Planning for the Springback, and the "Freedom" Budget

Yet, as MediaVillage founder Jack Myers saw far ahead of the rest of us, marketing has been in a recession for the whole century so far, not growing in line with the rest of the economy.

Why is that?

The founders of the great brands all knew the importance of marketing. As Peter Drucker, the father of managerial thinking, said, "Because the purpose of business is to create a customer, the business enterprise has two — and only two — basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business." The great brands' founders knew this.

Apparently, too many of today's CEOs do not know this. Enslaved by the quarterly analyst call, no other yardstick counts, it would seem, other than avoiding black eyes in the press. Not only is this short-term thinking only about the metrics that matter to the analysts, but it's also thinking unbefitting of the inheritors of the top executive positions of the founders. The inheritors ought to learn how their founder thought that made the company great, and at least use that as a foundation on which to express their own creativity.

The analysts themselves are enslaved to a system that the entire world depends on, which is actually a legal gambling system, where the winners are the ones who can most accurately guess the next waves of sentiment from the herd, whether people will be bullish or depressed. All investment markets rise or fall based on this.

It's truly ironic that marketing — the function which is most focused on understanding the consumer — is largely ignored when it comes to making forecasts of the economic environment.

Getting back to Peter Drucker's dictum, the two functions he identifies as most important, marketing and innovation, both depend on creativity. And yet, perhaps causally related to the 20-year recession marketing has suffered, CEOs (also about 20 years ago) began to assign advertising and media to procurement departments. They did this as if buying creative marketing was the same "minimize cost" game as buying ball bearings; as if creativity were a commodity, though the opposite is true.

Even before procurement, the advertising industry had been too focused on minimizing the cost of a media unit, as if that were the only thing that mattered; as if that ad would deliver the same emotional persuasion per impression wherever it was put.

Until a dozen years ago, when the first of insights agency TRA's ROI findings started to reach general attention, it was also generally believed that (or so actions would reveal), among brand marketers, the only "targeting" one needed to do was by sex and age. TRA empirically demonstrated that sex and age have approximately zero predictivity of ROI, while the density of convertible ("heavy swing") purchaser audience targets reached is a splendid predictor of ROI. Today, the purchaser targeting message has gotten across and the context is just beginning to dawn.

At the 2019 ARF Annual Conference, TV-data company 605 presented a study for a major advertiser showing strong evidence that a single ad exposure, in a context aligned psychologically with the ad, lifts the most used branding metrics by double digits. Media people should be placing the greatest emphasis on media selection based on the intensity of the impression given by the context congruence, plus targeting the convertibles (not people who will buy anyway). They have to keep reach and efficiency in mind.

In contrast to today, when efficiency is the main focus, targeting is too often aimed at consumers who will buy anyway or to lookalikes (almost as fluffy as sex/age), and context is given blatant lip service. All of this can be different when we return from quarantine.

All of this should be different when life resumes in its fullest, and the world is everyone's oyster like it hasn't been since the original Roaring '20s. We will have gotten our rest and will be at our best for a fresh start. What better time to cast out the malpractices that have diminished not only in marketing, but also far beyond? As Peter Drucker told us, marketing is what gets new customers and business exists to get new customers. The markets have been kept artificially high in the absence of real growth in new customers for mature brands, but we can cause the markets to be truly high without the eventual boomerang-pay-the-piper-effect that artificial manipulation risks.

How? By making marketing what it should be and has been in the past until it all slipped into treating media as an expense and not an investment. By not using media mostly to make quarterly earnings reports look good, without regard for long-term brand equity. And, by shifting most of the money out of branding and into activation media. Consider: of the 22 largest advertisers in auto, CPG, and QSR, only four grew market share since 2014.

The most important thing we can do to fix marketing when we emerge from this dark tunnel is to change the way advertisers write agency contracts. Right now, advertisers unwittingly paint themselves into a corner by getting guarantees on sex and age reach and GRP. Then, when the CMO wants to buy some other way, the agency points to the contract and says, "No, we're not going to reach into our own pockets to pay you back if we don't deliver contracted impressions." I've witnessed CMOs' public embarrassment when they said they were going to go right and then the agency said, "Nope, we're going left." The CMOs, because of the contract, had to back down.

The recommended way out in the better future we are all planning now is to have two budgets: one with the guarantee (but on convertible targets, not sex and age); the other called, perhaps, the freedom budget, for the CMO to direct as they see fit.

The contracts should also provide a specified metric and third-party measurement supplier that CMOs can use to determine their agency's performance bonus.

With these simple changes in place, in a year, Jack Myers will be predicting that we are coming out of the marketing recession. And he'll be right.

Don't stop now! Stay in the know on advertising trends and ROI strategies with more from Bill Harvey.

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The opinions expressed here are the author's views and do not necessarily represent the views of MediaVillage.com/MyersBizNet.