advertising and media spending trends

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The Auditor’s Role In Media & Advertising Stewardship R&C Internal Audit Roundtable April 23, 2014

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This presentation highlights the risks and challenges around advertising and media expenditures and how internal audit can add value to their organizations within this area. Presented at the Creating value and trust: Navigating risk and meeting customer expectations, PwC's Internal Audit Ethics and Compliance Retail and Consumer Roundtable for internal audit and ethics and compliance executives, April 2014. For more information, visit: http://pwc.to/1rbVnlY

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Page 1: Advertising and media spending trends

The Auditor’s Role In Media & Advertising Stewardship R&C Internal Audit Roundtable

April 23, 2014

Page 2: Advertising and media spending trends

PwC

Financial Stewardship Audit Determine accuracy and timeliness of payments and expenses between advertiser and agency. Identifying opportunities to improve process.

1

2

3

4

5 Contract Assessment Comparing agency contracts to PwC’s leading practice checklist including assessment of any performance related incentive schemes.

Agency Compensation Assessment Determine accuracy of agency compensation, including any bonus/malus. Review staffing allocations and changes over time.

Creative Production Audit Determine accuracy and timeliness of payments and expenses. Identifying opportunities to improve process.

Media Performance Assessment Validate delivery and determine compliance to buying guidelines. Benchmark performance relative to fair share and competition.

Agency Compensation

Assessment

Media Performance Assessment

Financial Stewardship

Audit

Creative Production

Financial Audit

Media & Advertising Assurance

PwC’s Media and Advertising Assurance Services

2

April 2014

Page 3: Advertising and media spending trends

PwC

Media and advertising assurance services solutions…

• Drive process improvements and leading practices

• Identify cost savings opportunities

• Evaluate effectiveness and efficiency of media and advertising spend

• Establish framework for efficiency throughout the media and advertising processes

3

April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Strategic solutions Operational solutions Compliance solutions

• Customer/client development and

relationship management

• Marketing planning

• Media planning/process development

• Marketing ROI/effectiveness analysis

• Marketing mix analysis

• Business process assessments

• Comparables analysis and

implications assessment including

competitor analysis

• Media spend management analysis:

- Media cost

- Media quality

- Media data/reporting

- Media mix/analytics

• Organizational design assessment

• Procurement/sourcing strategies and

implementation assessments

• Advertiser/agency IT security controls

assessment/privacy

• Third party data and controls studies

• Internal controls assessment

• Marketing technology automation

• Contract compliance – financial

stewardship across multiple categories,

including but not limited to:

- Media planning and buying

- Production cost

- Agency compensation

- Direct marketing

- Internet and new media

- Events and sponsorships

- Social media

• Media audit

- Buying performance (e.g.,

audience delivery, etc.)

- Traditional and digital media

(search, impressions/clicks, etc.)

Page 4: Advertising and media spending trends

PwC

Today’s discussion

Your Agency Universe

R&C Industry Media Spend

Key Trends

Media & Advertising Spend- a hot topic for R&C Internal Audit

Panel Discussion

4

April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Page 5: Advertising and media spending trends

PwC

Your Agency Universe

5

April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Page 6: Advertising and media spending trends

PwC

The agency universe

• Advertising

- General Market

- Multi-Cultural Markets

• Creative Production

• Media Planning/Buying

- Traditional

- Internet and new media (digital)

- Social media

• Direct Marketing

• Promotions/Events Marketing

• Sports Marketing

• Public Relations

• Brand/Marketing Consulting

• Customer Relationship Management (CRM)

6

April 2014

R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Page 7: Advertising and media spending trends

PwC

Typical steps of the end to end media process

R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors 7

April 2014

Budget

Pla

n

Buy

Pay

1. Initiate annual preliminary allocation

2. Determine media planning rates

3. Develop communication strategy

4. Develop strategic media plan

5. Approve annual budget

6. Develop detailed media buy

7. Execute purchases

10. Resolve discrepancies

8. Receive invoices

9. Process invoices

11. Perform initial media reconciliation

12. Analyze media performance

13. Conduct back end audit

14. Reallocate resources

Shared

Agency Led

Advertiser Led

Page 8: Advertising and media spending trends

PwC

Retail & Consumer Industry Media Spend

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April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Page 9: Advertising and media spending trends

PwC

Retail & Consumer Industry Media Spend*

• Significant spend

- Retail & Consumer industry measured media spend was

over $35 Billion in 2013

- Does not include below-the-line marketing spend

◦ Creative production

◦ Direct marketing

◦ Public relations

◦ Agency fees

• Shift from traditional media to internet & new media advertising

9

April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Media Type 2013 Total $ (in 000’s) * 2013%

Magazines 7,270,000 20%

Cable TV 6,330,000 18%

Network TV 5,240,000 15%

Newspapers 3,910,000 11%

Spot TV 2,700,000 8%

Internet Display 2,230,000 6%

Internet Search 2,090,000 6%

Syndication 1,390,000 4%

SLN TV 1,110,000 3%

Local Radio Sum 1,040,000 3%

Outdoor 730,000 2%

National Spot Radio 430,000 1%

National Newspapers 420,000 1%

Network Radio 380,000 1%

Sunday Magazines 270,000 1%

B-to-B 190,000 1%

Local Magazines 80,000 0%

Hispanic Newspapers 80,000 0%

Hispanic Magazines 30,000 0%

Grand Total 35,920,000 100%

*R&C industry media spend was pulled using industries that fall within the retail & consumer spectrum including : retail, department stores, food & beverages, liquor, beer & wine, foods, apparel & accessories, cosmetics & beauty aids, footwear, jewelry & watches, games & toys, and personal hygiene & health. Source: Kantar

Page 10: Advertising and media spending trends

PwC

Media & Advertising Spend-a hot topic for R&C Internal Audit

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April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Page 11: Advertising and media spending trends

PwC

Accountability , Complexity and Transparency

• Move toward marketing accountability: - Cost and ROI

• Increase in media complexity: - Outlets and intermediaries

• Big agency consolidation:

- Limited choice, sister companies

• Rapidly evolving practices and technologies: - Data visibility and management

• Questions around financial transparency: - Discounts, rebates

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April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Page 12: Advertising and media spending trends

PwC

Benefits • Increased transparency

• Improved agency relationships

• Maintain competitiveness

• Financial due diligence

• Cost savings opportunities

• Process improvements

• Verify “proof of performance” and delivery

• Compliance and contract assessments

Areas Typically Reviewed • General billing and compensation

• Media services and agreements

• Creative services and agreements

• General agency operations and workflow

• Media placement schedules and post-buy reports

• Media buying guidelines

Agency Reviews Help Gain Control over Marketing Investment

12

April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Typical Questions Answered • Did the advertiser receive what they paid for?

• Did advertisements actually run as planned and bought?

• Has audience delivery been accurately calculated by the media buyer and reported to the advertiser?

• Does advertiser’s scope of work and agreed-upon labor hours for Brand X or Project Y prove to agency labor reporting records?

• Are fee reconciliations being performed?

• Were production out-of-pocket costs billed in accordance with contract guidelines?

Page 13: Advertising and media spending trends

PwC

Panel Discussion

13

April 2014 R&C Internal Audit Roundtable: Media and Advertising Risks for Internal Auditors

Moderator:

Jonathan Spira- PwC, Director, Media & Advertising Assurance Services

Panel Members:

Susan Claremont- Weight Watchers, Vice President, Internal Audit

Lynn Laskiewicz- Walgreens, Director, Strategic Sourcing-Marketing

Jackie Weiner- PwC, Director, Media & Advertising Assurance Services

Page 14: Advertising and media spending trends

Thank you

Jonathan Spira Director Media & Advertising Assurance Services PwC 300 Madison Avenue New York, NY 10017 646-471-8016 [email protected]

Jacqueline Weiner Director Media & Advertising Assurance Services PwC 300 Madison Avenue New York, NY 10017 646-471-4327 [email protected]

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