What's the ROI of Putting Your Pants on in the Morning?
Listen to the agency buzz, and we're all masters of measurement and analytics. Every agency worth its salt claims to not only solve its client's business problems but has the data and case studies to back it up. By the same token, CMOs cite producing measurable results as their No. 1 priority.
That's all great. CMOs want results and agencies deliver. Shouldn't everybody be happy? Not so fast. The other buzz out there is that agencies are getting killed on price and are frequently viewed as a commodity service. That's no way to treat someone who helps drive your business success. Maybe agencies are not measuring enough, or measuring the right variables? Maybe the measurement is fine, but the results just aren't good enough? In any case, there's a gap between what agencies are saying about the ROI of their programs and how they're valued in the market.
Direct agencies can argue that they have solved this problem, and digital agencies get high marks for raising the bar on analytics. But right now everybody suffers from the same price erosion and competitive pressure. While we debate the merits of one approach over another, billions of dollars are gushing straight to Google and contextual advertising. According to Ken Auletta in his recent article in the New Yorker about Google, they "provide an answer to the adman's legendary line: I know half of my advertising works, I just don't know which half."
The cold reality is that lots of money that used to go to agencies of every persuasion, now goes somewhere else. This shift has also led to the market devaluation of many of the attributes that agencies use to differentiate themselves, such as creativity, planning, service -- and, yes, even measurement. In a buyer's market, even the most specialized qualities become a commodity.
The only way out of this dilemma is for agencies to take the next step and conclusively prove beyond any doubt that they contribute to a client's business results. There's no faking it. You'll know you have succeeded because clients will happily pay premium pricing for an agency that's indispensable.
There is no secret formula. But after staring out the window for a good while, I'm convinced that agencies need to attack this problem from three specific directions: the client relationship, the resource allocation and the agency methodology.
To get credit for influencing business results, the agency's work has to be tied to a specific visible goal that the client management team really cares about and plans to measure. Then the agency can align its own measurement strategy around initiatives in which the client is fully vested. To enforce this alignment, the most senior people on the agency side need to stay fully engaged in the day-to-day strategy and management of the business. For the record, I think this is incredibly hard to achieve and depends on a near-perfect client-agency relationship.
Agencies also have to flip the financial equation. Too often the story goes, "Here's how much money I have; tell me what you can do." You wouldn't want a carpenter to take your money, but only fix half the roof. Agencies need better data to understand what it costs to achieve specific business results so that they have the resources to succeed.
The most important shift may be the need for agencies to reorient their culture and processes. We've read a lot about empowering everyone in an agency to be part of the creative process. Now we have to train and empower everyone to measure their contributions against the business results that we want to produce. The discussion can't stop with one sentence in the creative brief but has to track through every step in the agency methodology.
Just like putting on your pants in the morning, agencies deliver a lot of intangible value. That's why they will always have a place at the table. Business results, however, will guarantee their rightful place at the top of the business food chain.
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You can follow Phil Johnson on Twitter: @philjohnson