SapientNitro Global Marketing Series: Five Ways Agencies Are Grappling With Global Marketing by SapientNitro

SapientNitro Global Marketing Series

Five Ways Agencies Are Grappling WITH global marketing Article

of 3 The Evolution of Global Marketing | By Freddie Laker and Hilding Anderson

Executive Summary CMOs are struggling to adapt to a world that is fundamentally different from when they started their careers. Disruptive digital technologies and the new expectations of the global consumer are forcing global firms to adjust and innovate. At SapientNitro, we have made a significant effort to understand how these changes are impacting large global organizations. What we found was surprising: just 15% of senior marketers are prepared to deal with the rapidly changing consumer, and just 8% believe agencies are succeeding in their support of global brands. This should be a wake-up call for global marketers. To further develop an understanding of the causes and implications of these trends, we have conducted a 6-month study of 114 CMO-level marketers, including oneon-one interviews with former or current CMOs including The Home Depot and Intercontinental Hotels. Our research has culminated in three articles. The first is focused on identifying the obstacles, and understanding the implications of these new challenges. The second posits a new “Global Marketing Mindset” of the future CMO — one more comfortable with technology, consumer insight, analytics, and multi-disciplinary strategy teams. The final article explores the implications of these trends for agencies — how agencies can better support large global brands; it also points out major areas where they are currently failing.

Together, these pieces represent our perspective on the future of global marketing. While it is a challenging future, it also is full of opportunities for innovative, adaptable, and entrepreneurial leaders and businesses.

DEVELOPEr

STRATEGIST

storyteller

DESIGNER

architect

engineer

anthropolist

MARKETEER

Global agencies continue to grapple with a digital world requiring global consistency, but local articulation. Despite repeated efforts over the past two decades, agencies have been unsuccessful at fully solving the problems inherent in global account management in the digital age. Our research revealed the damage it has done to CMOs — just 8% of CMOs feel that their global agencies are supporting them successfully. When we looked at marketers who identified themselves as technology savvy, the number dropped to zero (0%).

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INTRODUCTION

SapientNitro’s recent research found five major problem areas, which agencies must address: increased specialization, a lack of deep country-specific knowledge, a lack of strategic digital thinking, a lack of omni-channel global concepts, and a lack of investment into skills and digital tools.

1. Struggles With Agency Specialization Senior global marketers deal with the daunting challenges of managing multiple countries every day. Too often, they are not getting multi-channel, global thinking from their fragmented agency portfolio. The growth of disruptive technology has fueled a proliferation of new types of specialized agencies. But it comes at a cost — particularly for complex global brands. As we mentioned in the introduction, the research shows that just 8% of senior marketers believe their agency partners are succeeding in their support of global brands. In our study, roughly 60% of senior marketers characterize themselves as tech-savvy. Among those who are technology savvy — presumably the group best able to understand the opportunities of this new disruptive technology — the number believing their agencies were successfully supporting global brands dropped to zero (0%). We believe these data show that even the most sophisticated marketer will struggle with too many specialized agency partners. Another aspect of the problem is that many digital agencies don’t offer end-to-end solutions. According to a 2010 survey, 80% of those surveyed in the UK feel that digital agencies are too fragmented and specialized, and want digital agencies to grow their service to provide a fully integrated offering (such as design and build, development, email, eCRM, search, data, display, and social media).” 1

One solution CMOs are using is to consolidate their agency partners centrally. Our research found that nearly 50% of marketers are seeking to consolidate their agency partners at a global level. Top agencies recognize the problem of specialization and separate P&Ls, and various solutions have been proposed. One option is to create “mini-agencies” for big clients. WPP CEO Sir Martin Sorrell’s experiment at Dell — a $4.5B global account — is an example of the benefits and pitfalls in this approach. In this case, they attempted to attract the stars to the account from across WPP. But separate P&Ls and the loyalty to the agency — not to the holding company — impeded the ability to create the best-in-breed team structure. Dell quickly reverted to an “ad hoc” set of agencies, and ultimately moved the account to three smaller agencies — none of which were part of WPP. Clients are increasingly looking for the integration of teams across multiple disciplines — design, architecture, engineering, anthropology, and storytelling can all play a role. Some of the best thinking comes when these skills are united under a single roof, not spread around the world.

Brands need to find the right strategic partners to get the right ideas. I’ve seen brands with 30 people from different agencies. Former Unilever SVP Brand Marketing

Tight integration is particularly important for large, global accounts for four main reasons: the importance of countryspecific knowledge, the risk of a cacophony of noise if not properly organized, the difficulty in identifying team resources in global accounts, and the growing emphasis on multichannel experiences.

Increased specialization represents a challenge for which agencies — particularly large, global agencies — continue to seek solutions.

Costa, Marylou. “Remodelling the Agency Relationship for the 3.0 Age.” August 2010

Figure 1:

CMOs Report That Agencies Are Not Succeeding In Their Support Of Global Brands % of respondents who agreed or strongly agreed Agencies today are succeeding in their support of global brands.

Our current global agency partners have the necessary global footprint to support our brands.

2. Local Needs and Tastes Remain Under-Explored 12%

FIGURE 1 To survive in the new marketing world, marketers must be flexible. Yet a minority of marketers feel prepared to deal with integrating their marketing activities to reach these consumers. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

And there is substantial budget being spent locally; nearly a quarter (23%) of companies spend more than 50% of their marketing and merchandising budgets at the local level. 3

One big surprise from our research is the gap between the promise of local customer understanding and the reality. Agencies realize the importance of localization, yet just 11% of their senior-most clients strongly agree that global agency partners have a deep understanding of local needs and requirements.

We also know that deep customer insight helps win pitches. According to our survey, deep insight into changing customer behaviors is the number one capability for choosing agency partners (see sidebar). And this local insight is critical for both tech-savvy marketers and less tech-savvy marketers; both scored “deep insights into changing consumer behavior” in their top three selection criteria for new agencies.

The core problem is that many agencies’ global footprints are insufficient, according to clients. Just 12% of CMOs strongly believe their current agencies possess “the necessary global footprint” to support their brands. 2 Figure 2:

CMOs Prioritize Knowledge About Local Needs And Tastes In Choosing Agencies

This local knowledge is growing more important in the digital age; 92% of respondents responded that the importance of tailoring campaigns to local values, customs, and norms is going to be the same or more important in three years.

Costa, Marylou. “Remodelling the Agency Relationship for the 3.0 Age.” August 2010

October 2011 CMO Council study titled “Powering Performance on a Field Marketing Level Through Localized Content, Advertising, Promotions, Search Contacts, and Cyber Community Connections” 3

% of respondents who agreed or strongly agreed to the question

Q: What are the most important global trends in marketing that will impact your business in the next 3-5 years? Ability to provide deeper insight into changing consumer behavior

36%

53%

89%

How do large multi-nationals choose agency partners? Top 3 selection criteria for:

#1 Best-in-class creative

Brand stewardship (e.g. brand strategy, etc.)

33%

38%

54%

49%

88%

87%

FIGURE 2 Managing global campaigns in the new global and digital world was identified as a key challenge. In particular, social media, and blending online / offline experiences were key global marketing challenges. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

non-tech savvy marketers

technology savvy marketers 95.7% 87% 82.6% 82.6%

Brand stewardship (e.g. brand strategy, etc.) Ability to drive cost efficiencies by utilizing fewer agencies across multiple geographies /capabilities Ability to provide deeper insight into changing consumer behavior Best-in-class creative

Best-in-class creative

Significant amount of local expertise in our key markets (e.g. agency having physical offices in key markets) Ability to provide deeper insight into changing consumer behavior Brand stewardship (e.g. brand strategy, etc.)

88.3% 88.3% 88.2% 88.2%

FIGurE 3:

Agencies setting up a global campaign for a global organization must have a presence and/or experience in the markets they are focusing on. An agency with one office in NYC cannot serve the needs of our organization in Bangalore. Senior Global Marketer from 2012 Survey

HOW DO TECH-SAVVy MArKETErS THINK ABOuT AGENCIES DIFFErENTLy?

How important are each of the following capabilities when selecting agency partners?

TECH-SAVVy1

NON-TECH SAVVy

% who strongly agreed

Is online an important revenue channel for your business (i.e. selling products or services online)? Our current global agency partners push us to think across all channels, not just one or two.

Significant amount of local expertise in our key markets (e.g. agency having physical offices in key markets)

74%

24%

44%

Ability to provide deeper insight into changing consumer behavior I am satisfied that our current global agency partner(s) depth (e.g. deep marketing insights) and breadth (a mix of digital and traditional) of skills. Ability to drive cost efficiencies by utilizing fewer agencies across multiple geographies/ capabilities

61%

17%

39%

47%

+27.1%

+23.7%

24%

+20.6%

41%

+20.2%

+17.3%

24%

+15.3%

Agencies today are succeeding in their support of global brands.

14%

Cross-channel expertise in both digital and traditional commerce

46%

24%

FIGURE 3 The new CMO - one who is as comfortable talking CMSs and multi-variate testing as brand tracking studies – has very different expectation on the role of agencies. What we found was that they are much more likely to expect multi-channel thinking from their global partners, much more likely to choose agencies which offer depth and breadth – and hence be satisfied with that breadth – and also to believe agencies are succeeding. Agencies which can connect to these types of knowledgeable leaders – and provide the right mix of services – seem to be performing better than those who are not.

DIFFErENCE

Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

+14 %

+22.7% 4

Best-in-class creative

52%

The research also revealed that this local knowledge gap among global agencies appears to be driving the usage of local agencies — agencies that often lack the technical depth to build gamechanging digital platforms at scale. Two-thirds (67%) of senior marketers agree that local agencies are an essential part of their global, go-to-market strategy. The result is that game-changing digital or cross-channel experiences may never get built. Digital pure-plays, which traditional agencies have developed over the years, were also singled out as missing the global footprint. A former CMO of a global CPG corporation summed it up: “My experience has been that a number of digital agencies lack a global perspective. They don’t have a strong [global] footprint.”

71%

-19.0%

Tech Savvy is defined as those who agreed or strongly agreed to the statement ‘I consider myself to be very knowledgeable about technology (e.g. the back-end infrastructure for marketing programs)’

And if you need more validation of the emphasis on local expertise by global CMOs, respondents to our online survey also were clear about this need.

There are very few agencies that can truly operate at a global level and provide equally good services in different markets. This is particularly true in the emerging economies. This trend is exacerbated once you start to work across multimedia channels … relevant marketing is done on the ground and is culturally specific.

experience

researcH

insigHT markeT knoWleDge

culTural aWareness

experTise

local neeDs

senior global marketer from 2012 survey

The solution that many agencies look for is to operate as a global network; it should be a network where any region can connect with and bring in the global perspective and insight. But the reality is that the success of this approach depends on the effectiveness and quality of the global management team. Deep consumer insights on the global level are key to developing great global experiences. For example, mobile technologies vary by market. One story we heard was of a client who tapped top creatives at agencies in London and India for

Two-thirds of senior marketers (67%) agree that local agencies are an essential part of their global, go-to-market strategy.

a feature phone (non-smartphone) project in Southeast Asia. Only the India team got it right — the London team didn’t embrace the limited technology of feature phones, while the India team developed a groundbreaking campaign using the available features. Other global mobile

nuances include variation in the support of texting plans, or the rising role of WiFi in lieu of voice plans in developing countries from Mexico to Brazil. This level of local understanding is helped by geographic proximity. The bottom line is that many global pitches are made — and won — based on the strength of consumer insight in multiple regions. yet a great challenge remains in how to operationalize strategic insight across different P&Ls, cultures, and languages. The research shows that too often global agency partners are not bringing deep local understanding.

FIGurE 4:

DESPITE COST PrESSurES, LACK OF LOCAL KNOWLEDGE IS DrIVING CMOS TO LOCAL AGENCIES 3. GAPS PErSIST IN THE STrATEGIC MIx

% of respondents who agreed or strongly agreed

Our current global agency partners have a deep understanding of local needs and requirements.

35%

Local agencies (i.e. those operating in just one country) are an essential part of our global, go-to-market strategy.

11%

In an environment of disruptive technology, CMOs are demanding more from their agencies. Agencies are increasingly being tapped for deep strategic insight across both traditional and digital. According to our survey, however, few agencies (just 10%) are fully integrating digital and traditional strategies for their clients.

46%

51%

16%

67%

In the agency world, both traditional and digital agencies share the blame. For traditional agencies, our survey found that just 11% of global CMOs strongly agree that traditional agencies have a good understanding of how to leverage digital. While digital agencies are hardly exempt: less than half (43%) of CMOs agree or strongly agree that their digital agency partners have a leading strategic role in the marketing decision-making process.

COST EFFICIENCIES DrIVE CMOS TO WANT TO CONSOLIDATE % of respondents who agreed or strongly agreed

Ability to drive cost efficiencies by utilizing fewer agencies across multiple geographies/ capabilities

46%

32%

Over the past five years, both groups have continued to invest to try to close this gap. For example, agencies are shifting from a “big idea” to an organizing idea — one that defines a brand experience across channels, countries, and platforms. And it is even more important for global accounts than domestic accounts, as it can provide guidance to local partners and allow them to extend and improvise on their own. In our experience, the home office tends to want to be more brandoriented, while local markets want tactical, short-term activities with a defined rOI. An organizing idea allows you connect these two goals. The bottom line is that while traditional agencies particularly are strong at developing ideas, which map to an overarching strategy, both groups need to do a better job of integration and working across channels.

78%

FIGURE 4 Less than 11% of CMOs strongly agree their global agencies have a deep understanding of local needs. The result is that CMOs continue to look elsewhere for this critical capability, often to niche, local shops which in the long run increase brand, management challenges, and increase ‘silos’ of expertise. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

4. CHALLENGES IN DELIVErING GLOBAL MuLTI-CHANNEL IDEAS FIGurE 5:

COST EFFICIENCIES DrIVE CMOS TO WANT TO CONSOLIDATE % of respondents who agreed or strongly agreed Our marketing activities are fully integrated and working together (e.g. digital activities are in sync with traditional media campaigns).

Multi-channel consumers spend more — up to 400% more — compared with a single-channel consumer 4. yet in our discussions with company and agency marketers, too many described situations where global silos within organizations and agencies prevented the development of effective cross-channel experiences. The research is clear: in this new multi-channel world, just 16% of senior marketers strongly agree that their global agency partners are pushing them to think across all their channels, not just one or two.

“Multichannel At The Heart: Lessons From M&S On How Multichannel Is A Part Of Everyone’s Job” Laura Wade-Gery, Executive Director, MultiChannel eCommerce from Marks & Spencer

Campaigns should be developed to be channel agnostic. [The] going assumption is that it has to go anywhere and everywhere. On the POS physically and digitally. On TV. Online. If you start with a channel in mind, it will be very difficult to have global ideas. – SVP Global Media, CPG, Experience: North America, South America, W. Europe, S.E. Asia

FIGurE 6:

MuLTI-CHANNEL CAPABILITIES ArE IMPOrTANT… % responding moderately or extremely important

Furthermore, when we studied non-technology-savvy marketers, they appeared particularly likely to minimize multi-channel. In our survey, none (0%) of the non-tech-savvy marketers strongly believe they are being pushed to think across channels. This is clearly different from the tech-savvy marketers, who indicate that roughly a quarter (23%) of their agencies push them to think multi-channel. In the face of the latest in disruptive technologies, the ability to go outside of traditional channels is critical. For example, many 18- to 25-year old men targeted by marketers are very difficult to reach using traditional media buys. One senior leader noted that “ultimately, traditional channels are not the only or even the best way to reach these segments.” Social media, in-game media purchases, and other tactics should be applied to

reach these consumers. Agencies will be doing their partners a disservice if they don’t bring these ideas to the table. And CMOs realize it. As one respondent noted when asked what was the most important characteristic of their best global agency relationship: “the ability to help with the strategic application of brand to a multichannel and multi-country environment.” The implications of this gap are significant. Agencies have a responsibility to help their clients envision and then deliver global multi-channel ideas, even if it means we must fight to overcome outmoded organizational structures, practices, and partnership models.

Cross-channel expertise in both digital and traditional marketing

39%

46%

85%

…BuT TOO FEW AGENCIES ArE HELPING CLIENTS THINK ACrOSS CHANNELS % of respondents who agreed or strongly agree Our current global agency partners push us to think across all channels, not just one or two.

47%

10% 57%

FIGURE 6 Deep consumer insight emerged as the most important single capability for selecting agencies. yet too many agencies are failing to invest in research and consumer insights. The result is that local knowledge lives in local agencies, while global agencies have the budget and technology capabilities to create the strong experiences which CMOs are demanding. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

FIGurE 7:

DIGITAL AGENCIES, IN PArTICuLAr, ArEN’T BrINGING THE rIGHT STrATEGIC MIx % of respondents who strongly agreed I’m satisfied that our current global agency partner(s) depth (e.g. deep marketing insights) and breadth (a mix of digital and traditional) of skills. Our digital agency partner(s) has a leading role in our marketing decision-making process.

10%

CMOs Aren’t Satisfied

And Digital Isn’t yet Leading

FIGURE 7 Great global strategy requires a mix of depth and breadth, yet few agencies are excelling. And though they specialize in the major area of growth for agencies, many digital firms aren’t taking a leading role in delivering great strategy. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

FIGurE 8 :

DIGITAL AGENCy PArTNErS ArE ONLy ADEQuATE IN DIMENSIONS OF SCALE AND MuLTI-CHANNEL COMMErCE % of respondents who strongly agreed Our digital agency partner(s) have the ability to scale and handle large engagements of any scale.

Our digital agency partner(s) have deep expertise in commerce (i.e. kiosk, online, mobile and in-store digital commerce experiences).

47%

43%

10% 57%

7% 50%

5. rIGHT SKILLS AND ASSOCIATED TOOLS rEMAIN CHALLENGING

FIGURE 8 The ability to scale, and the ability to provide deep commerce expertise are core elements of delivery for digital agencies in the new world. yet too few are delivering at the level they should. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

FIGurE 9:

DIGITAL SKILLS rEMAIN A CHALLENGE FOr CMOS – AND AGENCIES ArEN’T PrOVIDING THE SOLuTION Q: How challenging do you consider each of the following for your marketing organization? Is this less challenging, more challenging, or about the same as it was 5 years ago? In 3-5 years?

ExPECTED CHANGE IN 3-5 yEArS

TODAy % responding moderately or extremely challenging

LESS Gaining access to the appropriate skills and people across the organization

51%

26%

18%

Clients rely on agencies to provide these skills. yet the skill requirements at many global agencies haven’t kept up. In a recent CMO Council survey, just 9% of senior marketers believe traditional ad agencies are doing a good job of evolving and extending their service capabilities in the digital age. 5 New sets of integrated tools — and the proper training — in analytics, localization, and multi-channel campaign development and delivery all take time to learn. And, it can be quite difficult for an agency to combine regional knowledge with these new digital skills.

32%

Skills such as real-time data that measures social media chatter or digital media performance are incredibly % of respondents who strongly agreed

Our traditional agency partners have a good understanding of how to leverage digital.

Agency leaders know that their clients struggle with a lack of skills in digital — especially globally. In our survey, over three-quarters of senior marketers (77%) noted that it was moderately or extremely challenging to gain access to the appropriate skills and people. And nearly a third of respondents (32%) believe it will get more challenging in the next three years.

11%

FIGURE 9 As we reported in an earlier article on this subject, access to the appropriate skills and people across the organization is quite difficult for CMOs. But Agencies are not doing their part. In particular, gaps in analytics, localization and multi-channel campaign development were identified in our research. Source: Q2 2012 online survey to 114 senior marketers with global responsibilities

important. This data is fundamental to executing multichannel marketing campaigns so critical in reaching the new consumer. Tools among companies and agencies are another gap: the lack of a single, cross-channel digital marketing platform was identified as the number one obstacle to the growth of digital marketing among 350 enterprise decision makers. 6 The research confirmed this: traditional agencies are likely to be challenged. In fact, 47% of client marketers plan to build internal capabilities and use incumbent agency services less. Furthermore, 45% are bringing in outside consultants to help set up and structure digital programs. 7

CMO Council 2012. http://www.cmocouncil.org/press-detail.php?id=2943

http://www.dataxu.com/news/press-releases/digital-marketing-studycmos-believe-big-data-is-a-game-changer/

CMO Council 2012. http://www.cmocouncil.org/press-detail.php?id=2943

About our research

Conclusion The rapidly evolving world of marketing poses new and dynamic challenges for agencies. Tasked with partnering with CMOs and their marketing teams globally, agencies have an opportunity to be a trusted partner managing an ever-increasing number of marketing channels, and rapidly changing consumer demands. Yet what we found in our research was that many CMOs remain dissatisfied by their partners. Despite multiple attempts, more hard work remains for agencies to build the right team and assets to deliver sophisticated global accounts that balance local articulation with global consistency. For more research on how CMOs and organizations are changing the way they think about global marketing, be sure to see the other articles in SapientNitro’s Global Marketing Series: “CMOs Reveal Obstacles to Successful Global Marketing” and “The New Global Marketing Mindset.” The first is focused on identifying the obstacles, and understanding the implications of new challenges of globalization and the rise of disruptive technology. The second posits a new “Global Marketing Mindset” of future CMOs — one more comfortable with technology, consumer insight, analytics, and multi-disciplinary strategy teams. While the five areas covered in this paper demonstrate major problems for both marketers and agencies, they also represent an opportunity for forward-thinking agencies to set themselves apart from the pack — for the ultimate benefit of agencies and marketers alike.

Building on our team’s three decades of multi-channel marketing experience, SapientNitro conducted a series of 20+ detailed interviews with senior marketers within and outside of SapientNitro, and followed it up with a far-reaching survey to 114 senior global marketers and global CMOs. We also reviewed existing literature related to this topic. The majority of the research was conducted in Q2 2012. We have captured this research in three articles — the first focused on new global marketing challenges, and second on key elements of the global marketing mindset, and the third on five ways agencies are struggling with global brands today.

About THE AUTHORS FREDDIE LAKER – is VP of Global Marketing Strategy and has extensive experience working across a broad range of global clients. He actively speaks at leading conferences around the world on topics ranging from global marketing trends to emerging disruptive technologies. HILDING ANDERSON is a Sr. Manager of Research + Insights, and focuses on digital strategy and the emerging digital consumer for SapientNitro. He is also the editor for Insights 2013, Sapient’s annual digital trends report.