October 11, 2004

Consumer Advice for Advertisers



THE official theme of the 94th annual meeting of the Association of National Advertisers was "Masters of Marketing," but it might have been more bluntly, and more accurately, summarized as "Change or Die."

Speakers at the conference, which concluded here yesterday, warned the more than 700 attendees that executives who oversee the estimated $300 billion a year spent on consumer marketing in the United States must become more accountable, innovative and creative or be doomed to failure.

"The traditional marketing model we all grew up with is obsolete," said James R. Stengel, global marketing officer of Procter & Gamble, the world's largest advertiser.

"We are taking the reinvention of marketing very seriously at Procter & Gamble," he added, "and we all need to do that."

Mr. Stengel was one of several speakers representing big, well-known sellers of consumer products and services that are substantially reorganizing or rethinking their marketing efforts. The others included DaimlerChrysler, General Electric, Home Depot, Charles Schwab, Toyota Motor, Wachovia, Wrigley and Yahoo.

Those strategic shifts stem from a growing belief that most companies have already increased profits as much as they can through cost-cutting, said Michael J. Winkler, executive vice president and chief marketing officer of Hewlett-Packard, and need now to "focus on revenue growth" to further fatten the bottom line.

"Marketing has got to become a competitive advantage," he added, much like superior product quality or better customer service.

But a formidable obstacle looms, according to Mr. Winkler: many of the chief executives to whom chief marketing officers report think that marketing is "largely a financial black hole, an ambiguous function of the business, with immeasurable results and limited return on investment."

That was the subject of several hours of discussion on Saturday as the association and Booz Allen Hamilton, the consulting company, presented the findings from the first phase of a two-year study on corporate marketing.

"Marketing is more of a critical success factor than five years ago," even in fields where it has not traditionally been valued, like banks and other financial services, said Paul Hyde, vice president for the financial services practice at Booz Allen. "But it is being seen as disconnected from the C.E.O. agenda" and as a result typically lacks adequate resources, he said.

"Marketing has a long-term focus, and yet corporations are expecting their chief marketing officers to deliver short-term results," he added. "C.M.O.'s are being asked to sink or swim and in many instances, it's 'Mission: Impossible.' ''

One inevitable outcome has been the revampings of marketing departments at more than 70 percent of the companies that responded to the survey, Mr. Hyde said, adding in an aside to the audience: "Don't go on vacation. Your job might not be there when you get back."

Indeed, the average tenure of a chief marketing officer is 23 months, he added, citing a study by Spencer Stuart, compared with 54 months for a chief executive.

Peter J. Littlewood, senior vice president for corporate marketing at the Masterfoods USA division of Mars, said that he and other marketing executives can prove their worth to skeptical chief executives by "thinking about consumers, about brands, about creating demand."

For instance, Mr. Littlewood said, "we believe there's a huge opportunity for M&M's in customization and personalization," offering candy made to order in special colors or stamped with names, initials or greetings, "but shipping consumers customized colors X days ahead of a wedding is a very different business model" from selling them in standardized packages in supermarkets, drugstores and newsstands.

The corporate marketing study is part of plans by the association, which represents almost 350 companies that own about 8,000 brands, to "promote, encourage, cajole and when necessary fight for greater accountability," said Robert D. Liodice, its president and chief executive, in response to the intense pressure on members "to demonstrate real value for their investments" in marketing spending.

"We marketers needed to get our collective butts kicked around a bit," he said. "Candidly, we had it a little too good and a little too easy for far too long."

Another realm where such physical displays of disaffection are prevalent is in the relations between marketers and their advertising agencies. "We often talk about the marriage analogy," said Barbara M. Ford, vice president for global advertising resources at Kraft Foods, which is majority-owned by the Altria Group, "but if it were a marriage, it would be easy."

For example, Ms. Ford said, referring to her spouse, "If he has a bad day or misses a deadline, I don't look for input from other husbands."

"Getting to powerful ideas that can impact consumers in meaningful ways" can be achieved most effectively through what Ms. Ford described as a "provocateurship" that "brings out the best on each side" in the relationship.

"We remind ourselves all the time at Kraft that we get the advertising we deserve," by asking "Are we being the kind of client that gets the best people at the agency to do their best work for us?" Ms. Ford said.

Another way to improve campaigns, said Larry Light, executive vice president and global chief marketing officer of the McDonald's Corporation, is to consider agencies "as creative resources" rather than corporate entities that assign accounts to specific employees at specific offices.

"That's the future, not to assume the office you've been assigned to has all the creative geniuses you need," Mr. Light said, citing the worldwide competition McDonald's conducted last year among its agencies to develop a new ad theme. The winner, "I'm lovin' it," was produced miles from Madison Avenue, by an office of DDB Worldwide, part of the Omnicom Group, in Unterhaching, Germany, near Munich.

The success of the new theme, Mr. Light said, which has helped contribute to 16 consecutive months of global sales gains after years of declines, can be attributed to a realization at McDonald's that "we had to change our voice and let the customers speak for themselves."

"It was 'We love to see you smile,' 'We do it all for you,' 'We love it when you love it,' '' he added. "We took our eye off the consumer and we lost consumer relevance."

The conference, which began Thursday night at the Ritz-Carlton Hotel here, set an attendance record of 707, besting the record, set last year, of 565. Those audiences represented a turnaround from the last time the conference was here, in 2002, when only about 250 people attended.

After that dismal showing, the association was reorganized under Mr. Liodice, with assistance from Mr. Stengel, the vice chairman for 2002-4, and James D. Speros, the chairman for 2002-4 who is also United States chief marketing officer of Ernst & Young.

At a board meeting during the conference, Mr. Stengel was elected the chairman of the association for 2004-6. Stephen G. Sullivan, senior vice president for communications at the Liberty Mutual Group, was elected the vice chairman for 2004-6 while continuing as the treasurer.

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