Benchmarking is the Waterboarding of the Ad Industry

Benchmarking is the waterboarding of the industry enhanced interrogation that weakens its subjects but develops no useful information Although benchmarking has become commonplace it has had no positive longterm benefits Indeed the opposite is true advertiser brands are still not growing CMOs last in their jobs only half as long as CEOsamp160and agencies have been compromised and weakenedFor those who do not understand benchmarking practices I have prepared a special guide for readers by rewriting an advertisers39 RFP and putting it in plain English See belowPlain Language RFP by Big Brand Advertiser for a New AgencyPurpose Big Brand Advertiser BBA is seeking a lowcost New Agency NA to carry out an undefined Scope of Work consisting of many unplanned strategic and creative deliverables that may or may not have the effect of improving brand performanceAgency Salaries BBA is seeking an agency whose people are paid near or at the bottom of the range of salaries paid by comparable agencies BBA will determine what these low salaries should be by comparing them to quotbenchmarked salariesquot contained in a salary database whose validity BBA and its benchmarking consultants are not prepared to reveal If NA39s actual salaries are higher than our benchmarked salaries we39ll pay at the benchmarked rather than actual rate Agency salaries should be about 50 below the comparable range of salaries paid to management consultants as validated by GlassdoorcomAgency Overhead NA should have a minimum of overhead for its operations Zero overhead would be ideal the homeless people in Grand Central Station provide a useful benchmark BBA will use its Overhead Benchmark to evaluate how many dollars of overhead will be allowed per dollar of direct agency people This quotOverhead Ratequot is a moving target we proudly reduce it every year as we drive down what we pay for overhead see point No 4Cost Exclusions As part of our overhead benchmarking BBA will exclude certain overhead costs at NA like training new business development and holding company fees for shared services In other words BBA will not actually cover NA39s actual overhead costs just as it will not actually cover NA39s actual salary costs That39s what benchmarking is quotBenchmarkingquot is a more elegant term than quotfake cost analysisquotOther Exclusions We will not discuss inefficiencies from poor briefing or poor ad approval processes We will exclude Scope Creep from our deliberations We will not calculate quotpricequot for agency services fees divided by SOW workloadsResource Plans SOWs and Profitability BBA recognizes that NA is unable to calculate the number of people it will need since BBA is not providing detailed SOWs BBA will solve this problem for NA by telling NA in advance what fee BBA will pay NA can then allocate a number of people so that it can generate a profit margin that is 1 consistent with the fee and 2 acceptable to BBA This acceptable profit margin will be based on benchmarked salaries and benchmarked overhead costs as defined above and it will be called the Benchmarked Profit Margin BBA recognizes that the actual achieved profit margin will be less than the Benchmarked Profit Margin and that the assigned NA people may have to stretch themselves to complete the SOW but that39s the way things are in an oversupplied market and BBA intends on taking full advantage of such oversupplyExpectations NA will work in coordination with many other agencies who will compete with NA for the fixed agency budget that BBA has established NA should not expect to have much influence over BBA39s Scope of Work or strategic direction since NA39s advice cannot be trusted in this competitive environment BBA will handle SOW development and brand strategy on its own even though its own modest marketing capabilities have been stretched by Procurement and Finance over the years and its CMOs have turned over every 23 yearsInnovation BBA in its perpetual quest to innovate in marketing will continue to develop new benchmarks like the recent quotnonworkingworking ratioquot which defines agency creative and production efforts as quotnonworking costsquot BBA will seek to minimize such nonworking costs through various efforts to bring the quotnonworkingworking ratioquot to zero which would lead ideally to the elimination of the need for any creative agencies at allBenchmarking PR BBA believes that its CMO can generate positive publicity for BBA by showing how innovative it is in thinking about marketing benchmarks and ratios amp160thus disguising the moribund state of BBA39s actual brand growth rates BBA expects NA to be a full supporter of benchmarking and to participate on ANA panels with BBA about its benchmarking innovations thus creating industry buzz that will be fully reported in the trade pressPerformance Expectations BBA expects as a matter of course that NA will generate quotBainlikequot analytical quality and quotBernbachlikequot creative quality during its short tenure as a new agency for BBA If NA fails we will simply issue a new RFP in 23 years and exploit our growing experience with agency pitches to find an even lowercost agency to meet our requirements using innovative new benchmarks to be developedIf any ad agencies are interested in this RFP have your New Business people give me a ring and I39ll direct you to the right peopleCartoon Credit Drew Dernavich The New Yorker The Cartoon Bank With permissionClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this article are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated bloggers

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Benchmarking is the Waterboarding of the Ad Industry

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Michael Farmer

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