Why cost-cutting pressure drove an effectiveness revolution for Diageo

Drinks group has increased marketing spend by 31% since 2016.

Diageo's Adam Ben-Yousef
Diageo's Adam Ben-Yousef

A "big bang" in Diageo’s marketing effectiveness would not have happened without the impetus of corporate cost-cutting, two of the drinks giant’s senior marketers told the IPA's EffWeek conference on Tuesday.

Adam Ben-Yousef, global marketing effectiveness director, and Andrew Geoghegan, global planning director, explained that Diageo's 1,200-strong marketing function had undergone dramatic change with respect to effectiveness.

Diageo owns brands including Smirnoff, Guinness, Baileys and Johnnie Walker.

Catalyst, its three-year-old web-based marketing effectiveness tool, has delivered a 16-fold gross profit return on investment, with the result of greater business confidence in marketing investment, they said.

However, the pair stressed to the audience that the business did not magically decide to invest in improving its marketing effectiveness function.

"Four years ago at Diageo effectiveness, was in a familiar state," Geoghegan said. "There were a couple of passionate people in developed markets who had access to the right data. They provided backward-looking analysis and academic perspectives rather than helping us make better future decisions."

They "lacked influence and were rarely present in the meetings where resources were allocated", he added.

"Even though we were a very brand-led business, we could not demonstrate the impact of our marketing spend and often it was the first money to be cut," Ben-Yousef and Geoghegan said.

The trigger for change came from investors, who were conscious that other consumer-focused giants such as Anheuser-Busch InBev were achieving cost savings by applying zero-based budgeting to advertising spend among other things.

This led Diageo management to promise to generate an additional £500m over three years by overhauling productivity – and in turn led the marketing department to take the bet of promising the board it would contribute £100m of that sum.

"That was a significant enough figure to motivate marketers across Diageo and significant enough to unlock some investment to help us," the duo said. "It enabled us to reframe the role of marketing and marketing effectiveness in the context of what really mattered to Diageo and its stakeholders beyond marketing."

They said their advice to other marketers who want to know how to get their boards to invest in marketing effectiveness was to find a similar "Trojan horse" trigger for investment.

"By making the case that, for marketing, productivity could mean a combination of eliminating ineffective spend and generating more profit by shifting money to more attractive brands and activities, we were able to make the case for the kind of productivity that in theory could also deliver long-term growth," Ben-Yousef and Geoghegan said.

"It also gave us the impetus to think about our marketing practice and improve the consistency with which we evaluated marketing outcomes. To put it bluntly, every incremental pound that we could get from our spend on marketing would be one less pound taken away from things like indirect costs and overhead – people – to deliver that £500m."

They also advised their peers to set a financial target, since the £100m figure was a great motivator. "Although it was daunting, it motivated our external partners, our general managers and our marketers to deliver it in full and on time," they continued. "It was a factor in all our bonuses and this created a shared outcome and a supportive attitude from people when times were tough on the project."

The pair also stressed that introducing an effectiveness culture was not just a matter of "fancy software". They attributed their success to continuing to prize creativity, having the right KPIs and having a "no-fault culture" in place.

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