Advertising Age published an interesting set of findings from The Association of National Advertisers (ANA) about a significant shift to more use of in-house advertising from outside agency usage. The title of the article “Leaner Ad Budgets Mean …” got my attention mostly because of the word Lean, which has become a throw away word similar to what happened to Re-Engineering a while back. (OK quite a while back.)
The two executives from the ANA quoted in the article, Bob Liodice and Bill Duggan, suggested two different root causes for the shift. One, Bob’s, focused on a true lean issue, while the other, Bill’s, focused on a cost-based issue. And in those two focuses we can see that what is happening to “Lean Thinking” is what happened to Re-Engineering before it.
Any activity which does not add value is waste. Some (many) non-value-added activities are mandated by law, but others can be removed using Lean Thinking. Bob Liodice noted, “But is the value equation with the agency still there? Are marketers still finding there is value in working with outside partners?” If the value received is not equal to (or preferably greater than) the cost invested, waste is created … by definition.
Bill Duggan focused on the other side of the equation: reducing ad budgets. The euphemism being a “leaner ad budget.” Leaner does not mean less budget, it means less waste. But, as Bill notes, procurement drives this side of the process. Too often their metric is how much less did you spend this year than last on the same services. While spending less on wasted activity is indeed thinking lean, it is not really Lean Thinking. Lean Thinking is eliminating the wasted activity.
However, because budgets are being cut (which is not lean, it is just a cut), procurement is driving increased in-house ad work. This may cut the size of the outside checks being written, but what about the internal costs? Or worse the cost of poor quality? I am not suggesting in-house agencies are inherently less qualified than are outside agencies, but as the article notes:
“The biggest challenges that in-house agencies face in 2013 are staying on top of key trends (it was cited as a disadvantage 45% of the time in 2013, up from 36% in 2008) and the lack of creative innovation (which increased to 43% from 34%).”
If your goal by investing in advertising related activities is an increased top line driven by acquiring new customers, retaining existing customers, and/or increasing share of wallet/share of customer, then how does cutting the ad budget improve that outcome? Measuring and monitoring results can and should help direct investment, but to simply suggest that cutting the budget is “lean” is to misunderstand Lean Thinking.
But then that’s why we don’t hear about Re-Engineering any more?