Insider Advertising: CMOs need to get smart on price

Hello and welcome to Insider Advertising, a weekly newsletter where I break down the most important news and trends on Madison Avenue and beyond. I'm Lara O'Reilly, Insider's media and advertising editor. If this was forwarded to you, sign up here.

Thanks so much to everyone who offered their feedback on last week's edition. Please do continue to send your comments, tips, and pun suggestions to [email protected].

On with this week's news:

• How the consumer price surge will impact marketing;
• Global ad spend rebounds – though some larger companies' marketing budgets have declined;
• The VIP Slack groups agency execs can't get enough of.

Price, price baby

Summer's here and for many marketers, that typically means it's budgeting season once again.

But this time it's different: US consumer prices rose at their fastest monthly rate since 2008 between May and June this year – and at a higher rate than analysts had forecast.

While lots of companies raise their prices at a regular frequency, businesses this year are also contending with supply chain issues and rising commodity costs that are eating into their margins.

Many marketers and academics consider "Pricing" as the most important of the "4Ps of marketing" (product, price, place, promotion) - or more specifically, the ability to build a brand strong enough to maintain sustainable pricing power.

PepsiCo certainly thinks it has. Consumer-products companies including P&G and Kimberly-Clark also set out intentions earlier this year to raise their prices.

Marketing consultant and former AB InBev CMO Chris Burggraeve tells me the topic of pricing is coming up at every board he speaks with right now: "In unusual times like this, more than ever."

Burggraeve, who recently published a book entitled "Marketing IS NOT a Black Hole," said it's important for marketers to make sure they're in the mix as these conversations happen. It's not just about raising prices either - there can be opportunities to hold or even lower prices strategically and capture market share or volume from competitors.

Marketers without the luxury of having already built a strong brand may get away with raising their prices in the short-term, Burggraeve said. But he added that it's likely they may have to immediately pull back and discount again to counter negative dips in volume and share.

I'm reminded of that often-quoted Warren Buffett adage: It's only when the tide goes out that you see who's been swimming naked.

I get knocked down, but I get up again

Global ad spend is expected to grow by 10% to $634 billion in 2021, according to an upgraded forecast from Dentsu. That would mark a swift recovery from last year, which was the weakest-performing since the global financial crisis.

But, wait a minute! Gartner's latest annual CMO Spend Survey found that marketing budgets as a proportion of companies' revenue have fallen to 6.4%, down from 11% in 2020, as the WSJ's CMO Today reported.

Why the discrepancy between these two datapoints? The suggestion is that much of the surge in ad spending anticipated by Dentsu and other forecasters this year will be driven by smaller, often online-only businesses and not necessarily the larger companies that Gartner surveys.

For those marketers, it's as good a time as ever to get closer to the finance decision makers in their business. As Burggraeve put it to me, marketers need to "get out the comfort zone of storytelling and advertising, and go back to Kotler and the 4Ps," referring to Philip Kotler, the renowned marketing author and professor who has been dubbed "the father of modern marketing."

You can find me in the club

At the end of the working day, the very last thing on my mind is the idea of logging back in to Slack to continue the industry chatter where it left off. (Not offence to my lovely, witty, and talented colleagues, readers, and sources.)

But it turns out a bunch of advertising pros are champing at the bit to join a set of highly exclusive VIP Slack groups.

This fun piece from my colleague Lindsay Rittenhouse details how some of these industry Slack groups have thousands of people years-long waiting lists to get accepted in. Many have a list of rules to follow once you finally get behind the coveted velvet rope.

While some of these Slacks - described by some as digital versions of the Soho House private members' club - were established years ago, the pandemic has added extra urgency to the clamor to join these groups to network and hunt for work opportunities.

I'd like to know whether any private industry groups are also popping up on newer platforms. A Discord for digital buyers? A Mumble for marketers? Let me know if you can sneak me in on the guest list.

The 90-second slot

In this semiregular corner of the newsletter, I'll bring you a rapid-fire, 90-second interview with the industry's most influential executives who are dominating the week's advertising news.

This week I spoke with Mediaocean CEO Bill Wise, hot on the heels of the company's announcement of its intention to acquire adtech company Flashtalking, in a deal worth $500 million, according to The Wall Street Journal.

How did the acquisition talks first come about?

They have been a longstanding partner for us so it kind of came together naturally. We were trying to solve similar things philosophically and it just made sense.

Are you still on the hunt to make more acquisitions of similar sized companies?

We are always on the hunt. This is our 11th acquisition in about five years. We are already in another discussion. There is a massive opportunity to be the leading, independent, and neutral operating system because Big Tech just has so much of the ad dollars that the world needs us to do this.

Adtech dealmaking is off the charts at the moment. How do you think the pace of M&A is going to ebb and flow over the next year?

I think whereas maybe five or six years ago it was advantageous to be a startup, scale matters now. And global presence matters. Marketers want proven companies at scale who can expand globally. So I think the best companies are going to continue to consolidate.

What does that consolidation mean for marketers?

It means marketers have more choices. They don't just have to rely on Google, Facebook, and Amazon for their digital marketing. They are going to be able to have neutral alternatives.

Recommended reads

There are plenty of extracts doing the rounds this week from "An Ugly Truth," a new book from New York Times reporters Sheera Frenkel and Cecilia Kang, which takes readers behind the scenes at drama inside Facebook. While the book doesn't delve too deeply into the nuances of its ads business, it does portray an apparently withering relationship between Mark Zuckerberg and Sheryl Sandberg, and also how Facebook often prioritized its image first, and fixing things later - The New York Times

Speaking of Facebook: Kate Kaye reports that its brand safety audit with the Media Rating Council - an olive branch promised in July 2020 in the wake of an advertiser boycott - is on ice for now - Digiday

The new "Space Jam" is set to be a product placement and brand-collab bonanza - Ad Age

Travel influencers are finding their work is picking up again as the tourism industry returns to spending on marketing - Insider

Goldman Sachs' consumer bank Marcus takes digs at other banks' perks in its biggest ad campaign since launching in 2016 - Insider

See you next week - Lara