Efficiency & Effectiveness: The Yin & Yang of Marketing, by BPG Max’s Tej Desai

By Tej Desai, strategy director, BPG Max.

Recently, Reed Hastings shared a story about how Netflix had surpassed Blockbuster. A company that had refused to buy Netflix for US$50mn had declared bankruptcy in just a decade. When he was asked for an explanation for this triumph despite Blockbuster’s larger than life brand, power, resources and vision, he responded:

“…we had one thing that Blockbuster did not: a culture that valued people over process, emphasized innovation over efficiency, and had very few controls. Our culture, which focused on achieving top performance with talent density and leading employees with context, not control, has allowed us to continually grow and change as the world, and our members’ needs.”

This quote got me thinking about our industry’s ludicrous obsession with ‘efficiency’ over ‘effectiveness’. There is a strong tendency to over-estimate the importance of efficiency whilst undermining the value of effectiveness. And this may not change until Marketing is no longer seen as an expense rather a necessary investment to grow the business. And this difference in perspective unfortunately has only deepened further since the onset of the pandemic.

Undoubtedly, it would be naive and precarious to undermine the significance of achieving efficiency. For instance, in an FMCG company, it would be of paramount importance to ensure the products are manufactured, assembled, shipped and distributed in the most efficient manner. Consequently, capacity is optimized, supply chain costs are controlled and wastage is minimized.

Similarly for our industry, efficiency is crucial in media buying with the consolidation of ad buys and hard negotiations. However, it would be fatal for any business to use it as the only criteria while selecting a communications partner.

A company might end up on-boarding a partner who brazenly commits to deliver marketing communication services at the lowest possible cost but possibly lacks sufficient credentials to deliver on the business goals. In effect, mutating the budgets allocated for ‘marketing investments’ into ‘marketing cost’. A wasted expense delivering no desired output.

Thus, this approach of expecting parity in pricing for agency fees feels flawed and unreasonable when applied to agencies providing services like Media Planning or Creative Development, since it will always be a function of the quality and experience of talent it brings to the table. It is almost like expecting Apple to revisit their pricing of an iPhone to match a Nokia.

We need to be cognizant that the role of marketing communications is to effect change in consumer perception and thereafter consumer behaviour, to drive business growth. This can be delivered only with clever strategic thinking supported by persuasive, creative inputs crafted to address the problem. So, in the communications industry, the ingredient and material cost are a direct correlation of the quality & experience of the talent and resources they bring to the table. Needless to mention, most agencies will now also need to relook at their structures to be nimble, agile and leaner with hierarchies to be more cost effective.

So, if the objective is to change the perception of our audiences, drive trials, increase sales, grow market share, it is crucial to focus on identifying a partner that not only brings efficiency on marketing investments but also has the ability to drive ‘effectiveness’ for their marketing efforts.

To put this in a more relevant context, it is definitely fair to expect cost efficiencies on media buys, but equally important to gauge agencies on their skill-sets, experience and ability to help deliver the desired business goal. For which the fees will be completely varied and cannot be expected to match that of others.

To sum up, efficiency pertains to the process and is the foundation for survival whereas effectiveness is about the outcome and thus the foundation for success.

As a result, we need to ask ourselves, what are we aiming for by bringing an agency on board – grow the business or merely minimize costs?