CMO interview: GroupM CEO Mark Lollback on marketing, media, transparency and technology
- 29 September, 2016 07:09
There’s no doubt the media industry is going through fundamental change, and agencies are at the pointy end of the stick. The list of challenges is a hefty one: Ad viewability and adblocking, trust erosion around media agency charging practices, changing client relationships thanks to digital and customer data disruption and an adtech explosion, to name a few.
But finding a way out of the chaos is exactly the way GroupM’s CEO, Mark Lollback, likes it.
Having spent many years as a client-side marketing leader, most recently as CMO of McDonalds Australia, where he helped turn around the fast food chain to deliver stronger long-term customer value and sustainable business growth, Lollbank joined GroupM in April, taking over the reins from John Steedman.
Six months in, Lollback caught up with CMO to talk about the shift from client-side CMO to agency CEO, the state of the media landscape, the role technology is playing in GroupM’s transformation and that whole issue of transparency.
A mandate for change
Lollback says what attracted him to the GroupM post was the willingness for fresh, disruptive thinking.
“Coming from a CMO role, I have a unique perspective of not only understanding media, but also what is and isn’t important to marketers and the business side, and what role media should be playing that perhaps it’s not playing,” he says.
Labelling himself the “client CEO”, Lollback groups his priorities into three buckets: Relationships; people and talent; and technology.
“Relationships to me are about not just having a beer with a client in the pub, it’s how close and how much we understand their business, and how passionate we are about it,” he says. “At McDonalds, nobody could become a supplier unless you worked in the restaurant and had been part of that. It’s a great way to get close to the business and demonstrate you genuinely understand it.
“For me, it’s about how our agencies build those really strong, quality relationships that are deep and high value. That’s an area we can improve on.”
Talent is another priority, and Lollback highlights the shortage of resources in the industry. He attributes this to multiple reasons, the first being the breadth of job opportunity in the marketing and advertising sector today.
But he also lays the blame for shortages at agencies themselves. “Rather than trying to find new talent, there is a lot of stealing talent amongst ourselves,” he says. “I want to look at how we change that dynamic as well and make those people feel more valued.”
In addition, Lollback questions whether agencies are hiring the right people for the right jobs as the roles and types of people coming into the workforce changes. An emphasis on analytical and client management skills, for instance, is key.
On the technology front, GroupM is making significant investments into core capabilities that can be utilised across its portfolio of agencies. Lollback points to proprietary media products, including ad serving offering, Plista, and programmatic platform, Xaxis, as examples.
“We have spent $27m building Xaxis to be the premiere programmatic system, and there is a pipeline of $45m to keep building that out,” he says.
GroupM’s data room meanwhile, is expanding to both improve targeting and media efficiency as well as turn data into insights that can be leveraged with clients. Building out external technology alliances is another string in the bow, and the recent relationship with ad verification player, Moat, is one of the ways GroupM is embracing emerging technologies.
Another tech innovation, codenamed Project Compass, will launch later this year. The project aims to provide GroupM with a centralised data spine and tech stack that can take client data, connect it to the agency’s data pools, then use that for segmentation, media targeting and attribution.
“This project will enable CRM to connect with our customer data and marry it, and out of that will be new segments but more importantly, look-a-like profiles which we can use for better targeting,” Lollback says. “We can plug that data into our data spine, mix in third-party data for attribution, then take that and put it through our Xaxis platform, so it’s connected up.”
Such technology disruption is triggering a major change in the way media agencies interact with clients. As a former CMO, Lollback has been on the receiving end of media agency work, and he believes agencies could do a better job of simplifying and educating clients about what’s really going on with technology. It’s why GroupM recently launched its custom video series, Tech Talks video series in August.
“Our whole organisation in the past has been focused on scale; I’m trying to move to smarts,” he says. “All of the conversations I’m having with the team and clients are based around the smarts we have, and how we apply those to your business to get better outcomes.”
Taking a horizontal approach
One way GroupM’s parent company, WPP, is looking to simplify how clients tap into its agencies smarts is by taking a ‘horizontal’ approach. This sees the group providing bespoke solutions to larger clients streamlining a breadth of capability via one client-facing team.
Lollback points to the Global Team Blue group managing WPP’s global relationship with car manufacturer, Ford. The single client-facing team has key communication and media skills but then taps into the diverse set of media, creative and PR capabilities stretching across the WPP group as required.
“As a CMO, one of the most frustrating things as the industry is fragmenting is the number of agencies you have to deal with - it is getting out of hand,” Lollback says. “When we looked at the digital landscape alone for McDonalds, we had 14 different agencies touching our digital assets.
“In this new model, whether you have a PR, digital, social or advertising problem, you go into one small central team of capabilities that specialise in each of those areas. It’s then that team’s job to get the best of WPP. You are helping to simplify things for the client, while still bringing them choice.”
WPP has 45 of these teams running globally with clients and Lollback is keen to bring the model to GroupM. These teams are also culturally closer to the client’s team, something marketers are increasingly asking for.
“They become true partners,” he says. “Plus the client knows that team they’ve helped handpicked are absolutely behind them.”
This approach could help stem rapid churn by keeping staff in strategic roles for longer, Lollback continues. “Strategically, a client services lead is a role you don’t want to be churning. But if there are junior people doing the trading or buying and they do that for 18 months then move on, it’s not as big a deal.
“But that all gets caught up in the noise of churn. We can separate that out and manage those relationships better at the same time.”
Up next: Lollback answers the big questions on ad viewability and transparency
Viewability and transparency
Of course, many other trends are thrusting the media agencies in the spotlight, and not necessarily for the right reasons.
Ad viewability is one, and GroupM is taking a strong stance on addressing the issue. The group partnered with Moat, to track viewability as well as brand safety and ad fraud and is working with publishers including Ninemsn, MCN and Guardian, to ensure ads meet stricter definitions. It’s also kicked off 100 per cent viewability campaign trials with Twitter.
But it’s the issue of transparency and media agency earnings that has really captured the industry’s attention over the past year. Non-transparent kick-backs and rebates, governance and over-charging have ruptured the trust that exists between client and agency, raising questions about the long-term approach needed to agency management and relationships.
What’s created a lot of debate around transparency is that media companies in general have done a very poor job of explaining to clients how they make money
Lollback sees two parts to this equation. One of these is compliance, and he claims GroupM is the most transparent media company in the country, with a full-time compliance team and daily compliance testing practices.
The other is how agencies make money. “What’s created a lot of debate around transparency is that media companies in general have done a very poor job of explaining to clients how they make money,” he says. “We are a media service organisation, and we do have multiple revenue streams, not just client revenue.
“What’s exacerbating that is as fees get smaller, and as cost gets driven down, agencies rightly need to find other products and services to generate an income to pay their bills. From what I have seen inside GroupM, we’re very open here with clients, they can check their contract and we’re clear with them. But also we need to be able to talk to them about other revenue streams we have, which are all legitimate and compliant.
“I know there is some non-compliant money changing hands in the industry, which doesn’t happen here, and that should be washed out.
“When our revenues start declining in one source, we are going to have to create products and services to generate income that are higher margin and interesting. Buying and selling media is one thing we do, but having proprietary media with Plista, which has a revenue stream, is another, and of course we need to invest in tech and analytics.
“We have nothing to hide, I just don’t think agencies have talked about it.”
Lollback agrees things were much cleaner 10 years ago, when clients agreed a fee to pay the media agency, and the agency then took a 10 per cent commission from the media vendor.
“What has happened over time is that the 10 per cent doesn’t exist, or if there is a discount or commission, clients want it to come to them. They’re paying a fee and they expect additional revenue to be passed to them.
“It’s like we’ve created this through bad business terms and negotiation. We’re getting close to a reset – we are going to have to sit down as an industry and with clients to work out the right remuneration model for the industry.”
The quest for long-term effectiveness
Another industry-wide concern raised during this year’s Australian Effies awards was the declining emphasis on long-term effectiveness. Media agencies play a part in this trend, but Lollback says clients need to provide the solution.
“The problem starts at the top, with CEOs,” he says. “All the analysis shows the world is moving towards shorter and shorter cycles. For most clients, they’re publicly listed businesses that have to report and demonstrate results on a quarterly basis. It’s driven the whole industry to quarterly activities.
“Having been a CMO, I used to pride myself on long-term effectiveness and not short-term strategies. I nearly broke McDonalds by going short term, where we were launching things every 3-4 weeks. Stepping back, moving to platforms, focusing on stuff we could invest in that has longevity and building on those over time, were fundamental pillars that turned the business towards sustained, long-term growth.”
Another challenge is that many CEOs haven’t come from a marketing discipline and don’t understand the power of brand or why it needs to be nurtured, Lollback says. But the roots for change are there, with big US investors such as Warren Buffett calling on listed companies to go back to long-term thinking and invest in the future.
Why CMOs need to be braver
At the same time, Lollback is convinced CMOs aren’t showing enough bravery and leadership, particularly when it comes to defending media spend.
“One of my questions around this pressure in procurement at the moment is: Where have the CMOs gone?” he asks. “What I’m seeing is as we get to the end of negotiations, the CMO isn’t involved and it’s purely procurement led.
“Procurement comes in, everyone is looking for cost savings, and one of the biggest expenses is marketing. Within that, media is often the biggest expense, and it’s the easiest place to go and cut. Then we get into this pitch situation and it’s a run to the bottom for everyone. No one is going to win this game. As margins go down, you can’t hire good people, it’s harder to invest in technology and so on.”
Lollback encourages CMOs to come back to the table, or risk ending up getting less value.
“If there has ever been a time brands and marketing teams need help from the best people, sophisticated technology, insights and brains that agencies can provide, it’s now. But it comes at a cost,” he says. “There is a tension building around this and it’s an area we definitely need to tackle.”
Going from CMO to CEO
With his appointment as GroupM CEO, Lollback has become one of a small group of Australian marketers who’ve made the leap up to the top job. The big difference he’s noticed so far is the breadth of subjects to make informed decisions on.
“Coming in here, it’s another helicopter level higher and your scope is everything, from insurance to legal, people, rent, clients,” he says. “My days are just as busy but the scope on a daily basis is amplified.
“The other thing – although I always did this anyway – is you have to be able to be very focused on whatever you’re doing at that moment. It’s focus, detach, focus, detach.”
As a final comment, Lollback says it’s vital for CEOs to have good people around them that they can trust. “These are people you can talk and give direction to, feedback or share a concern or question, and ask a question, and know you can go away and come back and there’s work done,” he says.