Improper billing has been a serious problem in the advertising industry since its inception, but several highly publicized cases in recent years have hung heavy over the industry. Ogilvy & Mather's padded charges to the Office of National Drug Control Policy (ONDCP), a U.S. government agency, is the latest overbilling story to hit the front pages. In the wake of the billing revelations, an ONDCP official told CNN, "In the ad industry, people fly first class. They can't do that in the government." As a result, a recent ADWEEK column on the subject lamented, "given the widely held perception of ad agencies as indulged pockets of corporate America, populated by free-spending, high-living executives, many clients tend to suspect the worst when questions arise." Add to this reputation for suspect billing practices the industry's slow reaction to make ROI measurement tools a standard account service and the stricter financial scrutiny from stockholders and others in the wake of corporate scandals, and you've got a lot of nervous clients.

So what does corporate America do to remedy the situation? They call in the procurement department. Procurement people, typically charged with negotiating the best price and terms with vendors, have been brought to the table to enforce the same standards and practices it applies to dealings with all other suppliers—from paper products to hiring firms to janitorial services. "Client procurement executives and their Excel spreadsheets took up residence on Madison Avenue in 2003, and there's no sign they're leaving anytime soon," quipped ADWEEK recently. Renatta McCann, CEO of Starcom North America and chair of the American Association of Advertising Agencies' (4A's) Media Policy Committee warned her colleagues at the start of this year's 4A's annual conference that agencies, particularly media firms, face the growing involvement of procurement officers in the client-agency relationship. In addition to advertising and media, we've also seen procurement's growing jurisdiction extending to marketing consulting and research.

In theory, the involvement of the procurement department as part—and we emphasize the word "part"—of the selection of a marketing services providers is a good thing. Explained one media agency executive, "Involving procurement ensures clarity around business relationships from the start of the partnership." The CEO of DDB Australia added:

"When the procurement department has been involved in the pitch process, at least to the extent that they understand what the organization is seeking in terms of deliverables, I've found they can be a useful voice of impartiality actually ensuring that the resources that are being offered up by the agency are adequate to ensure client expectations are met. At least as professionals in this arena they have the expertise to conduct a rational negotiation. There is nothing worse than negotiating with a client when sheer dogma is driving their position."

Clients can say they have done their due diligence and comfortably report to management and other stakeholders where budget dollars are going and what they will get in return. So goes the theory.

The problem is in practice, procurement—typically at senior management's direction—is driving the decision-making process while marketing executives are only tangentially involved. In "screw the supplier" mode, they force terms driven by a dollar figure without consideration of the quality of the service an agency, consultant, or researcher offers or the realties of an assignment. In many cases, they're not knowledgeable enough about marketing to even evaluate quality. Subsequently, the best, highest quality providers walk and the lower value, low cost, and often desperate suppliers remain and the client company is ill-served. Deutsch Advertising, for instance, ended its relationship with a major client because of procurement-driven contract specifications. Production firms refused to work with Ford because procurement-driven terms made it impossible to make money (Ford later compromised). We've also walked away from potential assignments when procurement offered terms unprofitable to us.

In at least one instance with our firm, procurement went with another company that would abide by procurement's terms, but marketing eventually threw out the results of the project—they were unusable and essentially worthless. We're sure this wasn't the only time marketing has had to throw out work delivered by the low cost procurement approved provider.

Marketing executives MUST be the ultimate decision-makers when it comes to screening and selecting agency and consulting partners, not procurement departments. Marketing is the business discipline charged with getting and keeping customers, so marketing services providers could and should be among corporate marketers' most important business relationships! Chosen wisely, providers are a strategic asset that can propel a brand and company to greatness; chosen lazily by penny-pinching procurement people who don't have intimate knowledge of the services offered and the nuances that separate great companies from mediocre ones, providers become commodities which add little value to corporate thinking.

Show an eight-year-old a fresh deck of cards, pointing out the ace of diamonds (a metaphor for an exceptional campaign) one that has approximately a 2 percent probability of being selected at random. Replace the ace, shuffle the deck, and ask the kid to bet $1 against your $5. If she draws the ace, she gets your $5; if not, you keep her $1. Make the game less risky. Give her two picks. Most eight-year-olds refuse the bet. They know that the odds against finding the ace are pretty high. Even if they don't know they are 52 to 1 for the first card and 51 to 1 for the second.

Yet brand managers take this bet all the time. They accept one or two campaigns from their agency (like draws from the deck of cards), betting the budget that they've found a winner. They do, however, want assurances that the proposed advertising will be effective at generating awareness, persuasion, and other measures so many will undertake a copy test. The test generates scores for the ad on different measures which are usually compared to copy testing norms to see how well the ad performed against other campaigns. Most companies will move ahead with a campaign if the ad has scores considered "above average" based on the norms.

But here's why using copy testing norms the way most companies do can be a dangerous move. The normative database contains the performance of every campaign tested in the category. There's a lot of poor and mediocre advertising that went through the test, and, even though most of these ads were never run, the scores of these bad ads are in the database. Given that poor and mediocre advertising is more the rule than the exception, an above average performance compared to copy testing norms isn't saying a whole lot. In fact, those ads which make it past the copy test (i.e., are declared to be "winners") and are selected to run in the real world, are, generally speaking, ineffective. Their ROI hovers around 0%. What does this say about the potential ROI of ads in the copy testing database to begin with?

Copy testing is an extremely valuable tool, but "above average" ads that perform marginally better than a database of disasters are not going to cut it in the real world. Instead, companies should use copy testing to find extraordinary advertising, 2- and 3-sigma better than average in order to see outstanding ROI.

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Three years ago, we opened the virtual doors of the Counterintuitive Marketing Hall of Fame and Shame as a tribute to the marketing blockbusters and disasters of the recent past and present. Once again, we've examined nominations from our colleagues and readers and studied industry reports and the business press looking for the best examples of transformational and truly terrible marketing to add to the ranks of members once again.

This year's Famers have achieved great marketing success adhering to marketing fundamentals such as targeting and positioning and obsessively implementing programs. Shamers, on the other hand, made strange marketing decisions or bumbled execution so miserably, they undercut their brands.

So without further ado, we proudly present the 2004 inductees:

Thanks to everyone who participated in this year's nomination process. For more on our inductees, please visit http://www.counterintuitivemarketing.com/hall.html, and check out our Hall of Famer and Shamer of the month picks at: http://www.counterintuitivemarketing.com/hallofthemonth.html

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

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We're always intrigued by books about leading brands—we love hearing all the mythology and folklore that surrounds powerhouse brands—so when we saw The Real Thing we immediately picked it up. We weren't disappointed by this account of the Coca-Cola Company, which begins with the beverage's invention in the post-U.S. Civil War period and continues through modern times. While certainly not the definitive book on the company, it's an interesting read and we especially enjoyed the account of the New Coke debacle and the state of the business under different CEOs.

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If you only attend one marketing conference this year, this should be the one. On May 10-12, at the Westin River North, Chicago, Illinois, the American Marketing Association will present Transformational Marketing: Straight Talk from the Great Minds in Marketing Today, featuring a powerful line-up of speakers talking about cutting-edge concepts including customer equity and marketing ROI measurement.

For a PDF of the conference brochure, click here.

To register, visit www.marketingpower.com/strategy

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