Tuesday, September 29, 2009

What do CFOs have that CMOs don’t?

By Scott Davis, Senior Partner (pictured) and Francisco Pinedo, Senior Associate at Prophet.

We have to admit: as marketers we can be good at many things; but marketing ourselves is not one of them. Time and time again in the race to occupy the CEO seat, CFOs win.
The current financial crisis provides another proof point, as many companies are following the CFO’s advice instead of focusing on the needs, preferences, and behavioral patterns of their customers.
They are cutting costs (including marketing budgets) without considering the potential long-term consequences on their brand.
Thus, while CFOs are increasingly becoming the CEO’s right hand, we are watching the CMOs struggle to get a seat at the table.

Why is this happening?  How can we turn it around?  The answer is simple – CFOs have a “P&L mindset.” And marketers need to get it too.

Having a Profit and Loss (P&L)mindset means having a deep understanding of and/or hands-on experience with what it takes to run a business line and deliver the numbers. It’s critical for marketers to develop or sharpen if they expect to advance from being order takers or sales supporters to enterprise-wide, visionary leaders.

By developing a P&L mindset, CMOs can communicate with the CEO in his or her own language, leaving aside -at least momentarily- concepts such as “brand awareness” or “intent to purchase.” Instead, they use terms like “EBITDA” or “Economic Value Added”; terms that come naturally to the CFO.

Thus, CMOs are empowered to act upon their knowledge of the customer and drive growth through the launch of new products, services, programs, and pricing strategies.

They can engage in one-on-one discussions with the CFO, contrasting the resources that they need with the expected increase in their gross margin, and explaining (with numbers, of course) that these are not expenses but rather attractive investments.

As marketers, how can we develop a P&L mindset?
First, we need a complete understanding of the business we’re in and how we make money. As obvious as this may sound, many marketers don’t understand, for example, how it is possible that a very profitable line of products can start generating losses by slightly modifying the way their company assigns fixed costs.

How are we supposed to enter into discussions with a CFO if we don’t understand where our operating profit comes from?
We need to master our P&Ls and decode the way our accounts are affected by decisions that are made inside and outside the Marketing department. We will know we have conquered this stage when we start being consulted or at least informed before any changes that affect our P&L are applied.

Next, we need to change the way we communicate to reflect our P&L mastery and elevate the dialogue by taking it to a more strategic and integrated level. To do this, we will have to stop talking about the need to increase the marketing budget, and replace it with a discussion on how to achieve common business objectives through a customer lens.

This allows us to increase interactions with other functional areas like Finance, Logistics, or Sales and create internal partnerships and alliances, while extending our credibility within the organization. As soon as we are able to show top management small wins in the P&L as a result of these increased interactions, we will have overcome this second stage.

Finally, it is vital for us to understand that we will not be able to get here alone. If we want our marketing teams to develop a P&L mindset, we need to align performance evaluations and rewards systems with the company’s key objectives.

A brand manager may understand and even manage according to a P&L mindset, but if he or she is ultimately evaluated and rewarded according to market share growth, he or she isn’t incented to develop and execute strategies focused on what the organization really needs.

Furthermore, in proposing this organizational change, we will finally get the CEOs attention, who will understand that we are aligned with her objectives and will start to listen more closely.

Both CMOs and CFOs have to play a role in our organizations’ strategic growth discussions. When marketers are left behind, the company underestimates the power of our brands, the value of our markets, and the value of our greatest asset – our customers.

Making important decisions without these considerations can be dangerous; especially considering the effects could last well beyond this crisis. We can avoid this, but in most cases, we will have to make the first step. Let’s place the marketing function were it really belongs – at the top, helping lead the C-suite discussion.

Desperate Spokeswives: A New Marriage With Ads

Sprint Teams With Producers to Integrate Campaign With Hit Show

NEW YORK (AdAge.com) -- Viewers of Sunday's launch of the new season of "Desperate Housewives" may have noticed a little something extra during the proceedings. As the show broke away for a set of ads, viewers saw a brief sign announcing a segment titled "Another Desperate Housewife," sponsored by Sprint.

During the short, which was crafted by "Desperate" staffers, romantic tension erupts among a married couple, with Sprint's Palm Pre playing a central role in the proceedings. In the next seven weeks, viewers will see seven more vignettes featuring the couple, who find that Sprint products help them learn more about infidelity, betrayal and justice than they ever might have imagined. A few weeks down the road, the two characters should show up in subtle fashion in the actual show, "Desperate Housewives."

It used to be easy to tell the difference between a TV show and a TV commercial. One entertained, one promoted. One had high drama or a laugh track, and the other featured shots of hamburgers or sneakers. As the TV networks launch shows for the 2009-2010 season, however, they are working feverishly to make the ads look just like the shows upon which they intrude.

"You want to be able to relate to viewers within the property they know and love and that they have a passion for," said Stephanie Kelly, Sprint's entertainment media manager. The telecommunications company has also embarked on a similar venture with NBC. Last week, the first episode of "Heroes" contained a commercial-break vignette featuring a new character from the superhero drama.

In Japan, characters from favorite programs have long cropped up in the ad breaks. Now in the U.S., TV networks are collaborating with marketers to concoct commercials that incorporate elements of the programs so they don't feel the entertainment is stopping so the selling and hyping can begin.
Keeping eyeballs
"More and more, the critical tipping point for these integration kinds of deals is being able to exploit the content in ways that make sense," said Geri Wang, senior VP-prime-time sales, ABC Television Network.

TV networks are trying "to look at the entire time you have an audience watching. They have some sort of relationship with your network," said Alison Tarrant, senior VP-integrated sales and marketing at the CW network. "You try to make it as entertaining and as meaningful as possible so they don't leave the commercials." 
During the debut of "Gossip Girl" this season, the CW ran an ad that talked about "evil" characters not only in its own "90210" but also the villain in the new 20th Century Fox teen-horror movie "Jennifer's Body."

Sprint's new "Desperate Housewives" vignettes incorporate a setting and narration that are familiar elements of the show. This sort of program-specific advertising has been on the rise in recent years -- NBC has pioneered use of the technique in everything from "Last Comic Standing" to "30 Rock" to "Heroes" -- but ABC's foray seems to be a sign that this sort of customization is becoming de rigueur when it comes to TV advertising. "This is something [ABC executives] have not done before, in terms of getting an actual writer and creator of one of their hit shows to be intimately involved in the product of these shorts," said Denise Ocasio, a managing director at WPP Group's MindShare who helped craft the "Housewives" deal and oversees the agency's Sprint business.

By weaving program elements into ad breaks, networks hope viewers will be less eager to channel surf or fast-forward, thus increasing commercial ratings. Because the ads are tied closely to a particular entertainment property, they demand the forging of closer relationships between network and advertiser, and result in commercials that really can't air anywhere else other than the show for which they were designed.

But these efforts require a significant increase in effort. As Sprint's Ms. Kelly describes it, the process of creating the "Housewives" shorts required much back-and-forth between ABC and the telecommunications company. Mr. Cherry and his production team "were responsible partners. They ran scripts by us and we had a representative on site as [the shorts] were being shot. We were able to review them afterwards," Ms. Kelly said.
Many issues
Many logistical issues can also surface, said Lisa Herdman, VP-director of national programming at independent agency RPA, which helped devise promotional vignettes for the Honda Fit that aired during "30 Rock" and featured Judah Friedlander, who plays a character on the show. "There are often talent issues, production issues, production payment," she said.

Speaking during a recent conference during Advertising Week, NBC Universal president-sales and marketing Mike Pilot suggested that all TV networks would begin making use of the show-specific technique, as the efforts can foster deeper relationships between an individual program and an advertiser, as "Heroes" has with both Nissan and Sprint.

"I don't see them going away," he said, though he also suggested networks and advertisers may do fewer of them overall, making the ones that do get done more "elegant," or even more seamless and alluring.

Starbucks Marketing Push for Via Begins With Taste Tests

Instant-Coffee Product Also Gets Unorthodox Retail Distribution Through REI, Office Depot, Hotel Chains

CHICAGO (AdAge.com) -- Starbucks launches its first major advertising and marketing campaign Tuesday for Via, the instant-coffee product it spent 20 years developing. The marketer is tapping traditional and social media, and asking consumers if they can tell the difference between the instant variety and the brewed coffee that made it a household name.

The chain is expecting between 8 million and 10 million consumers to visit its 7,500 company-run cafes in the U.S. and Canada to participate in a taste test that runs Friday through Monday. Participants will receive a "thank you" card good for a free coffee on their next visit, and $1 off their purchase of Via at any Starbucks.
Part of the idea for the taste test, said Terry Davenport, Starbucks senior VP-marketing, came from the Chicago market, where Starbucks did its only advertised test of Via. While the TV ads led to a high level of awareness, consumers weren't motivated to visit stores -- so the brand created an event in hopes of spurring its faithful into action.

"Instead of selling something at them, we ask them to participate with us," he said. In so doing, "we're using the best weapon in our tool kit, one that on one else has, our store-level partners." Starbucks is sending its 4 million Facebook friends invitations to participate, with the anticipation that they will invite their friends. "It has a multiplier effect," Mr. Davenport said.

A print ad from the new campaign.TV support begins Tuesday and will last through Monday, with heavy rotation in the morning. The 30-second spot builds on the chain's ads on "Saturday Night Live" last weekend, with disparate groups of people unable to tell the difference between the two types of coffee. Starbucks is also attempting "roadblocks" in major newspapers and has approached morning deejay teams in major markets to integrate a Via taste test.

The chain has foreshadowed this type of campaign since Via launched in test markets this March. Two of three Ad Age taste-testers at the time, inspired by Starbucks' bold words, tried but could not tell the difference.

"I've been fooling people for almost a year now, at home, at the office. I make coffee for my wife almost every day," Starbucks CEO Howard Schultz said in a call with reporters. "I tell people this is the instant version of Starbucks brewed coffee and they're shocked."
Starbucks' agencies are BBDO for creative, PHD for media and Edelman for the company's outside PR.
Creating more 'usage occasions'
With this launch, Starbucks is expanding distribution of Via from test markets Chicago, Seattle and London to stores throughout the U.S. and Canada. In addition to its own cafes, Starbucks Via will now be sold in REI, Office Depot, Compass, United Airlines, Barnes & Noble cafes, and Marriott and Omni Hotels. Via will break in to mass grocery in 2010.

Mr. Schultz said that the chain is looking to create "additional usage occasions" for Starbucks coffee. The idea is that heavy coffee drinkers may have a cup of Starbucks on the way to work and a mug of swill once they get there. Starbucks sees additional opportunities with travelers and campers. Mr. Schultz initially defined instant coffee as a $17 billion market, but has expanded that estimation to $21 billion, based on updated international sales figures. Instant coffee is much more popular outside the U.S., making up about 40% of worldwide consumption.

While such a retail strategy seems unorthodox, it has worked for companies such as Red Box video, which rents DVDs outside supermarkets. Cranium, the popular board-game, grew its business by scoring distribution at Starbucks stores. Red Bull catapulted to prominence in part by its popularity as a mixer with vodka.
"All of those outlets make total sense," said Lynn Dornblaser, director-consumer-package-goods insight at Mintel International. "But that's not what a major market position should be, because it's only going to be a tiny, tiny percentage of consumers."

Starbucks acknowledged that another reason for holding off on mass grocery is ensuring that Via will be merchandised with other Starbucks products, and away from Nescafe. The Nestle product has mounted offensives in Seattle and Chicago, describing Via as a product that costs 400% more, or about $1 a packet.