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In what must be one of the most unusual CMO presentations I've had the pleasure of listening to, Matthew Jauchius, EVP & CMO, Nationwide Insurance, provided insights as to how he has used marketing efficiency to drive the effectiveness of their advertising budget.
With a background as a CPA, and having most recently worked at McKinsey's, Matthew put forward a compelling operational argument that looking to eliminate waste, in what he termed a "Seek and Destroy" mission, has had a huge impact on getting the most out of his $400 million budget.
Elimate waste in agency management
In looking to eliminate waste, as is been demonstrated by leading automotive companies such as Toyota, a wide range of different questions are asked (which he did not reveal!), and these not only drive down cost and inefficiency, but they can also have a remarkable effect on the top line.
He was also very clear in articulating that looking to remove waste is not a way to drive down agency margins. In fact in his mind, the word "Vendor" is poison to productive agency relationships. It's critical to understand that this is an important relationship with specialists which generates tremendous value for advertiser organizations and agencies. And it is vital that together, the client and the agency must be lean and transparent and act together to grow. The strength of the relationship can be measured using specific metrics related to, for example brand (awareness) and people (engagement).
Six Sigma principles
Nationwide uses Six Sigma principles extensively as a way to look to reduce waste. Some examples Matthew provided were:
- Motion - could you collate all your marketing teams marketing (and even agencies)?
- Overprocessing - how many approvals for change orders and contracts?
- Overproduction - are you producing printing that's not needed?
- Wait time - how long does it take to get approval for work?
Repurpose what you save
One also has to be very careful to ensure that this is not a "finance sweep", and that the best way to avoid this is to repurpose what you save.
For example, if a proposed campaign was going to cost $100,000, and by trimming waste it's possible to do this for a $80,000, then the $20,000 that has been saved can go to an additional campaign. In fact, Matthew pushes it even further because he takes that $20,000 demonstrated savings back to the business and asks them for an additional $5,000 investment.
Some agency management "savings" results worth noting
Nationwide now has 31 people in marketing who are Six Sigma Green Belt certified. He estimates that last year they saved 18,000 hours of wasted time which equates to 11 full-time equivalent people. That also managed to decrease their production costs by around 30%-a huge savings by any measure!
Author: Richard Benyon (Decideware)
