When reviewing marketing spend, all too often organisations focus on the broad budgetary issues that they have, want and need to solve, from ‘how can I buy or do this for less?’ to ‘why can’t my agency hit the brief first time every time?’.
To address these types of issues there are a number of steps that can be taken in marketing procurement based on Lean Six Sigma methodology. Six Sigma is a collective name given to a selection of tools and techniques which businesses can use to improve processes and is great way to help reduce marketing spend without the dreaded fee negotiation route.
Lean Six Sigma brings core issues to the fore and then works out what the root cause of the problem is. Originally developed by Motorola over 25 years ago, its development is rooted in direct procurement origins, particularly in manufacturing, focusing on eliminating waste and improving performance and overall customer value using a collaborative team effort. Global brands such as Toyota in particular were key in the adoption of this approach with its Toyota Production System while Amazon, Boeing and General Electric also employ the method.
Applying Lean Six Sigma thinking
Lean Six Sigma differs from traditional process improvement methods as decisions are based on measurement and analysis of activities and results, activities are then improved to get better results. The science of Lean Six Sigma demands that problems are addressed at the input root cause level, eliminating the need for unnecessary further review and inspection - and added costs for rework.
While Lean is proven to work in manufacturing, the marketing industry has not generally adopted the approach, often due to a lack of awareness of the method, or fears that a manufacturing approach would not work in marketing – but we have proven it can and does, it is just that the types of waste identified or defects are different in marketing to manufacturing.
No agency welcomes the phrase “we need to cut marketing spend”, which normally involves assessing and negotiating on fees, undertaking audits and drawing up agency rosters as companies looking for cheaper ways to deliver marketing services without compromising on quality. But this traditional approach is neither sustainable for cutting costs long term, or great for client-agency relationships. Lean Six Sigma is far more sustainable way for Marketing Directors and CMOs to reduce spend.
While marketing ‘wastes’ - such as misaligned briefs, brand assets not being available to the agency at the right time, or a large number of rework loops - are often there and can cause tension, cost and friction within the system, they are probably not deliberate and might not be anyone’s particular fault. In order to change the behaviour and stop the waste within Lean Six Sigma you need to learn to understand why it is happening in the first place.
A five step approach
Despite its name, Lean Six Sigma's rigorous approach actually comprises of five steps, known as DMAIC (de may' ik):
1. Define the problem (defect) and the process in a precise way (whether you are examining the entire marketing process or just one part of it, such as timescales or deliverables.
2. Measure the activities and the ensuing results.
3. Analyse data (from step 2) for variations in the results and the activities that produced them, looking for cause-and-effect relationships.
4. Improve the process by devising a theory of step change to improve results, then implement the change to test the theory.
5. Control the process to achieve future successes (if the theory proves correct) by making the change permanent.
By fully understanding the root cause of the problems marketing Six Sigma tools and techniques will help any organisation and agency work together with enhanced efficiency and productivity. Agencies can be treated fairly, while costs are reduced without losing out on fees through re-designing processes and identifying waste in how both organisations work. For example, in marketing this could be when the client cannot understand why the agency does not match the brief first time. The reasons for this issue can be multiple and varied but are usually focused on:
1. A bad briefing by the client.
2. Too short, or an unrealistic timeline.
3. Constant changes to the brief.
4. Inconsistent feedback from stakeholders.
As with manufacturing and retail businesses, we have found that by applying Six Sigma you can achieve fantastic savings across marketing spend, including an initial $34m year on year saving for one client alone where we focused on a number of core areas including network structure, implementation process and asset usage.
By understanding the true root causes of problems and acting on them at source, marketers can make a big difference, deliver better results and achieve a win-win for all, with shorter, more efficient processes and achieving more by cutting waste. From a marketing procurement perspective, it’s not just about cost savings, but also identifying and solving the underlying problem to make the system easier to work with - cost savings come naturally through efficiencies in the end.
By Milan Panchmatia, managing partner at 4C Associates
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