Advertising Age - September 5, 2011

With marketers in hot seat, some
are quick to blame the advertising

MARKETERS from p. 1

advertising lie—with the agency or the marketing executives?

“I don’t think it’s great practice to
publicly deflect blame,” said Scott Davis,
chief growth officer at marketing con-
sultancy Prophet. “But ... what share-
holders and investors are expecting from
these companies is pretty lofty.”
The recession that crippled the U.S.
economy was a tipping point for the
accountability of marketing depart-
ments. Companies rushed to scrutinize
every aspect of the ROI from advertis-
ing initiatives. No more leniency, and no
more road-testing of campaigns. The rise
of the social web—where the saying
“everyone is critic” actually rings true—
means one lousy logo can threaten to
engulf a sea of marketing successes.

Casey Jones, former Dell marketer and head of BriefLogic, recalls when former Microsoft top marketer Mich Mathews asked him in throes of the recession to help evaluate compensation structures for its roster shops. “By early 2009, Mich was managing unprecedented pressure from executives like COO Kevin Turner to be cost-conscious and value-driven in agency negotiations,” said Mr. Jones. “The pressure on marketing departments translates almost exponentially into pressure on agencies.”

SINGING A SAD SONG:

Old Navy’s ads took the blame for poor results.

“It’s almost like as soon as the stock price falls, their blood pressure rises,” said Christine Fruechte, president-CEO at Minneapolis-based agency Colle & McVoy, of clients. “One failed campaign can mean their career at that company.” “I can’t tell our clients what to run,” she said. “Agencies have to be bold enough to state what they think will work and boost business results. A CMO who blindly blames their agency isn’t doing their job, but an agency who says ‘Well, the client approved it’ isn’t, either.…If our clients are successful we are successful, and if it doesn’t work, your relationship is over and that makes you look foolish.”

Death by margins: Firms’ desire to
please Street may alienate consumers

MARGINS from p. 2

called for the marketer to separate its fast-growing global snacks unit from its sluggish U.S. grocery business. Other companies are spinning off units, such as HP, which is making a less-than-graceful exit from the PC business.

“As you begin to spin off portions of
the portfolio, you really get into some
complications about the brands and what
the brands stand for,” said Tim Calkins,
marketing professor at Northwestern
University’s Kellogg School of
Management. For HP, “is it still associat-
ed with PCs? Or is it going to be associ-
ated with printing, or is it going to just
be associated with the B-to-B compa-
ny?” he said. “We really don’t know
how that brand is going to evolve.”
In fact, a Wall Street Journal story
last week said Fluor Corp. is rethinking
both its decision to buy high-end com-
puters from HP and a pilot project
involving its tablets. Chief Information
Officer Ray Barnard told the Journal,
“I’ve put all that on hold,” noting, “it
appears that they’re lost right now.”
And rivals are pouncing: Dell is touting
on its website that it “remains very
committed to PC solutions,” while
plugging an “HP migration program.”
Marketers “used to talk about ‘You
spend your way through the decline,
you invest in the downturn so that you
can come out strong,’” said Andy
Flynn, a partner with Prophet, a brand
and marketing consultancy. “What we
are seeing now is the kissing cousin to
that, which is people are beginning to
make the hard decisions during a time
of natural uncertainty in the hopes that
… as things begin to get better and
their business model becomes a bit
more sustainable and effective, that
they can grow their way out of it.”
But the fact is, things just aren’t get-
ting any better. And while companies
have managed to post decent profits
this year, there’s a growing realization
that bolder moves are needed to keep
the momentum going.

It’s almost like as soon as the stock price falls, a marketer’s blood pressure rises.

WHY YOU SHOULDN’T BE SO QUICK TO CUT

Be careful what you cut in these slow economic times.

History shows companies that invest in the downturn
often end up on top. The Boston Consulting Group’s David
Rhodes and Daniel Stelter cite several such cases in their
recent book “Accelerating Out of the Great Recession:
How to Win in a Slow-Growth Economy.”
Take IBM, which opened a first-of-its kind corporate
research lab during the Great Depression. The then-
relatively small player went on to launch“three times as
many products as it had in the previous decade,” according
to the book. DuPont also accelerated investment, leading to
the introduction of neoprene in 1931 and nylon in 1939,
“giving it a first-mover advantage with two products that
proved to be hugely successful for decades to come.” Then
there’s P&G, which more than quadrupled its market-
research budget between 1930 and 1942, including sending
women door-to-door in 1930 to conduct homemaker
surveys. And we all know how that turned out. – E.J. SCHULTZ

new regulations taking effect next month that reduce so-called debit card interchange fees paid by merchants to banks. Bank of America, for instance, in May raised its monthly fee on its basic checking account from $8.95 to $12. (Customers don’t pay fees if they have direct monthly deposits of at least $250 or keep an average daily balance of at least $1,500.)

While banks might have few options to make up the lost revenue, “people don’t like to be nickel-and-dimed to death,” said former Wachovia Chief Marketing Officer Jim Garrity. For marketers, “it’s a pretty tough row to hoe right now because the fees are transparent; it’s not a hidden fee, it’s in your face,” he added.

One bank marketing executive familiar with the issues facing large banks acknowledged that new fees on things such as online bill paying or sim-

College football
deal leads to new
local promotions

COLLEGE FOOTBALL from p. 2

UPS can use the logos of those schools, which include Notre Dame, Alabama and Michigan, and has category exclusivity to an array of marketing assets, including local TV, radio and digital channels, in-stadium, licensing and game-day activations at more than 250 college venues, and in-store promotion.

George Pyne, president of sports and entertainment at IMG Worldwide, called it a “historic” deal.

“We put the local buy for 68 schools under one platform,” said Mr. Pyne.

Sports-marketing experts estimated that it would cost a marketer double or even triple UPS’ $100 million investment to go to every school individually for a similar sponsorship.

While UPS has category rights in shipping and packaging, IMG is also talking with other marketers in other categories. Last month it inked an agreement with Old Navy to have the retailer sell college logo-adorned merchandise. Terms of the season-only deal were not disclosed, but Old Navy is believed to be marketing the campaign with a $5 million spend, according to executives close to the deal. An Old Navy spokesperson declined to comment on the IMG deal.

ply maintaining accounts add to the risk that some consumers will leave individual banks, or even the traditional banking system altogether. Alternatives include PayPal, MoneyPak, Walmart’s reloadable money card or prepaid credit cards. But the bank executive said those alternatives are relatively small players at this point (PayPal owns only about a 2% share of online bill payment, for example), and that the banks have no choice but to find new fee revenue if they’re going to remain in business.

Kraft’s split, scheduled for late next year, is emblematic of a new phase for consumer packaged-goods companies, which are focused more on profits and less on volume and market share, said Rick Shea, a consultant and former Kraft marketer. “Where they are really getting increased long-term profitability is by positioning like businesses together—that’s where you get the synergies and that’s where you get the efficiencies,” he said. And while the split is likely to be invisible to consumers, Kraft must now change its corporate message from touting size and scale to “convincing stakeholders both internally and externally … of why size and scale aren’t the top priorities,” said Morningstar analyst Erin Lash.

The tough economic environment, including rising commodity costs, has taken a toll on P&G as well, leaving some analysts to suggest it restructure aggressively to lower costs. Sanford C. Bernstein is urging P&G to “take a hard look at its cost base.” The company’s “recent results, the limited amount of acquisitions available and the difficult economic environment have left it no other good option [than to restruc-ture] to stay on pace with/ahead of peers and deliver the results its shareholders expect,” Bernstein stated in a recent report.