Billion Dollar Roundtable

THE BILLION DOLLAR ROUNDTABLE 2006 POLICY PAPER

OPENING OPPORTUNITIES FOR DIVERSE SUPPLIERS IN ADVERTISING

Prepared by M.V. Greene

THE ORGANIZATION

The Billion Dollar Roundtable (BDR) brings together major corporations that make meaningful and measurable contributions to the economic growth of diverse companies. Each corporate member of the BDR spends $1 billion or more annually for a broad range of goods and services with diverse companies, whose majority owners are minorities and women. Spend is audited by an independent third party.

The BDR and its 12 member organizations promote and share best practices in supply-chain diversity excellence through various activities, including an annual summit. Each year, the BDR selects for further study and development, a supplier diversity issue of common concern to the members. Their process is to study and debate and to utilize the members’ long history of supplier diversity engagement and relative success to grapple with an area of spend or a particular supplier diversity issue that calls for better solutions. The BDR’s goal is to develop ideas and approaches that will result in increased opportunities and greater success for diversity suppliers along with better, more innovative and sustainable business solutions for the BDR member corporations.

Annually, out of this process, the BDR produces a policy paper to convey the information, insights and ideas for future actions that were the conclusion of their efforts. MBN USA publishes the policy paper each fall. This year, the BDR examined the longstanding challenge of how to include diverse businesses in the enormous area of corporate advertising spend. Historically, very little diversity participation has occurred in this important part of the business world. “Opening Opportunities for Diverse Suppliers in Advertising” is the title of this year’s paper.

The BDR, created in 2001, draws from the experiences and forward thinking of its members to accomplish the organization’s mission “to promote supply chain diversity excellence through research, education and best practices.” The BDR encourages corporations to grow their supplier diversity programs by encouraging the expansion of increased commitment and spending levels each year. “Opening Opportunities for Diverse Suppliers in Advertising” is the BDR’s fourth policy paper. BDR members are Altria Group Inc., AT&T Corp., DaimlerChrysler Corp., Ford Motor Corp., General Motors Corp., IBM Corp., Johnson Controls Inc., Lockheed Martin Corp., Procter & Gamble Co., Toyota Motor North America Inc., Verizon Communications Inc. and Wal-Mart Stores Inc.

OVERVIEW

Scope

This paper is a report of the initial findings of the BDR regarding supplier diversity in advertising. It represents the beginning of the BDR’s journey into this major area of business. The paper also touches on associated fields that include marketing communications and production. Going forward, a deeper study of the advertising arena is planned, as well as the dissemination of recommendations that will be useful in increasing diverse supplier participation.

Advertising represents a dynamic and inventive area of global business where communication messages are designed, targeted and delivered to consumers to drive the sales of goods and services. Huge sums flow from major corporations to advertising and communications companies and agencies in an effort to craft optimum campaigns that build brand loyalty, launch products, foster goodwill and influence public policy. Diverse agencies and other companies in the industry historically have faced obstacles getting to the procurement table in an industry that generates what is acknowledged to be significant procurement spend by major corporations. The industry magazine Advertising Age, in an annual survey of the leading 100 advertisers in the United States, estimates 2005 advertising outlays by those corporations to be $100.31 billion.

The advertising sector is typically characterized as one where creative familiarity among partners — the corporations that buy media and the agencies that create the messages — defines relationships. Unlike in some other industries, where supplier diversity has been successfully integrated for one or two decades, majority advertising agencies seem to have held on to the notion that creative expertise and carefully cultivated customer relationships would be compromised by the inclusion of other suppliers. Not surprisingly, major advertising agencies typically have no formal mechanism for advancing supplier diversity. While several diverse agencies have succeeded in securing a small part of the ethnic or multicultural advertising business of large corporations, the major market has been left exclusively in the hands of international advertising companies. Because executives of diverse companies tend to lead newer and smaller, less established firms, they have had difficulty in establishing the kind of dealings that drive significant agency relationships.

The BDR believes that the advertising and communications industry offers a fertile opportunity in supplier diversity to engage substantially more diverse suppliers. Today’s burgeoning digital age and the industry’s imperative for multicultural communication have the potential to change many of the rules for client and agency relationships and will highlight to advertising agencies and corporations alike the value of including diverse suppliers.

“Opening Opportunities for Diverse Suppliers in Advertising” has several objectives:

“Before you can fully develop a plan you have to establish a compelling business case. The Billion Dollar Roundtable wants to develop this compelling business case around this arena so that we can influence change,” said Sharon Patterson, BDR chief executive officer and co-founder.

In developing this policy paper that presents a body of work to press significant supplier diversity initiatives in corporate advertising, BDR members have held yearlong discussions to generate ideas and examine opportunities.

Additionally, MBN USA — whose publisher, Don McKneely, is BDR chairman and co-founder — has published a series of articles in 2006 on the industry to raise awareness and bring attention to issues confronting diverse companies. 2006 BDR Summit

On May 24, 2006, the BDR and more than 80 corporate procurement managers, advertising and communications executives, supplier diversity directors and others convened in New York City for the 2006 Billion Dollar Roundtable Summit to discuss ideas and produce recommendations for inclusion in this policy paper.

Altria Group’s corporate headquarters hosted the event, which Altria Group and Verizon Communications cosponsored. Participants examined a range of issues in advertising and communications, including supply chain diversity, multiculturalism, best practices and procurement techniques. Breakout groups involved all participants in extensive discussions that drilled down into specific topics affecting diverse companies in advertising, including trends, business case, value proposition, success stories, opportunities and solutions. The breakout groups’ ideas and recommendations provided key insights and direction for this paper.

A power panel set the stage for summit discussions: McGhee Williams Osse, co-CEO, Burrell Communications; Anita Laney, director, supplier diversity, GSD&M and BBDO Detroit; Victor Edozien, principal, the Asaba Group and Icy Williams, associate director, corporate supplier diversity development, Procter & Gamble. The panelists represented a broad perspective in advertising, supplier diversity, research and corporate procurement.

In remarks that characterized the advertising segment in the United States, long-time agency executive Williams Osse noted that marketing/advertising spend directed to diverse agencies hardly matches the economic buying power of diverse populations. Williams Osse’s contention is borne out by statistics. While Advertising Age’s top five core agencies — as ranked by worldwide revenue from traditional advertising — totaled combined revenue of $7.42 billion in 2005, aggregate revenue for the top five Hispanic and African-American multicultural agencies was $184 million in 2005. The Selig Center for Economic Growth, a researcher of economic, demographic and social issues at the Terry College of Business at the University of Georgia, forecasts that in 2010, the combined buying power alone of African Americans, Asians and Native Americans will be $1.7 trillion — more than triple its 1990 level of $454 billion. The nation’s total buying power will be about $11.8 trillion in 2010, the Selig Center predicts. African-American professionals number about 6 percent of the employees who work at U.S. agencies, but 20 percent of those agency workers are employed by the top 15 black agencies, Williams Osse said. Williams Osse pointed out that majority, general market agencies have contributed to the growing concept of “uniculturalism” that is presenting an additional barrier to minority agencies seeking multicultural spend. Indeed, retailer Sears Roebuck & Co.’s decision in August 2004 to fold its standalone multicultural marketing department into its general marketing department caused a stir within the industry.

In other panelists’ remarks, Laney of GSD&M and BBDO Detroit — who is a rarity in majority agencies as a supplier diversity director — exhorted agencies not to lump all diverse suppliers in the same level of capability. Laney said diverse vendors have different strengths, and the building of vendor databases can educate corporations on diverse firms that can successfully design and manage various advertising projects. Williams of Procter & Gamble said that corporate leaders need to be challenged to increase spend with diverse agencies. Corporate leaders are “tentative” in pushing supplier diversity initiatives in advertising and marketing communications when it is not clear how it links to the bottom line of profits, Williams said. Consultant Edozien of the Asaba Group, a Natick, Mass., strategy consulting firm targeting under-served businesses, said an imperative for increasing diverse spend in advertising is to increase demand for their services. To drive demand, Edozien said proponents must create a direct link between supplier diversity spend in advertising to the measured effectiveness of that spend. “Rational economics” not emotion will win the day, Edozien said.

As with previous summits, to guide the group discussions, participants were asked to leap ahead to the year 2015 — imagining a special issue of MBN USA for May/June 2015 with the cover title “The Amazing Success of Supplier Diversity in Marketing/Advertising.” Featured articles in the mock issue included articles on the success of resetting a compelling business case for advertising supplier diversity; how the economic value for supplier diversity advertising has been established, and stated benefits that have produced optimal results for corporate clients of diverse agencies. With that backdrop, participants were charged with examining the dramatic improvement in advertising supplier diversity that has occurred over the past 14 years since the BDR’s founding. Participants were instructed not only to outline why the initiative has been successful but also to reveal what happened to make it so. Each group offered a brief summary of the high points of their thinking.

BACKGROUND BRIEFING

Economic state of advertising industry

A snapshot of the advertising industry reveals an industry being challenged to its core on a number of fronts. Economically, the 100 major advertisers contributed a combined $100.31 billion in outlays for advertising in 2005, according to Advertising Age’s 51st Annual 100 Leading National Advertisers report. Topping the list of the Top 100 were Procter & Gamble, General Motors, Time Warner, Verizon Communications and AT&T. The Top 100 spent $10 million or more in measured media such as magazines, television, newspapers and Internet on 584 brands. Automotive, retail, telecommunication/ Internet, financial services and medicine/remedies were the top spending advertising categories, the report said. Some other categories included entertainment, personal care, apparel, toys and games, office equipment and real estate.

A second Advertising Age report in 2006 outlined revenues for the nation’s top agencies that provide the bulk of services to major corporations and brands. Estimated revenues of multicultural firms are included in Advertising Age’s 62nd Annual Agency Report. U.S. advertising and media sales for 2005 were put at $12.02 billion and marketing services, which include interactive, sales promotion and direct marketing, at $7.66 billion. Total U.S. marketing communications revenue in 2005, which includes advertising, marketing services and public relations, reached $24.38 billion. While the agency report highlights 2005 revenue of the leading multicultural agencies, it did not specify their portion of the total. The top multicultural agencies listed in the report are units of larger, majority agencies. The Association of Black-Owned Advertising Agencies Inc., a Chicago-based industry organization founded in 2005 to advocate for diverse agencies, estimates that black-owned ad agencies and marketing communications firms have annual billings of more than $1 billion.

Lack of diversity

On the issue of diversity, the advertising industry has been criticized for its lack of inclusion in recruitment, hiring and procurement. During 2006, the New York City Human Rights Commission has investigated Madison Avenue for lackluster diversity-hiring practices. After gathering testimony, the commission subpoenaed 16 chief executives of large New York City-based agencies requesting they appear at public hearings in September.

Dissatisfaction with the industry runs the gamut. Earl “Butch” Graves Jr., president and CEO of stalwart African-American publisher Black Enterprise called the industry “racist” in remarks in June to promote his magazine’s annual special report, “40 Best Companies for Diversity.” Agencies are not spending with black-owned media companies despite heavily targeting minority consumers, Graves said. Sen. John Kerry, DMA, responding to complaints brought to him by black newspaper publishers, requested a government investigation in May 2006 into whether federal agencies were living up to their responsibilities under Executive Order 13170 requiring that federal contracting for minority business enterprises be expanded in advertising. The black publishers told Kerry, the ranking member of the U.S. Senate’ s Committee on Small Business and Entrepreneurship, that advertisers who market to African-American constituencies, including the federal government, were retreating from their publications. President Clinton had signed the presidential executive order on Oct. 6, 2000, that established the first multicultural advertising guidelines for federal government departments and agencies.

The Annual Legislative Conference of the Congressional Black Caucus Foundation, considered to be the nation’s top African-American conference on policy issues, brought further attention to advertising industry issues in September through a panel forum, “Truth in Advertising: How You Are Affected by the Practices of Advertising Agencies and Their Clients.” Rep. Carolyn Cheeks Kilpatrick, D-MI, moderated the discussion. Richard Wayner, CEO of the True Agency, said at a conference of the Los Angeles Association of Advertising Agencies in May 2006 that majority agencies were intent to cast multicultural agencies to the side. Wayner contended that marketers designate only about 5 percent of their budgets to African- American and Hispanic advertising — thus placing aspiring agency executives into a category akin to baseball’s “Negro leagues” rather than integrating these diverse firms into mainstream activity and opportunity.

Looking forward

The skyrocketing buying power of multiethnic populations and women and the dynamic changes in the way technology allows for the delivery of content have reshaped marketing/advertising supply chain. In its survey, the Selig Center noted the impressive statistics associated with increased minority buying power. “Both the African-American and the Hispanic consumer markets already are larger than the entire economies of all but nine countries in the world. Moreover, by 2010, it is very likely that the buying power of African Americans and Hispanics will exceed the GDP of Canada — which is the ninth largest economy in the world,” the Selig Center report said. Additionally, African- American households spent $679 billion for goods and services in 2004, according to Target Market News, a Chicagobased news and research company that tracks African-American marketing, media and consumer research and which publishes annually a report, “The Buying Power of Black America.” Coinciding with the growth of minority spending is the accelerating rate at which minority populations are establishing business enterprises. Preliminary results from a U.S. Census Bureau survey released an August 2005 show that African Americans formed businesses at a rate of four times the 10 percent national average between 1997 and 2002, and Hispanic-owned businesses grew 31 percent during the same time. Asian-owned firms grew by 24 percent. Additionally, about 48 percent of all privately held U.S. firms are 50 percent or more women-owned — or about 10.6 million total firms that generate nearly $2.5 trillion in sales, according to the Center for Women’s Business Research in Washington, an organization that advocates for women business owners and their enterprises worldwide. About one in every 11 adult women is an entrepreneur, the center said.

Findings from the Asaba Group offer that such economic power in the hands of minority populations compel marketers to focus their efforts to win customers on building sustainable relationships with those populations. Just buying electronic and print advertisements on ethnic media is becoming less effective. What is proving effective is the development of culturally relevant value propositions and culturally adaptive operating models to deliver the big gains and superior shareholder value demanded by this growing minority economic grouping, according to Asaba Group. Indeed, the multicultural market offers key opportunities for business growth, but corporations need to examine the relevant opportunities in relation to sales, growth potential and profitability by understanding the uniqueness of the multicultural opportunity, the Asaba Group contended. Additionally, a determination must be made on how best to leverage current investments in corporate diversity, including recruitment and MWBE sourcing. Clarity on fundamental strategic issues will provide insight on multi-ethnic customer segments — the unique value the marketer provides to these customers and the relevant channels needed to penetrate these markets.

Running in parallel with shifts in buying power, technological change is forcing marketers and advertisers to adjust how they deliver messages to consumer and business markets. Digital technology is giving consumers greater control over the content they want to receive, including marketing/advertising messages. According to the Boston Consulting Group, a Boston-based global consultancy, technology has set off a series of complicated “first- and secondorder effects” that have profound implications for marketing/advertising. The result is that advertisers are having a much more difficult time reaching mass audiences and measuring the cost-effectiveness of their efforts, according to Boston Consulting Group report on media proliferation. Companies that find innovative ways to leverage emerging technologies — such as wireless phones, digital assistants, MP3 players, home wireless networks, digital television, broadband Internet, digital video recorders and video-on-demand — will survive an “inflection point” and build richer and longer lasting relationships with their markets. To get there, advertisers are being forced to ask themselves hard questions: whether they know the cost of diminishing mass market consumer reach; if their targeting of consumers need improving; where they should target their marketing/ advertising messages; how to change their mix of advertising; and whether they are using the right metrics to measure impact and reach.

Bain & Co., a London-based strategic marketing practice, said 21st-century marketing requires that corporations deliver a “customer experience” to their markets — rather than solely relying on once standard marketing practices that dictated determining psychographic consumer segments then reaching consumers through advertising media without the benefit of tools to satisfy the customer experience once the product was sold.

Multiculturalism is a component of the customer experience — where future generations of consumers will have more discretionary income, less time and more choices, and will display wholly new spending patterns, depending on age, geography and wealth. Bain offers these recommendations: design the right propositions for the right customers; focus on the entire customer experience by recognizing that customers interact with different parts of an organization across a number of touch points; treat every customer interaction as a precious resource as the ultimate test of any company’s delivery lies in what customers tell others; create crossfunctional teams involving employees from marketing to supply chain management and motivate them to deliver in a coordinated, seamless manner across the entire customer experience.

BILLION DOLLAR ROUNDTABLE SUMMIT DELIBERATIONS

Identifying the key issues

In charting a course for discussions at its May 2006 summit, the BDR outlined a number of key issues to be deliberated. The issues identified were that:

Key to the groups’ strategy sessions was to punch ahead to the year 2015 when dramatic improvement in the state of advertising supplier diversity has been realized. The objective was to outline why efforts for advertising supplier diversity have been successful. In her instructions, BDR CEO Sharon Patterson encouraged the groups to “break the rules” and “change the language” of marketing/advertising supplier diversity.

Resetting the compelling business case

In resetting the business case for supplier diversity in advertising, group members determined that the case for robust return on investment first had to be measured and demonstrated to corporations. While the social relevance of supplier diversity is vital to demonstrate as well, corporations understand fully the impact of economic growth and shareholder value to their operations. This is substantiated through measurement, reinforcement and the proper “weighting” of the impact of supplier diversity, the participants determined. In support of measurement, a May 2005 survey from Best Practices LLC, a Chapel Hill, N.C., research and consulting firm that analyzed how top-performing companies identify systems for quantitative measurement of their diversity initiatives, concluded that measuring and managing diversity initiatives must operate in parallel with a company’s business objectives to ensure a successful effort. The survey benchmarked 65 companies across various industries to analyze how the companies implemented diversity programs’ four areas: representation, advertising, suppliers and philanthropy. In supplier diversity, benchmarked companies attributed accurate recording and tracking of relevant data for increased supplier diversity spending. Profit, brand image, compliance and purchasing power are key benefits that arise from measurement, the group reasoned. Corporations appreciate a consumerism model where they achieve revenues when goods and services are purchased through their supply chains. Measuring the impact of multicultural marketing on bottom line business growth would present the clearest case for supplier diversity in advertising — that enhanced minority group demographics translates into increased buying power, which in turn means increased value for the corporation. Leonard Greenhalgh, professor of management and director of executive programs for minority and woman entrepreneurs at the Tuck School of Business at Dartmouth College, noted in a 2005 paper that harsh business environments driven by the globalization of business dictate that a social case for supplier diversity is no longer persuasive. Instead, the compelling business case drives corporate procurement managers in their interactions with all businesses, including diverse companies. Amid enhanced minority group demographics and buying power, that connection to business opportunities needs to be articulated, the group reasoned, adding that corporations will embrace marketing/advertising supplier diversity if it affects them positively but will repel it if it adversely affects their business. Increased business in the hands of diverse companies means a greater sphere of influence for the corporation as dollars trickle down to other minority companies and consumers. An “invest in the future” paradigm that will leverage growing minority populations and women’s buying power will influence corporations positively, the group said.

Establishing the economic value

In ascribing an economic value to including diverse suppliers in the advertising spend, group members outlined opportunities for significant penetration into multicultural and women’s markets. Value can occur in multiple segments — business-to-consumer, business-to-business and business-to-government, the group concluded. Increased sales and market share, rising consumer traffic from advertising campaigns and the enhanced ability to cross sell products and services substantiate the opportunities for increased value. Increased value comes as diverse firms are more wholly integrated into the economic fabric of the U.S. economy through scale and growth. Vital to the value proposition of diverse companies will be to increase their scale, the Boston Consulting Group outlined in a research study on supplier diversity that served as a basis for the BDR’s 2005 policy paper. “Building capacity and capabilities of minority businesses to provide more value-added products and services” will help achieve integration into the greater U.S. economy, according to Boston Consulting. Additionally, inherent in the value of diverse companies is the opportunity corporations and majority agencies will realize for diversity employee recruiting, the breakout group concluded. Within the advertising industry, the delivery of advertising and communications services is expected to drive employment growth of 20 percent over the next decade, according to Boston Consulting. Meantime, diverse companies are primed for success in all forms of traditional media, including print and broadcast, but also new media such as the Internet and wireless communication. Success for diverse agencies will hinge in a great degree on diverse firms being integrated with majority agencies rather than being dependent on select individuals for business. Corporations that forgo the opportunity to advance multicultural marketing through diversity will “miss the market” and be forced to react rather than lead, group members reasoned.

Threats/trends/key drivers

Among trends and key drivers favorable for supplier diversity in advertising include changing minority-group demographics; clearly defined consumer markets; increased buying power in ethnic and gender markets; and the movement of advertising into the procurement process, according to deliberations of the group members, who developed a comprehensive “SWOT” chart in outlining its conclusions. Supporting the group’s contentions about the rapidly changing demographic landscape is the release of the U.S. Census Bureau’s American Community Survey from August 2006. In California, for instance, the survey found that 42 percent of the population speaks a language other than English at home and the consequent need to reach such populations with specific, multicultural communications messages. The University of Georgia’s Selig Center also noted the minority populations are growing at a much more rapid pace than the majority group. From 1990 to 2010, for instance, the nation’s African- American population will grow by 32.4 percent compared to 17.6 percent for the white population and 24.2 percent for the total population. Among threats to inclusion, the BDR group identified the move toward “off-shoring” of the technical aspects of marketing/advertising. Offshoring, for instance, stems from the rapid globalization of business that has led corporations to consolidate their supply chains in the effort to reduce costs. Other threats include the view by corporations and majority agencies of diverse groups as “homogenous”; the lack of ethnic representation on corporate boards and executive management in contrast to the customer base; “rogue” spending; the fear of losing established markets; and a lack of accountability on the agency side where inclusion is not tied to performance; vendor consolidation; the perception that diverse agencies lack capacity; and a lack of technology to deliver cost effective, targeted marketing. The group urged that greater efforts be made to share success stories of supplier diversity in advertising, such as their contribution to economic advancement and job creation. Strong metrics and benchmarking that substantiate the capabilities of diverse agencies will drive action, the group concluded.

Opportunities/solutions/ strategies

In its recommendations, this breakout group determined that a number of opportunities exist for diverse companies in advertising. Given the changing nature of communications in the global economy, one key opportunity would be minority- and women-owned agencies competing for general market advertising work. Targeting new media will also present opportunities for increased business. Bearing out the participants’ contentions are rising forecasts for Internet advertising. In 2005, U.S. Internet advertising spending surpassed $10 billion for the first year, according to eMarketer, a New York Internet market research company. eMarketer projects that companies will spend $22.3 billion in 2009. Group members suggested that another solution is to push joint ventures between diverse companies and majority agencies. One method of doing this, the group said, is to push second-tier contracting opportunities with majority agencies and corporations. Through second-tier contracting emerges opportunities for significant collaboration between minority and majority agencies. Strategic partnerships all serve to spur job creation and growth, rebuild inner cities, enhance tax bases and build larger customer bases, Boston Consulting noted in its 2005 paper on supplier diversity. Further, the breakout group urged that the BDR develop a mentoring program for diverse agencies that would promote diverse-majority company joint ventures. It was suggested that the BDR use its influence by going to the major advertising agencies and request they create a formal supplier diversity program with a dedicated director who would set and track spend goals, add diverse vendors to the supply chain, set goals for recruitment and hiring of diverse professionals and creative talent, particularly in the creative director’s track, and establish a mentor protégé program. Another strategy suggested by the group is to push for a “virtual agency model” to support the idea that the corporate client owns the advertising strategy rather than agency.

Stated benefits for optimal results

The group concluded that an attempt should be undertaken to determine as closely as possible the bottom-line value of diverse firms to advertising. Benefits of supplier diversity should be clearly communicated to advertising stakeholders — including consumers, corporations, employees, investors and policy makers. The diversification of an advertising supplier base can be explained, for instance, as being comparable to stated benefits from diversifying something as innocuous as a 401(k) plan, the group said. A required infrastructure component for agencies to achieve benefits of an inclusive supplier base should be that procurement dollars are targeted to diverse companies within the request-for-proposal process. As corporations spend research and development dollars on new markets for their goods and services, authentic opportunities should be created to include diverse companies in that planning, according to the group. This recommendation will ensure that dollars are allocated specifically to developing diverse companies.

EMERGING BEST PRACTICES

As major corporations and majority agencies take up the challenge of enhancing the inclusion of diversity in their advertising and marketing communications spend, they can turn to a number of best practices already in place, such as fully resourcing the initiative with dedicated staff and adequate budgets. The first look ought to be at the 12 BDR members, whose collective spend with diverse companies totaled more than $24 billion in 2005. Each of the BDR companies has dedicated supplier diversity staff and significant budgets directed to the achievement of supplier diversity goals. On the agency side, GSD&M of Austin, Texas, operates a dedicated supplier diversity unit. Among industry groups, the American Advertising Federation, of which a preponderance of advertising agencies are members, has a dedicated executive leading its diversity efforts. Here is a snapshot of some emerging best practices:

BDR Members

BDR members list advertising as one of their largest product/service categories and one that is ripe for increased supplier diversity participation. They seek out diverse agencies and advertising industry suppliers to provide opportunities for them both at the first- and second-tier level in advertising and marketing communications as they would in every other area of spend including accounting, office equipment, transportation services or technology. For instance, Joan Kerr, executive director, AT&T Supplier Diversity, said AT&T does not exclude any category when setting supplier diversity spend targets. Advertising offers “tremendous opportunity for diversity participation,” according to Kerr. “The Billion Dollar Roundtable member companies aim to use their experience in developing diversity solutions, where none previously existed, to work with our own suppliers and others in the industry to share best practices and support the expanded utilization of diverse suppliers.”

AT&T has utilized diversity-owned advertising agencies for decades but is now also encouraging relationships between diverse agencies and majority agencies by working with them to help determine the optimal way to include diversity suppliers in the overall advertising spend. To expand opportunities for minority- and woman-owned agencies and other diverse suppliers in advertising and marketing communications, AT&T offers coaching and mentoring to its prime suppliers on starting a supplier diversity program and on supplier diversity second tier contracting and business solution partner relationships, which Kerr said especially helps companies that have recently begun their own supplier diversity initiatives. AT&T ensures that diversity requirements are included in advertising agency and other advertising and media communications contracts; introduces its marketing and advertising suppliers to AT&T’s Prime Supplier Program Guidelines and tools; nurtures current supplier diversity solutions; develops plans for supplier diversity goal achievement; and facilitates introductions of minority-, woman- and disabled-veteran- owned suppliers to AT&T’s primary advertising and media communications suppliers. AT&T is also a corporate sponsor of the StreetLights project, an industry initiative designed to promote ethnic diversity on production crews that work behind the camera. The Los Angelesbased program, which was founded in 1993, trains and advances career placement opportunities for under-represented minorities in television and film.

BDR member company Verizon Communications selected Burrell Communications Group, a diverse agency, as winner of its Supplier Excellence Award for 2006, one of 14 prizes given. The award is indicative of Verizon’s push to increase opportunities for diverse companies in advertising and marketing communications. Burrell received the award based on several measures of yield, including the total number of projects undertaken and the number of projects finalized within the established time and budget. The projects assigned to Burrell were designed to meet aggressive marketing objectives. Faced with this challenge, Burrell launched 100 percent of the campaigns within Verizon timelines. Verizon attributed the Burrell programs to its strong sales growth for telecommunications and broadband services. According to Burrell, its programs generated 1.6 billion PR/media impressions for Verizon. Verizon works with many diverse agencies including AdAsia and Admerasia for its outreach with the Asian market. La Agencia de Orcí is the company’s Hispanic agency of record.

Procter & Gamble supports diverse supplier recruitment through two separate business units, supplier diversity and multicultural business development. Both organizations work closely with diverse suppliers in advertising and marketing communications. Two beneficiaries of this focused support are Carol H. Williams Advertising in Oakland, Calif., and Burrell Communications, both African-American owned agencies. Procter & Gamble’s objective is to spend 10 percent of advertising and marketing communications procurement dollars annually with diverse agencies, said Icy Williams, associate director, corporate supplier diversity. Williams pointed out that because Procter & Gamble is a consumer products company supplier diversity spend is driven solely by its consumer needs, not social responsibility. Procter & Gamble recognizes that increasing numbers of its customers are from minority groups, and it relies on creative professionals from diverse agencies to help reach that audience. Anne Sempowski Ward, associate marketing director for multicultural business development, said partners like Carol H. Williams and Burrell, as well as Bromley Communications, which specializes in multicultural marketing to the Hispanic demographic, serve as “eyes and ears” to brands targeted to multicultural consumers. The Williams Agency, for instance, has helped support Procter & Gamble’s Queen Collection cosmetic line, a Cover Girl line launched by African-American entertainer Queen Latifah. Burrell has supported Procter & Gamble Olay’s Quench body lotion targeting African-American women in a national television and print campaign.

GSD&M — Agency

GSD&M is a rarity among general market advertising agencies: it has a dedicated director for supplier diversity and staff, demonstrating that the agency is serious about its supplier diversity program, according to its biggest corporate client, AT&T. Some agencies may designate an internal accounts manager to push diversity as part of contract fulfillment for a particular corporate client. GSD&M has demonstrated supplier diversity leadership in the advertising industry as the first agency to become a national member of the Women’s Business Enterprise National Council and one of the first agencies to join the National Minority Supplier Development Council, two organizations that certify diverse enterprises. Anita Laney, GSD&M’s supplier diversity director, is co-founder of the NMSDC’s Advertising, Entertainment Media and Sports Industry Group. GSD&M, the agency of record for AT&T’s consumer brands, works closely with their diverse and specialty agencies. In October 2005, GSD&M participated with the Southern California Minority Business Development Council and several media organizations in an industry matchmaking event with minority businesses. Matches were based on products and services in some 75 categories that include broadcast production, commercial illustration, direct mail, advertising services, editing services, marketing research, set design and Web development. Laney said the key to GSD&M’s efforts is staff awareness and senior management support. The agency has no formal procurement department, so individual staff is responsible for making agency buys. Laney said raising staff awareness about supplier diversity will assist diverse companies in building critical relationships with agencies. The Sanders Wingo agency of El Paso, Texas, a diverse firm, and the multicultural agency for AT&T’s African-American market has benefited from a longstanding relationship with GSD&M.

Industry efforts

The American Advertising Federation based in Washington, the nation’s oldest national advertising trade association, bills itself as the “Unifying Voice for Advertising,” representing 50,000 professionals in the industry. The AAF offers a number of initiatives targeting multiculturalism and advertising led by an executive vice president. It has been an early advocate for inclusion and co-hosted a 1998 congressional summit on diversity in advertising for members of Congress. While most industry efforts primarily address the recruitment and hiring of minorities into positions at majority advertising companies, supplier diversity increasingly is part of broader initiatives.

The AAF operates the Mosaic Center on Multiculturalism to implement its multicultural and diversity initiatives. The Center’s mission includes development of new programs and services to meet evolving corporate and governmental needs for education, strategic recommendations and access to business and human resources. The AAF’s Mosaic Principles and Recommended Practices offers guidelines to the industry to help companies grow opportunities in multicultural markets. In seeking to impact diversity in the industry, the AAF awards scholarships through the Most Promising Minority Students program to advertising students and runs career fairs for advertising, marketing and communications students seeking entrylevel positions. The AAF’s annual Survey on Recruiting and Multicultural Advertising Trends addresses hiring challenges and multicultural marketing and recruitment. Additionally, the American Association of Advertising Agencies issued its “Principles and Best Practices for Diversity and Inclusion in Advertising Agencies” in May 2005 in order to advance industry initiatives. An internal committee developed the document to promote “diversity and inclusion at all levels of advertising agency and communications firms.” The AAAAis the national trade association of the advertising agency business serving some 1,200 agency offices that employ more than 65,000 people. In November 2006, the AAF and AAAA planned to co-sponsor a supplier diversity trade fair in New York City, which they said was the first-ever industrywide trade fair that gives diverse suppliers the opportunity to meet buyers of goods and services from premier advertising agencies.

Ten African American advertising agency executives founded The Association of Black-Owned Advertising Agencies Inc. in February 2005 to advocate for the interests of diverse advertising agencies and marketing communications firms, including in the area of vendor diversity. Eugene Morris, chairman and CEO of Chicago-based E. Morris Communications Inc., served as the group’s first chairman. In addition to Morris, the founding agencies are Anderson Communications, Atlanta; Equals Three Communications, Bethesda, Md.; Fuse Advertising, St. Louis; Lattimer Moffitt Communications, Atlanta; Matlock Advertising & Public Relations, Atlanta; Muse Communications, Los Angeles; Prime Access, New York; R.J. Dale Advertising & Public Relations, Chicago; and SWG&M Advertising, El Paso, Texas.

CONCLUSION

Billion Dollar Roundtable member companies, long-time leaders in the broader development of global supplier diversity initiatives, believe the time is right for the advertising industry to embrace fully the concept of diversity in supply chain procurement. Advertising, marketing communications and associated fields closely touch all segments of society as a prime mechanism for major corporations to reach and influence consumers and others. Clearly, technological advances in mass media, burgeoning buying power of ethnic populations and the increasing business and professional participation of minorities and women mean no area of global business can exempt itself from the embrace of diverse suppliers — advertising included. This influential segment, where creativity and ideas are paramount, lags other industries in securing business from diverse suppliers. The BDR recognizes that much needs to be worked out to determine how best advertising can join other industries like automotive, financial services, retail and technology that have been more inclusive to diverse suppliers. In this policy paper, the BDR provides a platform to explore ideas and generate further discussion of key issues that include the business case for supplier diversity in advertising, key drivers and economic benefits. This paper represents a beginning rather than an all-encompassing solution. The solution will come as corporations, majority agencies, industry organizations, policy makers and diverse suppliers advance deliberations on key issues and find common ground in breaking down obstacles to progress.

BDR SUMMIT 2006

THE BILLION DOLLAR ROUNDTABLE 2006 POLICY PAPER

OPENING OPPORTUNITIES FOR DIVERSE SUPPLIERS IN ADVERTISING

Prepared by M.V. Greene

THE ORGANIZATION