September 21, 2009

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3 Ways for Agencies to Cope with Recessionary Pressures Ad agencies have always been at the mercy of client anxieties. Now that it's 2010 planning season, agencies are getting hammered on process, productivity and price. Agencies have always been the whipping boys for all manner of brand or product performance issues. Everyone understands that agencies exist so they can be fired. Everyone also realizes that the core agency value proposition is either “we know or can do something you cannot” or “we have arms and legs to get things done faster, better and/or cheaper than you can do it yourself.” But during this recession agencies have had even more tenuous relationships with their clients. The list of clients that broom agencies quickly seems to be growing. The research indicates that clients change agencies, on average, every 2.5 years, twice as frequently as before. There are all kinds of reasons but the bottom line is that few clients believe that agencies are long-term partners. You can’t be a partner if they don’t know you well. Rarely are agency chieftains, part of a client’s inner circle. It is unusual for agency heads to be considered the CEO’s or even the VP Marketing’s consigliore or to even have a voice in crafting client strategy. Instead agencies and their leaders have become receivers of strategic output and implementers of tactical plans. Very few clients believe that their agencies actually know the fundamentals of their business, their category or the critical processes within their enterprise. Agency expertise is understood as generic, plain vanilla project management and content creation. Agency outputs are commodities that can be priced and negotiated by purchasing agents. And even that role, too, has a built-in trap. Aggressive cost controls and benchmarking have given savvy clients unusual leverage. Many specify upfront the time, cost and staff to produce a postcard, a website, an e-mail campaign or a #10 mail package. Few are willing to pay for anything but minimal staffing. Even fewer are willing to pay for senior people who allegedly bring added value, insight or experience to their accounts. Yet agencies, from the 2-person shops to the global conglomerates, seem to be impotent to affect the size, timing or sequence of client spending. Agencies are output. It is a sobering thought, which fundamentally changes the game. Yet changing these circumstances requires changing the way agencies do business. Consider three areas to creative an opening for agencies to have a greater impact on their own fate. Leadership. Clients hire agencies that have a point of view. If you don’t have a POV you are just another vendor cranking out pretty pictures or punchy copy. Unfortunately too many agencies either haven’t developed or articulated a distinguishing POV or are unwilling to expose their POVs for fear of rejection. In a corporate and financial environment that risk averse, having a POV is a point of distinction, which must be leveraged to an agency’s benefit Agencies often have practical knowledge not only about a client’s strategy but generally understand the distribution channels, the media, contact centers, customer service, fulfillment, retail traffic patterns and nuts and bolts operational reality. Agencies are often in a position to traffic information, data and ideas among and between different business units and to infuse grand schemes with a healthy dose of reality. Leadership requires agencies to get out ahead of their clients by thinking through and anticipating events, sketching out likely competitive scenarios and contingency plans, understanding the personalities and power dynamics within client organizations and presenting “crazy” ideas or trial balloons for client consideration. Doing this requires proactive thinking and investment spending. It also requires that use senior, seasoned people to get top-level access and to put this stuff across persuasively. Account people who take reasonable risks, get beyond the day-to-day and become trusted, memorable or effective on the basis of their personalities play a critical role in offering clients the leadership they crave. Efficiency & Transparency. Developing tools to train, manage, deploy and effectively use agency resources is critical to maintain margins and grow profitable businesses. Clients routinely ask skeptical questions about rates, billing and productivity. Though most agencies have adopted the professional services fee model, they haven’t used professional services norms to maximize the value, productivity and utilization of their people. This is not a software problem. It is a matter of understanding who is working and what they can do and mapping these resources transparently against client needs in real time. Improved real-time resource planning in-tandem with clients is a necessity. Agencies have not parsed...
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Can Online Display Ads Work Harder? Online display ads are the red-headed freckled kid of interactive advertising; present but not quite understood even though last year 4.5 trillion ads were served and each of us was exposed to nearly a hundred ads per person each business day. Marketers spent an estimated $5.9 billion in 2008 to spray and pray banners, skyscrapers, advergames, “ghost” ads and moving or animated images (the top five ad formats) across the Internet. Some hoped to provoke clicks and convert those clicks into sales. Yet many just hoped to expose passing web surfers to a brand image or brand impression in the hope of raising or extending awareness or priming the pump for later consideration or sales. And while the metrics of direct response advertising is generally known there is still no real consensus around and the value and utility of display advertising other than the logical belief that what worked for a century in traditional media ought to work in digital media. And while we buy the logic, many of us still have the “banners suck” mantra at the forefront of our consciousness. But rationally it makes sense. Images, sound, moving pictures and uber creativity ought to capture the attention and motivate consumers at least as well as short text ads served up by search engines. But the difference for leading display ad sellers like Yahoo, Facebook, Fox Interactive, Microsoft, AOL and Google is in the perception of value and the ability of marketers to target and measure campaigns. And while 9.5 percent of campaigns were “behaviorally” targeted using a variety of methods and measurements, most marketers don’t have faith that they can effectively and efficiently reach target audiences using online display advertising even in this environment where there is a glut of inventory at significantly discounted prices and a gaggle of ad networks peddling remnant inventory for as low as 40 cents per thousand. The Online Publishers Association and ComScore, both seriously interested parties, did a study of 80 campaigns for 50 top brands which was tracked across the top 200 highly trafficked sites and concluded: 1. The 80-20 rule applies to clicks. Eighty percent of the clicks come from 20 percent of the people exposed to the ads. At very best only 1 in 5 ads draws a click whether that was the intention of the ad or not. 2. Displays Ads Prompt Search. Queries for terms exposed in display ads were searched 50% more often a week after exposure and 38% more often even 4 weeks after exposure. If you see something that intersects your interests or your personal wish list, you are more likely to search for it directly when you’re ready to buy. Direct and brand advertising interact synergistically online and offline. 3. Display Ads Drive Site Engagement. Those exposed to ads spent 34 minutes per unique visitor on the sites exposed. This is hard to believe in terms of the time spent on site and the amount of “lift”. Maybe it just measures the vagaries of site architecture and navigation. 4. Brand Exposure Bumps Up eCommerce. Those exposed to brand ads spent 7% more on average when they bought. This feels like advertising orthodoxy; exposure drives awareness, consideration and purchase and maybe added exposure convinces customers to trade up a little. But whether you buy this data or not, the issue of buying, targeting and measuring still looms large for anyone seriously contemplating an online display campaign. Into this fray comes Shaukat Shamin, a Yahoo veteran with $6 million in venture money from Rembrandt Ventures, Onset Ventures, Reid Hoffman and SoftTech VC, and a brand spanking new display ad platform solution called Permuto. Permuto purports to create tools for display advertisers similar to the Google Adwords toolbox which will enable targeting, price negotiating, clearance verification, reporting and more effective sales conversion from display ads. Shaukat has organized a network of about 100 eCommerce, comparison-shopping sites and bargain hunter sites that cookie prospective buyers based on the category, product and SKUs they look at online. They observe, infer and assign an “ActiveShopper Score” to these individuals and then offer marketers the opportunity to follow and serve them display ads for the products they spent time with on a cost-per-click (CPC) basis. He claims this is different and better than existing "remarketing" solutions but I can't see how. You buy this service on a per-SKU basis and, so far, there are no packaged deals to be had for multiple product sets or categories and there is no...

Danny Flamberg

I am a veteran marketing consultant working with leading and emerging brands

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