The New Negotiator: Agency of the Year - Carat

Powered by massive consumer insights and a no-silos-here culture, this Aegis-owned unit is rewriting industry rules

For years, advertisers and agencies have complained that TV networks have been delivering fewer eyeballs and charging more for the privilege of placing ads in their programs. They have also complained that networks have forced them to buy unwanted and lower rated shows along with the programs they have actually wanted to place ads in.

But during this spring’s television upfront Carat USA, a unit of Aegis Group, and Media Magazine’s 2012 Media Agency of the Year, pushed back and placed its money elsewhere when networks refused to budge on price or package. It was able to do so because it invested heavily to remake its go-to-market process. At the core of that process is a new consumer segmentation approach that rivals many syndicated services with the added benefit of being proprietary and thus adjustable on a continuing basis.

It’s been a landmark year for Carat on the leadership and innovation front. And while the agency world talks a lot about consumer-centric planning, big new clients have bought into Carat’s reformulated customer-at-the-core approac. Those clients include General Motors, which awarded Carat its $3 billion media assignment early in the year and Macy’s, which shifted its $500 million broadcast and digital account to the shop toward the end of the year.

Those new assignments, and The Home Depot as well, which shifted to Carat in late 2011, have driven the agency’s revenue growth 50 percent over the past two years. That performance has been key to helping parent Aegis generate organic growth in 2012 of around 15 percent, far more than most of its holding company competitors.

Rewiring Core Industry Relationships

And it’s not just the traditional networks that Carat is forging new ways of doing business with. It also has the major digital titans — the Googles, Apples and Amazons — in its sights. The goal there is to forge potentially game-changing “infrastructural relationships,” that drive advantages for clients, says Carat Global president Doug Ray.  Each of those digital media giants presents a unique opportunity that might be centered on data, or content, or distribution platform, or some combination of assets that could significantly advance clients’ abilities to achieve stated marketing goals.  

“It used to be I give you money for a good price,” says Ray of past agency tie-ups with media companies. “That was what it was all about.  That’s one component but the least important of what we’re looking for today.” Instead, innovation and competitive advantage are now the key drivers of big media company–agency relationships, says Ray. Some deals have been struck but they’re confidential per the competitive advantage piece of the equation. 

Pushing back against network pricing and packaging wasn’t easy. It took millions of dollars of investment that began around the time that Ray was named head of the agency in June 2011. Those dollars were used to create a new consumer segmentation process that ties the agency’s entire research-and-insights and planning-and-buying process together in a way that allows it to pinpoint precisely the target audiences that its clients want to expose their marketing messages to. Not by age or sex — the broad and traditional demographics that the networks have been pedaling for decades — but by specific clusters of customers and prospects who are most likely to buy client products and services.

“We really haven’t had the opportunity to push back on the rising rates as we have this year,” says Ray. But by spending the money to reformulate the way the agency identifies consumer segments and pinpoints where they can be found throughout the media landscape, Carat created that opportunity. And at least one network research team audited and validated Carat’s methodology.

Carat’s new approach raises questions for the entire industry about exactly how much bang network TV clients are getting for the bucks they pay in terms of actually improving business results.  Clients frequently pay double digit annual increases for ads based on traditional demographic ratings. “But when you actually look at the audiences we really care about it suddenly looks like a 200 percent premium. You share that with a client and they won’t buy into that when we can find the same audience at significantly less cost” somewhere else.

Nigel Morris, CEO of Carat parent Aegis Media Americas & EMEA adds that the industry’s go-to-market approach “hadn’t really changed that much,” in recent years despite huge change within the media landscape. Carat’s shift, he added, “is a strategic position, not a negotiating tactic,” he says.

The Exponential Power of Consumer Insights

The shop’s approach to gathering consumer insights begins with a survey sample known as CCS or Consumer Connection System. It’s a global system that reaches 300,000 consumers worldwide. Last year Ray decided to expand the U.S. portion of the survey from 10,000 to 30,000 consumers. It covers more than 60 consumer touch points and identifies 240 attitudinal and behavioral consumer profiles with 500 questions that are constantly being refreshed. Currently, nearly 40 questions address mobile usage alone.

Expansion of the sample size was critical to gathering more precise information about smaller consumer segments that clients care deeply about such as new moms. And Ray says CCS is now one of the largest single sources of market research about Hispanics and the gay and lesbian community, sectors that an increasing number of marketers care about reaching.

Adland talks frequently about consumers being at the core of marketing plans. They always have been, but the difference now is the oceans of data available in the digital world help marketers better define their customers, their habits, likes and dislikes.  Ray points to Millennials to illustrate the point. “Many clients are focused on them,” he says. “And there are fundamentally different types of millennial shoppers,” which can be identified with the expanded CCS platform. “For one group you need more mobile and social in your marketing plan. Another group mirrors older consumers in terms of [their desire for] deals and coupons.”

Expansion of the survey was just one part of the go-to-market reformulation. Survey data was then fused with Nielsen audience ratings and other third-party research databases to create customized ratings that define literally hundreds of behavioral subsets within programs, time periods and networks. “The survey itself is not that innovative,” says Ray. “But linking it to other data bases, and the unique way the data is massaged and fed through our entire planning and buying system gives us action-ability,” he says.  

“Being able to uniquely develop ratings for programs and networks against the target audiences that our clients are building marketing plans against gives us more perspective on the marketplace in terms of where the real value is,” says Ray. “We’re redefining the value of media.” And by doing so, Ray believes, he and his team are also taking the lead in redefining the value of media agencies and giving them a seat at the client’s table “with real influence.”

And it’s not just new clients that are buying into Carat’s redefinition of media value. Important current clients are buying in as well, notably Procter & Gamble, which rewarded the agency over the past year with two big new pieces of planning business, including the Gillette Venus line of women’s grooming products. Now Carat handles all of Gillette, having won the planning assignment for the men’s grooming portfolio two years ago.

Carat also was awarded P&G’s North American communications planning assignment for the London Olympics and now has been tasked with the client’s global Olympics communications planning assignment going forward.

Inventing the Future with MIT

Looking ahead, Ray says that constant innovation is essential to success in the media agency space. Carat does that in a number of ways, not the least of which is through a unique sponsorship agreement with the MIT Media Lab.

Ray says the agency thought long and hard about whether to create its own lab or support an existing one. Ultimately the feeling was “we could never be ahead of where the MIT Media Lab is because of the number of projects they have going at any one time and the number of engineers they have working there so we made a strategic decision to support them and be a part of that group.” The arrangement enables Carat to be among the first participants in tests of new platforms and other media-related innovations coming out of the lab.

And the relationship is yielding tangible results. One example is a startup called Luminoso that was developed at the MIT Lab. Luminoso software can analyze text from digital platforms interpreting results the way a person would. Carat has used it to refine customer insights for some clients. According to the Boston Business Journal, the software determined that consumers prefer more brightly-colored toiletry products. Ray declined to talk specifically about how the software is being used for clients.

Carat’s innovations unit, Jumptank, also drives the development of new media techniques and platforms at the agency. It created a platform called Connected Cultures, which isolates clusters of consumers that are connected through common interests, life stages, concerns, hobbies, philosophies and so forth and tries to define drivers and motivators of such groups.

Ray says that it’s critical that agencies understand why different clusters of consumers connect with each other. The more marketers know about such connections, he asserts, the more likely they’ll be able to motivate them to take action — like buying a product. “Agencies of the future that win will have a disproportionate understanding of connected individuals coming together and how to connect with them,” he says.

Ray also credits Morris of Aegis Media Americas, the media management arm that oversees all the company’s operating units, with creating an environment that breeds collaboration and innovation. Two years ago Morris reorganized Aegis Media NA’s financial structure, putting in place a single P&L where before each operating company had their own.

“There was no incentive to collaborate,” before the single P&L was implemented, Ray says. Now, there is, because senior executives across the company are compensated based both on the performance of their particular operating unit and Aegis Media NA as a whole.  That change enabled Carat to make adjustments that help the agency, clients and other Aegis operating units.

One example is the shop’s approach to search. Carat used to have upwards of 50 search experts in-house. On the balance sheet, they’re now employed by sister agency iProspect, even though they’re housed at Carat and are dedicated full time to the agency’s clients. The way Ray sees it they get better training at iProspect and serve Carat clients better as a result with those investment costs tagged to iProspect. The revenue the search people generate also goes to Isobar, “but that doesn’t hurt me because of the new set up,” Ray says. “They fit at Carat in an integrated team.”

That’s an operating model, adds Morris, that serves Carat and its sister shops within Aegis Media NA. “We’ve made part of the DNA of the culture here to deliver solutions with no silos.”

As for the company’s list of big wins this year, Morris asserts, “next year that will mean nothing. “ The focus has to be, “how can we get better and how can we solve our clients’ biggest problems. That’s the ambition.” 


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