How should advertising agencies be compensated?

4/27/09

At a recent ANA conference, Coca-Cola Co. announced that it is trying to start an industrywide movement toward a “value-based” compensation model. (Mullman, 2009).

It’s not exactly a new idea. Historically advertising agency compensation was based on a percentage of media spending, originally 15%. But, even before the separation of media and creative into different agencies made that system antiquated, many of my clients over the years were fee-based, with compensation tied primarily to hours worked, and bonuses built into the system to provide performance incentives.

The tricky part of course is how you define performance. While I firmly believe that advertising must produce sales in order to justify its existence, there is no doubt that external factors well beyond advertising’s control often bear the greatest responsibility for success or failure. Just witness how the current recession has boosted McDonald’s sales for yet another quarter.

Coke has indicated their assessment will be based on a range of factors including the work’s strategic importance, the talent involved, and the originality of the ideas produced. Hmm. Sounds kind of vague to me.

They go on to say that they are not concerned about the effect that this will have on their agencies since “they will bring their A-games no matter what”.

My question is, will they even have an A-game? Talent costs money, and presumably the base level compensation will be lowered, forcing agencies to hire less talented people for lower rewards.

I recently saw a wistful blog entry from a client who mentioned that account management staff used to have MBAs. I guess that agencies can no longer afford them.

Ultimately, what clients want better results. Is this the way?

Mullman, J. & Zmuda, N. (2009, April 27). Coke Pushes Pay-for-Performance Model. adage.com. Retrived April 27, 2009, from http://adage.com/article?article_id=136266

Does it make you want to buy an LG phone?

4/20/09

LG has announced that it is launching 2 focused campaigns for its phones based on the company’s brand positioning which is “all about self-expression”.

The first campaign, for the Xenon phone, is targeting “social networking-happy Gen Yers” with a tv, print, and online campaign featuring 19 year-old Heroes star Hayden Panettiere and placement in Jason Timberlake’s MTV series The Phone.

The second campaign, for the Rumor2 phone targets “style conscious teens and young adults”. It features Heidi Klum who designed custom backplates for the phone. (Wasserman, 2009)

The fact that they have a good sense of who their target is and have created plans that should speak directly to their interests/emotions is definitely a good start.

But, as we have discussed previously the use of celebrities is tricky. While they may stimulate interest, they also can easily overwhelm the message. And of course over exposure can be an issue.

What do you think? Will either of these campaigns prove to be effective?


Wasserman, T. (2009, April 18). LG Ready for Its Close-up. brandweek.com. Retrieved April 20, 2009 fromhttp://www.brandweek.com/bw/content_display/news-and-features/direct/e3if46ca983d59bcb8f960417fa8f52a9c6

Am I the only one suffering from charity burnout?

4/13/09

It seems like every time I turn around these days someone is informing me that part of the money I just paid to buy something is being devoted to some worthwhile cause.

The latest one jumping on the bandwagon is Tide detergent. They have been touting their disaster relief efforts, most notably those for victims of Hurricane Katrina, on television, and are now introducing a new package design featuring their beneficiaries that is scheduled to run through June. (Hopefully this isn’t a Tropicana packaging disaster in the making).

P&G, Tide’s parent company will be donating 10 cents from each sale of the newly packaged detergent to disaster relief. (Wong, 2009)

While a study conducted by Self magazine and consulting firm Latitude in spring 2007 indicated that women will pay an extra 6.1% for products associated with a social cause, I am skeptical. (“Self Study: Women Willing To Pay Premium for a Cause”, 2007)

Frankly, I’d rather decide for myself which charities I want to support rather than having someone else do it for me. What do you think? Is donation to a worthy cause a motivator for you when you make your purchase decisions? Would you pay +6% more?


Wong, E. (2009, April 10). Tide’s Charitable Makeover. brandweek.com. Retrived April 12, 2009 from:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3id54466e9215cc2ba9ef1c644d5ea54fa

(2007, October 15). Self Study: Women Willing To Pay Premium for a Cause. AdWeek, p38.

Which is more effective; targeting the user or the buyer?

4/6/09

On March 26, Ralcorp Holding announced that they were launching a new campaign for Post Grape Nuts cereal, targeting men, who apparently have been the primary eaters of the product all along.

The web based campaign features a special website on MSN with dozens of two minute videos hosted by ESPN personality Kenny Mayne. The site offers “The Guy’s Manual” with tips on topics like restoring cars, and advice on things such as how to ask for a raise during a recession. Print ads will run in Sports Illustrated. The new tagline, developed by Ogilvy & Mather is: “That takes Grape Nuts”.

Before the brand was bought last year, Kraft ran advertising for it targeting women gatekeepers with ads on daytime soaps and Oprah, focusing on a healthy eating message. The premise was that since they women were doing the buying, they were the decision makers. But are they? I usually ask my husband what cereals he would like before I go to the store. The article referenced below, was written by a man who thinks it’s about time. What do you think?

Seymour, C. (2009). Grape nuts: New Advertising Campaign Targets Men. ultimateworkathomedads.com. Retrived April 6, 2009 from
http://ultimateworkathomedads.com/gold/archives/219

Is naming names an effective strategy?

3/30/09

Conventional wisdom has always maintained that it is a bad idea to name your competitor outright in advertising, for fear that a consumer will remember the name of the competitive product rather than your own. It’s a valid concern since in most cases the brand doing the advertising is comparing themselves to the category leader.

But last year, Campbell’s decided to start the MSG wars with Progresso. Unfortunately for them, Progresso decided to fight back. (Wong, 2008) This has lead to a series of ads where each accuses the other of marketing unhealthy products. What has this accomplished? Well, in my case it made me more aware of the fact that all canned soup is loaded with chemicals and has turned me into a non-user of both.

Now comes word from Powerade that they intend to attack industry leader Gatorade head on with claims, backed by research, that Gatorade is an inferior method of hydration. (Zmuda, 2009)

Is this a good idea or bad? Do you think this will be an effective way to convert Gatorade users to Powerade users? Or is there a potential for a backlash here too?


Wong, E. (2008, October 8). Soup War Continues, Progresso Strikes Back. brandweek.com. Retrived march 30, 2009 from
http://www.brandweek.com/bw/content_display/news-and-features/packaged-goods/e3i7e19cce243eb21aaa2048c8982be98f9

Zmuda, N. (2009, March 23). Gator Baiter: Powerade Jabs at Powerhouse. adage.com. Retrived 3/25/09 from
http://adage.com/article?article_id=135436

Do sponsorships deliver enough value?

3/23/09

As we sort through the current economic crisis all media is subject to evaluation and possible elimination. One of the most difficult things to measure properly is the value of a long term sponsorship.

After over a decade of participation, L’Oreal decided this year to end its sponsorship of the Academy Awards, which had previously been one of the pillars of its communications plan. (“L’Oreal, Other Sponsors Leave the 2009 Oscars Stranded”, 2009)

On the flip side, last week VW announced that it had renewed and expanded its sponsorship agreement with Major League Soccer. The 4 year pact includes in-stadium signage during national broadcasts, presence at MLS special events and player appearances, and sponsorship of grass roots initiatives like MLS Futbolito!, a four-on-four traveling tournament for amateur players.

They will continue as presenting sponsor of the D.C. United franchise, with front jersey logo placement, and will increase their soccer media buys with ESPN, Fox Soccer Channel and Univision. Terms of the deal were not announced. (Crupi, 2009)


What do you think? Do you notice the signs in the stadium and the logos on the jerseys when you watch sports on television? What about in person? Who do you think is the primary audience for soccer in the US? Do you think the sponsorship will give VW significant leverage with them? Or do you think they would have been better off spending the money elsewhere?


(2009). L’Oreal, Other Sponsors Leave the 2009 Oscars Stranded. news.softpedia.com. Retrived March 23, 2009 from
http://news.softpedia.com/news/L-Oreal-Other-Sponsors-Leave-the-2009-Oscars-Stranded-104854.shtml

Crupi, A. (2009, March 16). VW receives in-stadium placement, including signage during national broadcasts. mediaweek.com. Retrived March 23, 2009 from
http://www.adweek.com/aw/content_display/news/strategy/e3ia9c64386847182ffedcec09f99f4af59

What were the folks at Skittles thinking?

3/16/09

In the past, the people at Mars Inc. have proved themselves to be savvy marketers, as evidenced by their fully integrated black & white campaign for M&M’s. (Carl, 2003) But, this time they appear to have lost their minds, or at least ignored what happened to GM when they ran their consumer-generated ad campaign for the Chevy Tahoe SUV. (Sandoval, 2006)

While there is no doubt that the growth in social networking has created an audience too tempting for advertisers to ignore, this idea may have been ill conceived from the start.

Initially, everyone seemed intrigued by the idea of Skittles turning their site over to consumers, by channeling consumer-generated content from Twitter, Facebook, Flickr, YouTube and Wikipedia to their home page. (Lukovitz, 2009).

But, it didn’t take long for consumers to turn nasty, so on March 3, Mars announced they were pulling the twitter campaign. (Sullivan, 2009)

And, on March 5 they announced that only the brand’s site on Wikipedia would be used for its homepage. (Sullivan, 2009) But, a visit earlier today led me to a homepage with YouTube content and still gave access to the twitter feed. So, at the moment is unclear what their current strategy is.

Are you surprised that consumers got out of hand so quickly? How should we balance the desire for consumer input with the tendency of people to turn nasty? How can we market brands in social networking settings without going to this extreme?

Carl, S. (2003) M&M’s are now black & white, no color. smgboard.com. Retrived March, 16, 2009 from
http://www.smgboard.com/forums/lofiversion/index.php/t12220.html

Sandoval, G. (2006) GM Slow to React to Nasty Ads. zdnet.com. Retrived March 16, 2009 from
http://news.zdnet.com/2100-9595_22-147502.html

Lukovitz, K. (2009). Skittles Generates Buzz With Social Media Efforts. online media daily. Retrieved March 3, 2009 from
http://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=101304

Sullivan, L. (2009). Skittles Pulls Twitter Campaign. online media daily. Retrived March 4, 2009 from
http://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=101437

Sullivan, L. (2009) Skittles Settles On Wikipedia For Brand's Home Page. online media daily. Retrived March 6, 2009 from
http://www.mediapost.com/publications/index.cfm?fa=Articles.showArticle&art_aid=101628

Are we really surprised that online is taking a hit?

3/9/09
In late 2008 people were predicting that online would continue to see advertising gains due to its low out-of-pocket and perceived efficiencies. But, recent data shows that online spending does indeed appear to be down in first quarter 2009. ("Online Ad Spending Seen Shrinking", 2009)

It has been my experience that during bad times, marketers retrench, take a conservative approach and fund only those media that have proven their worth.

Some new studies that have just come out indicate that television is more effective then ever in stimulating sales (Neff, 2009) -- the only true measure of success. Online on the other hand has succeeded admirably when it comes to attracting attention, a la the "elf me" promotion, but has not been equally successful in increasing sales growth.

What do you think? Is it a good time to run advertising online, or time to pull back?

(2009). Online Ad Spending Seen Shrinking. Wall Street Journal. Retrived February 25, 2009 from: http://online.wsj.com/article/SB123558776209174437.html?mg=com-wsj

Neff, J. (2009). Guess which medium is as effective as ever: TV. Advertising Age. Retrived February 23, 2009 from: http://adage.com/print?article_id=134790