Changing the mindset of cost-cutting to value add – Chris Midgley

Posted: January 27, 2015

by Chris Midgley There are a number of issues visible when we scratch below the surface and scrutinize what it means to “cut costs”. As clients continue to brief agencies to “cut costs and work within smaller budgets” (often coupled with greater demands in terms of return on investment), it’s not necessarily because clients want value for their money, or agencies to explore alternatives, but rather simply interchanging channels and believing this cost-cutting alternative will be as effective as the initial option the agency presented. By making the advertising and media work into simply a “commodity” there is potential to have the effectiveness reduced as well.

As an agency it is vital that we understand and acknowledge that being financially responsible, to both our clients and the agency, is imperative to the long-term success of both businesses. When agencies give in to the request to cut costs, the method most frequently employed is to simply look for cheaper channels. This in itself is not dangerous, as it forces agencies out of their comfort zones to look for creative solutions. The danger, however, comes in if the agency then positions the various channels as a commodity that is simply interchangible with any other channel. It also shows the client that what was initially presented could be achieved at a cheaper rate. Managing the expectations of the client at this point it vital. Does this mean that the same results can still be achieved at this new lower cost? If there is a channel that is right for the clients brand and reaches the prime prospects, then this is most likely the right channel to choose, regardless of cost.

Mike Margolin, the senior VP director of audience strategy at Rubin Postaer and Associates (RPA) notes that “when a client buys the dream of lower costs it gets what it pays for”. The challenge in these tight economic times is that clients have targets that they need to achieve and limited budgets in which to achieve them. What can an agency do?

One way in which agencies can manage these expectations is through measurement. Agencies need to start this process early so as best to know the impact and effectiveness of media and advertising in the past. This will aid in isolating the key media channels and placements that are delivering the highest return on investment. Measurement could be taken a step further and the placements broken down into categories such as increase awareness, sales results, cost of sales, etc. What this will do is help agencies to see what best delivers on the preset objectives, and then use the channels where they have been proven to be the most successful.

Once this has been identified, agencies then need to shift away from “cutting cost” towards showing “value-added”.  By adding value agencies need to be in a position where they know what is best for the client. This value is an integral part of what the agency delivers time and time again, in achieving the preset objectives. One sure way of getting the agency to consistently deliver in terms of value-add is to include an incentive in their fee structure. It’s a win-win where the agency is materially motivated to align and engage with the clients business, and the client factors the cost into sales rather than a budget line item.

Marketing expert David Littlefield, CEO of Littlefield Brand Development, with over 30 years brand development and marketing experience, reinforces this view and argues that brands should not simply cut costs but keep up a strong advertising campaign (perhaps most importantly during a recession) as it is possible for them to grow even stronger when the economy improves. By continuing to effectively advertise, it is possible to boost sales. As many competitors have cut their spend, and advertising they begin to cut their market share. When companies begin to cut back or go for a cheaper alternative in terms of advertising, they become less visible to their target market. However, brands that do not reduce their marketing campaigns remain visible to their target market and can grow market share.

About Blast Brand Catalysts

Established in 2001, Blast Brand Catalysts is a hybrid studio/agency that crosses the specialist disciplines of brand identity development and advertising. Design and advertising have dedicated skillsets and objectives. But working to a singular, longer-term strategic projection at the outset will factor market and media competitiveness as well as category differentiation. There is also an immediate, fluid transition from brand inception to activation.

Blast Brand Catalysts researches, strategises, designs, applies, implements, evolves and invigorates with proven, follow-through calibre. The tightly talented team gets it done, gets it done well, and gets the very next thing done even better.