How can firms quantify creative work to determine the best way to compensate advertising agencies? Several models have emerged.
You only have to consider the recent impact of Facebook and Twitter to understand the media revolution that has roared since the advent of cable television in the 1970s. As companies seek new ways to reach customers using ever-proliferating, constantly evolving media channels, customized advertising messages have become increasingly vital to success, with creative advertising agencies remaining as the major players in this process.
However, the dramatic change in the media landscape has done little to change the way companies compensate ad agencies—few companies want to rock the boat of an established relationship. But, to maximize their advertising budgets and achieve their business goals, leading companies are reevaluating how they compensate their ad agencies. By selecting the right model to manage their agencies' compensation properly, firms can dramatically improve their top and bottom lines.Close
Multi-product companies often need to break their business into component parts and prioritize profit opportunities within a market context.
For businesses seeking to improve profits, the low-hanging fruit is obvious. Fixes, such as reducing manufacturing costs, improving marketing effectiveness, or optimizing a supply chain are typically among the first to be implemented. Thus, a company that has already made such improvements faces a challenge. Does it, like the fox, conclude that anything else is out of reach and therefore not worthwhile? In such challenging economic times, a company can't afford to draw such conclusions. Does it then run for a ladder and raise it to a spot where, at first glance, more fruit appears to be within reach? Because of past improvement activities that seemed promising but failed to produce bottom-line results, many companies are wisely hesitant to do so. So is there a way to take a more holistic approach—to use the ladder to learn more about the tree, use scaffolding to align efforts to achieve productive results, and even prune the tree's branches to improve the likelihood of a long-term sustainable harvest?
Yes, there is a way. We call our approach Expanding the Profit Frontier. We've used it to help companies improve overall earnings 300 to 500 basis points before interest and taxes. For example, one company saw a 1 to 2 percent revenue lift when it aligned its pricing and discount strategies with a cost-to-serve model for each customer segment. Another company, initially planning to implement a single fixed-cost reduction strategy, instead combined this one initiative with another designed to streamline the product portfolio, and achieved six times the benefits with this more holistic approach.
Success for these companies was achieved using proven tools to address all of their profit frontiers (cost reductions, price increases, portfolio adjustments and other actions)—and doing so simultaneously as part of a continual business process to ensure maximum profitability both today and in the future.
Business case analyses give weapons program leaders a deeper look at sustainment systems and help them make the right strategic decisions.
Business case analyses (BCAs) for U.S. Department of Defense weapons programs should serve as more than a requirement—they should also be educational endeavors. BCAs provide the opportunity to step back from the daily grind and think strategically.
During typical business case analyses, staff members grind through the required elements, often gaining only limited insights about possible alternative means for completing their mission. A forward-looking approach—rooted in hard data rather than intuition and past practices—provides a deeper look at how the sustainment business model is working and the potential alternatives available.Close
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