Cost-Cutting is "Coping" -- A Poor Substitute for Effective Marketing

Coping is a temporary response to life39s crises Widows and widowers say quotI39m copingquot during the first year of their loss but we39d be surprised to hear this from them ten years onHowever advertisers are still 39coping39 for more than a decade with their inability to grow the top line Advertisers have experimented in many ways fragmenting their media spend and significantly increasing the volume of deliverables in their creative scopes of work amp8212 and to top it off changing their media and creative agencies every few years amp8212 but thus far revenue results have been poor Instead costreductions and other efforts like acquisitions and portfolio pruning have satisfied Wall Street for the past decade and share price growth has uniformly exceeded revenue growth by a wide marginAdvertiser PerformanceA sample of 10 major advertisers from the Top 100 advertisers shows the phenomenonData Source httpswwwmacrotrendsnet Analysis by TrinityP3 USAShare prices are largely driven by expectations about the future and as long as Wall Street believes that the future will be better than the present share price performance will exceed revenue performanceFor how long though can advertisers rely on cost reductions financial engineering and portfolio fixes to shore up share pricesAt what point in the future will advertisers be punished for the poor results from their marketing programs quotFake it until you make itquot might have been OK for chief marketing officers during the early years of digital and social media but as time goes on their CEOs and Wall Street will need greater assurance that the significant investment in media generates actual growth in revenue not just growth in clicksHolding Company PerformanceHolding companies like advertisers have responded to the post2008 period with cost reductions downsizings and quotjuniorizationquot of their staffs amp8212 their way of 39coping39 with client fee cuts and the need to shore up holding company share prices Holding companies were able to grow their share prices with this strategy but recent evidence shows that Wall Street is less confident about the holding company future than it was in the past amp8212 average holding company share prices have declined from previous highs and this was before COVID19 completely disrupted holding company performanceShown below are WPP IPG and Omnicom combined results with revenues and share prices indexed at 100 in 2009 Holding company results stand in stark contrast to the performance of advertisers shown above in a similar graphData Source httpswwwmacrotrendsnet Analysis by TrinityP3 USAIt should be obvious from the foregoing that Procurement has been delivering nearterm value for advertisers Marketing39s performance has been questionableFor the future Marketing and Procurement need to change priorities Future performance improvements must come from Marketing which needs to master its complex media mix while Procurement should focus on clientagency process improvements not just costs The costreduction game will run out of steam in any caseAgencies should be reengaged as strategic partners to help clients solve brand performance problems The practice of turning agencies into commodity suppliers of lowcost services has been an unmitigated disaster for everyone39Coping39 with the 2008 financial crisis through cost reductions needs to cease Cost reduction was meant to be a temporary fix not a longterm strategy It39s time to become 39strategic39 and focus less on tactical thinkingPhoto credit Dana Fradon The New Yorker The Cartoon Bank With permissionClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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Cost-Cutting is "Coping" -- A Poor Substitute for Effective Marketing

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Michael Farmer

"About That with Carl Mayer": Involved Media Connected Audience Fall 2024 Report (Episode 5) - By Carl Mayer

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Cost-Cutting is "Coping" -- A Poor Substitute for Effective Marketing

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