How an oil giant decides

How does a major oil company decide how much to allocate to marketing through its partners?  The worldwide head of distribution says: "With a retailer we look at overall potential in sales and profits and then at how much it will cost us to achieve that figure. We then top-slice a percentage for advertising to create consumer demand.  The account manager then sits down and agrees on how much to spend with the retailer in store or through retailer-driven promotions – it becomes a tactical decision driven by the relationship and the potential."

The picture is rather different with distributors.  Here, a percentage of sales is set aside for joint marketing and another percentage is set aside for training.  "Precisely how much we spend on joint marketing is again a decision made by the account manager and depends on the upside in the business plan.  We are investing more these days in training as the distributors become more professional."

But the oil company can’t measure the real return from joint marketing: "We aren’t generating leads that can be followed up.  It is more a question of whether or not we have achieved our joint objectives."

Oracle moves to a discretionary model

Like much of the computer industry, Oracle has moved away from giving all its partners a certain percentage of cooperative advertising in the last few years.  Tony Mulligan said: "We found that if it was a standard percentage people just built it into their business model; they didn’t value it."

Instead, Oracle partners have to apply on line for money on a project-by-project basis and at least match Oracle’s spend with their own. 

Mulligan says: "It takes about 15 minutes to fill in the application, which is about two screen pages.  They also have to say what they expect from the action in terms of response."

In the last few months Oracle has introduced effective closed-loop marketing and Mulligan says that he can now tell from precisely which marketing campaign each order has come.  He admits however that partners may be inclined to exaggerate the success of any joint marketing action by claiming that it generated extra orders, which in practice came from the existing client base!