Archive for the ‘agencies’ Category

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The agency billing model is broke

July 7, 2010

Agencies typically bill their clients by the hours they spend, not by the results they deliver. What’s wrong with this model?

We’re ultimately in the business of selling stuff. Billing hours for making things doesn’t necessarily mean we’re selling more stuff. So why are clients content to pay their agencies by the number of hours they work? And why are agencies content to bill by the hour if they’re confident they can sell more stuff more efficiently then their competitors?

Our industry is notoriously bad at connecting the dots between a marketing communications activity and a sale. John Wannamaker was famously quoted as saying “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” After 100 years we’re only slightly more equipped to answer that question.

Agencies and brand marketers work on the premise that marketing communications can create awareness, brand favorability, and purchase intent. Each of these can be measured to some degree through consumer surveys, but drawing a direct line to a sale is difficult.

Most marketers also have many marketing activities running simultaneously, so quantifying exactly what parts of their marcom is working can be a challenge. Marketers are also faced with deciphering what factors are driving the effectiveness of any given activity: The creative? The media? The tactics?

Over the past few decades we’ve made some progress in cracking the code of marcom ROI, but many of these techniques are extremely expensive or based on anecdotal evidence. Marketing ROI has yet to become a quantifiable science.

Should agencies throw up their hands and continue to bill by the hour? Not necessarily.

In the digital marketing world we can readily measure engagement. Here are few examples of rudimentary engagement metrics:

Comments, posts, reviews, retweets, likes/follows, email opt-ins, downloads, uploads, subscribing (email, RSS, podcasts, video series, etc.), links to, embeds/installs, user-initiated plays/replays, favorites/ratings, social bookmarks, page views, clicks, game plays, time spent, poll participation, entries (contests, sweepstakes, etc.), coupon prints, and product demos.

Marketing researchers are getting a better handle how different types of engagement impact purchase behavior. And although we’re still years away from quantifying the exact value of a particular engagement activity, we have enough evidence to begin associating a value to an engagement.

I propose agencies involved in digital marketing efforts begin developing engagement models and attempt to associate a dollar value to each activity. If nothing else, brand marketers will have a better benchmark for measuring success, and who knows, agencies might end up with a better model for billing clients.

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What we can learn from BP and Bear Stearns

July 4, 2010

Marketers aren’t immune to making monumental screw ups, although they might not be as notorious or colossal as those made recently by BP and a band of financial institutions. When people overlook or downplay risk, things often blow up.

In the late 2000s major financial institutions nearly cratered the entire U.S. economy as a result of their activity in the sub-prime loan market. A herd mentality created this crisis as an overwhelming number of bankers mistakenly believed housing prices would rise in perpetuity, and at exceptional rates.  A decline in home prices was simply unthinkable.

The exact cause of the BP oil spill might not be known for years, but most believe it was the result of an equipment failure that went unaddressed, reckless engineering decisions, and poor disaster planning. In the context of BP’s global operations, these probably seemed like small tactical issues to BP executives. Certainly nothing that could cost BP billions.

When a marketing communications strategy goes wrong, the fallout is rarely as obvious as an oil spill or financial collapse. Our methods of measuring success and failure often aren’t sophisticated enough to tell us exactly how poorly an ad campaign or marketing activity performed.

Our industry demands we take on risk. However, there are a couple lessons we can learn about risk from both BP and Bear Stearns .

  1. Be wary of group-think. Marketing people are huge suckers for Bright Shiny Objects: the latest fad, a new technology, a buzzword – hype that can distort our expectation as to how something will work in the real world. Experimentation is one thing, but making a big roll of the dice based on a mistaken belief can end badly.
  2. Execution matters more than you think. Agency leadership and brand marketers like to think big picture and often can’t be bothered with the icky, tactical stuff. Execution is almost always the first thing to get short-changed, from budgets to timelines. When implementation fails, the best idea in the world is worthless.
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Changing the Marcom Mindset (part I)

January 11, 2010

The marketing communications industry is ending a long decade of anxiety and bewilderment, mostly stemming from the increased importance of digital platforms, consumer control, media fragmentation, “free” content, and the waning confidence in the ability of traditional advertising to influence sales.

And while marketers find it increasingly difficult to generate awareness, trial, or loyalty through traditional marcom methods, they’re also struggling with a whole new array of tools.

It’s the mindset, stupid.

The biggest obstacle we’re facing is one of mindset – a one-to-many mindset, where most marketers and ad agencies still believe their job is to deliver commercial messages to large groups of consumers. Because of this mindset, our industry has been slow to adapt or embrace a new mindset, where marcom is something consumers seek out versus avoids.

Can we change?

This is the first in a series of post where I’ll outline my thoughts on where marketing communications is going…or where it should go. My guess is only those who change their mindset now will prosper in the next decade.

Next time: Understanding Brands

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Marcom Strategy – The Basics (part 2)

August 5, 2009

media mixThe Marcom Strategy – what does it look like?

Many folks in our industry immediately think ‘media mix’ or ‘discipline mix’ when they hear the words “marcom strategy”. This is understandable because an important outcome of a marcom strategy is specifying how budgets will be allocated between both media channels (television, print, internet, etc.) and disciplines (advertising, promotion, PR, interactive, etc.)

The problem with this way of thinking is ‘media mix’ and ‘discipline mix’ decisions are often made early on by brand management and used as the starting place. This top down approach greatly limits strategic, creative and tactical possibilities.

Ideally, the media mix and discipline mix is a co-equal outcome of the marcom strategy. This often means agencies taking a bottom-up approach, thinking of the consumer experience first, and figuring out the media/discipline mix last.

psychologyThere are ten essential outcomes of a marcom strategy…ten that I can think of anyway. Keep in mind these are not necessarily sequential. I’ve framed these as questions a strategy should answer.

  1. Target Consumers – What consumer segments and internal audiences will be targeted?
  2. Actionable Insights – What insight(s) provide the richest opportunity for connecting with and changing consumers?
  3. Measurable Goals – What thoughts, feelings, or behaviors do we want to activate? What metrics will we use to measure each?
  4. Core Messages – What is the emotional message? The rational message? Is there a story we’re telling? Is that story compelling?
  5. Touch Points – Where and when will consumers encounter the brand? What rationale is there for the timing, context, and relevance of each touch point?
  6. Experience design – What’s the experience? What value does the experience provide consumers? How is it different from other experiences consumers have access to? Why should consumers care? What tactics will be used? What experiences are passive? Interactive?
  7. Experience & decision paths – What activities need to be integrated? How? What paths will consumers take to experience more than one marketing activity? Are there behavioral triggers? What are they? What role does consumer/human psychology play?
  8. Discipline Mix – What disciplines need to play a role executing the marcom strategy? Advertising, PR, Promotion, Interactive, etc.?
  9. Media Mix – What mediums will be used in executing the strategy? Television, print, internet, etc.? What is the budget for each?
  10. Action Plan – What is the high-level plan for implementing the strategy? What are the risk factors? Can the strategy be executed successfully within budget?

You probably noticed there’s a lot more here than deciding the discipline/media mix.

KFC SIGNIntegrated Marketing Communications

‘Integrated marketing’ is a buzz phrase that has been echoing through our industry for over a decade now. To many, Integrated Marketing means ‘matching luggage’: where every marcom activity has a consistent look, voice, and message. This is not integration folks, its brand consistency.

Integrated marketing communications consists of marketing activities that have functional relationships to each other. Developing those functional relationships so each marketing activity increases the effectiveness of each other is what integrated marketing is really all about. Most marcom efforts I see today are only loosely integrated if at all.

Next time…

In my next post I’ll discuss outline the five things a strategist really needs to know before they can develop a marcom strategy.

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What’s wrong with agencies?

July 20, 2007

Broad brushI’ll admit I’m using a very broad brush but let me know if you don’t agree:

Agencies…

  • are led by offline thinkers with no hands-on, indepth interactive experience
  • don’t truly understand online user/consumer behavior
  • don’t understand concepts like authenticity and context
  • believe interactive media is just another way to “broadcast” ads to consumers
  • and their media buying fee structures make online media the red-headed step child
  • focus more on winning new business vs. servicing current clients
  • continue to hype the latest shiny new objects far beyond their ability to deliver marketing results
  • believe they’re entertainment companies…and good at it
  • hate metrics and spend as little time with them as they possibly can
  • don’t understand program/campaign execution is just as important as the so-called “big idea”
  • don’t teach their clients
  • think audio, video and animation = interactivity
  • think in terms of “campaigns” and “windows” – they have a short term orientation and don’t understand interactive marketing is a long term engagement with consumers – not a window