ON A JOURNEY TO A FULLY IN-HOUSED CREATIVE TEAMGlobal cr
34、eative agency(2014)Hone Production began to support Airbnbs in-house agency in 2016 as marketing requirements increased exponentially,reflecting the travel companys explosive business growth.In addition to production toolkits,Hone helped Airbnb refine their production guidelines,licensing agreement
35、templates,and production processes.The company also provides hybrid production support to Airbnbs creative team when needed.Case Study:DRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESRedesign of agency modelLeverage Next Generation Services&StructuresHolding companies,independents,and consultanci
36、es offer agility11 Clients businesses have changed Costs and fees have changed Agencies are increasing their scope of services Networks are consolidating agencies and bringing brand and performance together Emerging technology often requires partners with unique specialties Introduction to new areas
37、 for marketing,like Web3 Access to talent varies from agency to agency Insufficient understanding of the agency landscape Not properly identifying the skills and capabilities required from agency partners No transition plan Considering the needs of key stakeholders and securing crucial buy-in at a g
38、lobal,regional and local level Fee benchmarking and contract negotiationHow WPP Is adapting for Coca-ColaLocation:Centralizing the agencies to be geographically near the ClientStudioX:40 markets,making WPPs work for Coca-Cola more insightful,effective&efficientTalent:Bringing creative talent across
39、multiple agencies to work as a groupA common data and technology platform that operates across the entire Coca-Cola company.The platform connects the marketing team across its five global categories,nine operating units,Global Ventures,and Platform Services to WPPs OpenX,Dentsu,and the creative rost
40、er.Working on an open-source creative model that gives access to different creative units in different territories.OpenXPURPOSE OF REDESIGN OF AGENCY MODELRISKSBEST PRACTICE3Mine for Efficiencies In Media SpendDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESShifts in media spendIs Your Media Spen
41、d Meaningful to Business Outcomes?Strengthening the connecting with finance,marketing,and media13More than two-thirds of the U.K.s biggest advertisers are said to be cutting back on traditional television media in 2023,with the recession pushing them to digital media and last-minute promotions.40%of
42、 those surveyed stated they were set to cut spend in offline media,including TV,radio,print,and outdoor sites.SHIFT FROM TELEVISIONSource:McKinsey,2021Source:ISBA,2022Though the media mix modeling(MMM)has been around for many years,recent innovations have made the concept more relevant for modern ma
43、rketing and attracted the attention of both marketing and finance teams.Why is this relevant now?Privacy means marketers no longer expect to have granular device-level attribution of marketing efforts.Major mobile platforms,from iOS and Android to walled gardens like Meta,TikTok and Amazon,can no lo
44、nger be stitched together effectively.What is media mix modeling good for?Overall spend optimizationOverall marketing ROISpend allocationDetermining diminishing returnsChannel selectionUnderstanding organic upliftEstimating base levels of organic growthBroad incrementality insightBy 2021,84%of the U
45、.S.companies and 74%in the EU5 had shifted more of their budget to digital marketing.90%of MedTech companies reported that the success of their digital marketing has improved ROI by 10%or more.PHARMA&LIFE SCIENCESDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESMedia Is Getting More Effective for
46、McDonaldsStarting with a philosophy at the top that“measurement is crucial”14“My view is the budget is so well spent the cost of doing measurement is a fraction of the percent of what we spend on media,”he said.“You have to find some sort of measurement that will answer the effectiveness questions f
47、or you.”Chris GrahamGlobal Head of Media Accountability&ROIInitial challenge in overcoming how much data was needed.Supported by strong measurement in place,build values around transparency,and good agency management practices.Incorporates creative effectiveness measures,and responses to advertising
48、,including product,placement and creative,as well as how much you pay for it.Quarterly local reporting is based around defined variables McDonalds knows can impact a“great campaign.”These include weather,media channels used,creative content,if the product is great,if the restaurant has been refurbis
49、hed and so on.The time it takes to implement MMMNavigating the question of whether MMM is helping or hindering McDonalds from trying new media activations or channelsApproach to MMMSource:.au,2019 ResultsAt least 2-3 times the short-term benefit over long-term.Tripled digital budget in 5 years.(U.K.
50、)40 consecutive quarters of growth off the back of brand building-its clear long-term,strategic investment is crucial to sustained growth for McDonalds.(AU)Contribution of media to business outcomes has doubled in 5 years.ChallengesCase Study:DRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESUsing
51、MMM to Optimize Marketing at Several LevelsAdding value across the organization15How does communication affect sales in relation to other activities?How efficient are different media in driving short-term vs.long-term sales?How has efficiency of media investments changed over time?What is the optima
52、l media investment level?What is the optimal media mix?TOP MANAGEMENTImproved KPI targets by understanding the role of mediaCMO/HEAD OF MARKETINGImproved media ROI on business performanceMARKETING MANAGERSImproved campaign strategiesPERFORMANCE MARKETING/WEB ANALYSTSImproved agenda through cross med
53、ia perspectiveMEDIA AGENCYImproved media buying ROIBeneficiariesHistorical short-term(sales)Long-term(brand awareness)Data on significant drivers in the marketing mix and other internal and external factors,a complete breakdown of all sources of sales and brand equity is identifiedOther factors can
54、include:Market conditions:i.e.,holidays,seasonal variations,weather,consumer confidenceMarketing actions:i.e.,pricing,promotionsCompetitive actions:i.e.,product changes/launchesSALES AND BRAND MODELS Key QuestionsFactors ConsideredOutcome4Nurture PartnershipsThrough ContractsDRIVING TRANSFORMATION F
55、OR MARKETERS&THEIR AGENCIESHow Do Contract Terms Impact Client-Agency Relationships?17The post-pandemic business and talent landscape has created challenging financial situations for many marketers and their agencies.As companies find ways to better manage cash flow and direct investments to service
56、 more immediate needs,marketing is often one of the first-place advertisers look to cut costs.While larger holding companies might be able to weather longer payment terms,smaller independent or specialist agencies might be inclined to walk away from new business opportunities where unfavorable contr
57、act terms pressure business serviceability.What does this mean for Marketing?Understand the nature of your agency partners businessAssess agency partners for business continuityAgree with your agency on performance KPIsWhat does this mean for Marketing Procurement?Align contracts with current best p
58、racticesAlign contracts with current feesConsider other factors which might impact vendor performanceUse contracts as an opportunity to embed other business KPIs(i.e.,ESG,DE&I)REASONS FOR EXTENDED PAYMENT TERMS13%34%41%45%65%68%77%Better cash flowUpper management providing focus on account payablesF
59、ree up capital for other projectsBest-in-class practiceExternal forces driving companys positionOther marketers making similar changesConsistency with other geographies outside U.S.Q:If you have extended terms,please rate the reasons for the change to extended payment terms,where 1=Least Important a
60、nd 5=Most ImportantSource:ANA,2020DRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIESNegotiate Using Fee Benchmarks&Contract ExpertiseKeep partnerships sustainable and accountable18 Clearly define the relationship between client and agency Reconcile monthly invoices Ensure the right to reduce scope
61、and/or fees if(and when)needed Obtain transparency on how agency-owned media is managed Clarity on payment terms for agency fees and third-party suppliers Opportunity to review data ownership policies Agency and third-party confidentiality,as well as issues related to protecting trademarks,copyright
62、,and data rightsNo right to auditUncooperative agencyLack of robust fee benchmarksLack of expertise in agency contract negotiationPerform due diligence on the financial health of your agency partnerEmbed right to audit clauses in your contractsSelect the right remuneration modelOPPORTUNITIESWATCH OU
63、TSBEST PRACTICEKEY TERMSList of clauses that are typically included in an Agency/Client AgreementData ownershipReconciliation requirementsApproval of key personnelReduction in scope or feesAgency inventoryResponsibilities at terminationPayment terms5How R3 Can HelpDRIVING TRANSFORMATION FOR MARKETER
64、S&THEIR AGENCIES20A successful client-agency relationship is one whose goals and expectations are aligned.That relationship requires periodic checks to make sure both parties are still aligned and to rectify any issues in a timely manner to ensure continuous improvement.It is important that a sound
65、compensation structure is in place one that works to align expectations through set KPI and Performance-based Remuneration.To give clear direction for improvement areas and ensure best practice among agencies in the handling of client money,we take a detailed look at key projects and the invoices th
66、at relate to them with the goal of attaining better relationships based on transparency in the financial processes between marketers and their agencies.We help media and marketing procurement teams determine if their media agencies are delivering cost savings across markets.This ensures that perform
67、ance and accountability are elevated and that measurable media KPIs are set for key campaigns.We help marketing and procurement teams matrix their internal resource so they can build marketing capability aligned to core business priorities and forecast talent needs.This includes delivering insights
68、into the internal organizational structure of competitors,and similar and best-in-class brands needed for driving marketing excellence.AGENCY REMUNERATIONMEDIA FINANCIAL AUDITMEDIA SAVINGS AUDITORGANIZATION STRUCTUREWhat We DoDRIVING TRANSFORMATION FOR MARKETERS&THEIR AGENCIES21Driving Transformatio
69、n for Marketers and Their AgenciesReturn on MediaWe offer professional analysis of the media process,planning and buying with proprietary benchmarks and tools to set and measure performance.We conduct financial audits to validate and benchmark transparency.CLIENTSWe are retained by 12 of the top 20
70、marketers covering 60+markets on six continents.By making marketing accountable with:Return on AgenciesWe help marketers find,pay and keep the best possible agency relationships covering Creative,Media,PR,Digital,Social,Performance,Event,Promotions and CRM.We take the lead on improving the Integration process through proprietary software and consulting.Return on InvestmentUsing a bespoke and proprietary methodology,we help benchmark and provide insights into how your digital strategies perform in your category and across categories.EXTERNAL BENCHMARKSBEST PRACTICE INSIGHTSINDEPENDENCE