Wednesday, 28 October 2009

The Future Now: Your Marketing Efforts Just Went Global - Google Wave Demo Edited to 10 mins.

Interesting that the launch of Google Wave, developed by the Google Map creators, got a standing ovation from cynical fellow developers -- with laptops and mobiles being shaken in the air over their heads -- at the end of the demo.  Makes it almost seem like something every marketer should be trying to wrap their heads around!
The second loudest reaction was to something relatively small: "
real-time translation", that's in real-time typing, to be clear.  REAL-TIME MULTI-LANGUAGE TRANSLATION.  The world is changing as we sleep, and your marketing efforts just became not America- or Canada- or Britain-wide, nor North-American or English-speaking world or developed-world, but global, in real-time. (And this is barely, in our Anglo-US-centric world, getting any notice...)
Ponder the implications of what that means to "pull marketing"... Now, as the newly empowered consumer reacts/blogs/chats about brands, people in every country of the world can read/watch/hear/understand what they are saying.  That is a really big deal with implications I can't fully fathom.  


When you combine this with relatively ubiquitous, but so-far under-recognized technology, like Bluetooth wireless projection glasses that allow movies stored on micro-chips in mobile phones to play in "IMAX" size anywhere, Super 3G wireless transmission enabling full movies to download to your phone in seconds and sites like Hulu et al broadcasting TV on the WWW (link), you realize that we've already evolved PAST the tipping point. Apple's iTablet will only bring about the AHA! moment of recognition of this reality to the masses.



A simpler description of Google Wave:  

A few Wave features:  

Friday, 23 October 2009

A "Dinosaur" Staggers - is it a Death Blow, or Just a Death Knell?

Warc.com posted an article yesterday about Omnicom's latest report that their 3rd quarter net profit was down by 22.5%.
Let that number sink in:  MINUS 22.5%.
Certainly it's just due to the recession, when we all know ad budgets get cut drastically and it's only for a single quarter, but actually the decline for the last THREE quarters was 22.7%!  That's a heck of a blow if you think about it as though it was your take-home salary.  Sure you can survive if you lost almost a quarter of your income, but the real net effect is that it eviscerates your savings contributions and leisure activity budgets.  In other words,
A drop this dramatic, and sustained, takes all the cream off the top.
The telling number is not the larger percentage drop figure, but the smaller, a 14.4% drop in global revenue for Q3, or 15.4% over three quarters.  This overall figure was led by international operations which dropped 15.8% vs the US slide of 13.2%, despite the fact that overall ad spending in Asia Pacific was up by 11% in Q2, according to a Nielsen report on the same site.  As we have all experienced, as revenue declines net profit drops exponentially faster.  And these losses are despite drastic cost-cutting measures since last fall by Omnicom across the board.

Will Omnicom weather the recessionary storm and emerge wholly unscathed on the other side?  Quite possibly, but WPP, Pulicis and Interpublic (click on links for latest reports) are all experiencing similar issues, so the real question is will the "dinosaur" agencies -- all still relying virtually 100% on their ancient business model -- ALL prove viable over the next few years?  To do so, traditional ATL and their "push marketing" model, now being shifted online via display ads, search advertising, "push" video ads on popular sites and ad-supported "TV" sites like Hulu, will have to prove to be a natural 'fit' for them to continue with business as usual.

In my "What We'll Focus on in Marketing 3.0" seminar for Match Marketing Group (one of Canada's leading mid-sized XM players) at their annual meeting this week, the the discussion focused on how appropriate the Internet would prove to be for push marketing efforts in the future.  Some people thought that Hulu's shorter ad breaks and choice of which ads you are forced to watch made it far more palatable than traditional TV, but the 'light bulb' came on when we talked about what brought about this new age of the 'empowered consumer'.

It was the Internet that allowed consumers to, clearly and loudly, tell the marketing industry that they no longer wanted push marketing (link to post) and that they no longer wanted to watch our :30 video ads more than once or twice.  The Internet brought about The Death of Frequency (link to post) and the birth of hyper/micro-targeting replacing traditional 'reach' (still have to write that one...).  The introduction of remote controls and DVRs already announced The Death of Frequency, but the marketing industry chose to ignore the news and redoubled efforts to insert push marketing messages into shows through product placement and to force people to watch branded messages with an ever-growing barrage of new video media in toilets, elevators and at check-out lines (etc., etc.).

So now we have a ubiquitous, difficult to manipulate web medium with unlimited channels, literally millions of programmers ready to hack any controls we try to implement to force push marketing upon consumers, and a public who have shouted (if not begged), for us to stop our endless, mindless repetition of "branding efforts."  Yet, understandably, we also have related industries that include tens of thousands of people working in broadcast TV, legacy media and related dinosaur ATL agencies who are all hoping that they can shift push marketing onto the Internet.  Maybe I'm way off-base, but I'd urge all these folks to look at the demise of the old music industry's business model (and Apple's corresponding iTunes revolution) and recognize that the horse left the stable some time ago.

There IS a bright future for marketing.  It is called "Pull Marketing" and it will thrive not by shoving "push efforts" into social media via paid/sponsored bloggers, Facebook 'friends' and tweeters, or by building stores on SecondLife, nor by serving up static, animated or video display ads before, during, or on top of the content people want, but through still evolving technology, such as apps that provide real value through usefulness or entertainment on mobile devices like Yelp's new Monocle for the iPhone (if they can do THAT, what else can we serve up to mobile users in real time?).

Pull marketing efforts will include an endless variations of a pool of funny ads in lengths from 5 seconds to 55 minutes, repetition of branded messages in a vast mix of media and product placement and endorsements, but "pull" will be first and foremost based upon "Engagement with the Brand Experience." That's my latest invented phrase trying to encapsulate the concept that all marketing efforts need to begin with thinking first and foremost about what people get from their encounter with any given product or service.  

When we start from that point, the emotional, sensual (if you will) connection users have with something new to them that is based upon surprise, discovery and satisfaction at having found something new that they find valuable, we're usually talking about starting with experiential marketing, but we do need to consider the people who, instead of encountering a Brand Ambassador, are going to read a blog post about someone else's experience with the product or service, or are going to see a video or 2-dimensional ad illustrating, via third person, the initial experience with the product or service.

The key to any really successful marketing campaign, when you think about it strategically, has in fact ALWAYS been based first upon dissecting and bringing to life that initial Brand Experience, then involved figuring out how to maximize consumer Engagement with the most seductive, but real (not over-promised) depictions of it.  All that has changed radically since the dawn of modern marketing is consumer empowerment, delivered by the web, that is forcing us all to drop "push" and go back to "pull," putting the Brand Experience back into an honest, face-to-face, buyer to seller, intimate and true-to-life encounter that is powerfully engaging and is therefore relevant, impactful and memorable.

So the newer, flexible, not-tied-to-the-ancient-business-model agencies will certainly survive and thrive.   As for the dinosaur oligopoly, however, until it stops waiting for the good old days to come back (I'd argue Publicis's Honeyshed mega-flop, and even Hulu, are examples of the old guard trying to re-invent the push model) and hires dynamic 'change agents' to effect radical adaptation internally to adjust to the new reality, we are going to see some majors tanking in the coming 1-2 years.

The reason the slide toward their decline will be exacerbated is that large clients will, sooner, rather than later, begin understanding that they need to fund the much more expensive, but far more effective, XM efforts to stay ahead of their competitors.  The biggest piggy bank to raid for funding XM and emerging media (as we saw with P&G Canada's shift of 20% of their media budget to digital in 2009), and the one that has NEVER enjoyed an actual provable ROI link, is TV.  Once the more clever marketing leaders 'get' that no more push means no more repetition and that pull means more subtle reminders and infomercials in many more media, the TV industry's entire business model will fall apart (it is doing so already, of course) as the advertisers pull their budgets in order to spread the spending around to both higher production costs and a larger media mix.

Ironically, as I pointed out the other day, the CFOs have been allowing brand groups rush into social media willy-nilly with ZERO ROI metrics of any real consequence, yet they continue to bang the drum for provable ROI metrics before allowing a shift from TV to other media.  This has been true since the introduction of TV advertising -- smart, insightful Brand Managers and CMOs use their instincts to decide where to advertise because they know ROI metrics designed to track what actually motivated people to buy any given product are almost impossible to develop.

Wednesday, 21 October 2009

Clients & Agencies "Have to DO Social Media." Really? What's the REAL ROI on Those Efforts?

Comment on MediaPost.com to Mark Walsh's article (Link): Agencies Buddy Up With Social Media Platform

Buddy Media CEO Mike Lazerow says: "Agencies are starting to figure out they have to do social media and this platform is specifically a social marketing platform for agencies."

Excuse me, but WTF?!? "...figure out they have to DO social media..." What exactly is "DOING social media"? Apparently it involves: "...driving user interaction through a range of customizable apps for adding quizzes, polls, YouTube videos, slideshows and HTML, among other features to ("fan") pages." And the objective of this "user interaction" would be...? Making Brand Teams feel really good, like when they break 1,000 best friends on Facebook or followers on Twitter? What's the ROI on "doing social media"?

The brilliant creator of Universal City Walk, amongst other breakthrough architectural BID projects (Jon Jerde Partnership) said "People go where people are." A universal insight into human nature he leveraged in designing 'destinations.' It makes sense to slip in some advertising wherever people are, but no one with any conceptual ability would believe that setting up a booth at City Walk for Bud Lime at which people could become 'fans,' leave their email address and receive spam with funny video clips and quizzes was a great idea for turning them into loyal brand buyers -- oh yeah, great experiment, but we've learned people tire of the spam very quickly. Beer.com and all the other 'young male portals' died quickly due to a lack of content quality and volume as YouTube blew past them. (Link to post) Simply because the masses socialize in a new medium does not make it a new mass medium.

Folks, any medium labeled "social" is not an advertising-appropriate medium any more than telemarketing is. The illusion that people are willingly becoming 'fans' of your brand is nothing more than early adopter experimentation -- it is already fading out (witness the acceleration of how fast new bloggers, Facebook members and Tweeters drop out). "Social media," like listening in on any conversation between people, is merely for listening to how well your marketing efforts OUTSIDE of social media are doing.

Yes, we can whack up some animated display ads to inject into consumers' Facebook wall posts and they won't complain too loudly (they accept this as an annoyance that pays for this fun, free social connection tool), but "social" conversations aren't ripe for the injection of "push marketing" efforts. Early willingness to see what's going on with new technology like Twitter is identical to kids at raves being willing to chat with "guerilla" brand ambassadors handing out free branded vodka shots -- welcome to a new wild and crazy platform/venue, Brand X, but don't expect an invitation to my house party (and don't expect me to be so willing to chat at the next rave I see you at now that I realize what you are up to...).

There ARE going to be new technologies that will allow us to create "PULL marketing" efforts online for smartphone exposure (take a look at Yelp's Monocle and let your imagination work), consider how functional A.I. via Web 3.0 (The Semantic Web) will change the way we market very soon, but all this hoopla about "doing social media" is nothing but a fast-track to ruining our credibility as marketers on yet another new medium. RESIST the impulse to 'flock'; think, analyze and understand that the most fundamental lesson the Internet has taught us: NO ONE wants the endless repetition that push marketing is based upon; no one wants us interrupting their social interaction; and ultimately, no one really wants any brand to 'be their best friend' -- they have fellow humans for that.

What's most interesting in all of this is that the key barrier to experiential marketing winning a bigger slice of the media spending pie, that we've yet to develop a provable ROI metric, doesn't exist as major international brands fall over themselves to 'invest' in "social marketing," which has ZERO ROI metrics (standardized or even commonly accepted) going for it. Kind of like marketers complacent faith in TV advertising at any cost, no?

Monday, 19 October 2009

Hulu Can't Save TV Advertising If It Maintains a "Push" Model

Comment to a very important article about Hulu and the future of TV advertising on FastCompany.com (Link).

This is a pivotal “tipping point” article for broadcast TV’s future, but also for both “legacy media” people and the entire “ATL dinosaur ad agency industry.” Interestingly, so many of the fundamental, step-change answers, the consumer insights Kilar ‘listens for’ so carefully and constantly on Twitter, have already been uncovered, but remain untouched by the industry, in part because they're anathema to our status quo, "Push Marketing" model. Some telling quotes from the article: ‘Kilar: “Users deserve to have whatever they want to watch," he says, "whenever they want to watch it, however they want to watch it."’ ‘At a conference in early September, News Corp. chief operating officer Chase Carey warned, "Ad-supported only is going to be a tough place in a fractured world....You want a mix of pay and free."’ And users will, through TV Everywhere, Boxie and Hulu competitors, get “whatever they want whenever” very soon (Apple’s “iTablet” plus all their competitors and “always on Super 3G wireless Internet” combined with Bluetooth 3-D glasses will soon give it to them wherever they are). The key point that is not being addressed by Hulu due, in large part, to the ongoing power of the legacy-dinosaurs is “The Death of Frequency (Repetition)” -- NO ONE wants to watch a 30 second video ad more than once or twice. Really not. Lee Clow and Apple are one of the few marketing teams who get this at the moment. ‘For the June launch....Microsoft ran a Bing-a-thon....”This gave us the right audience, the ability to educate and entertain, and the opportunity for them to try out the product and then market our product for us....No other ad platform lets you do all that."’ The latter should have read: “No other MASS MEDIA ad platform lets you do all that.” The oldest marketing medium in human history does all of that and much more: Buyers at a market stall speaking with a seller about her/his product. Snake oil salesmen at a travelling fair. Door-to-door Fuller Brushmen. Blue-haired sampling ladies at your supermarket. Every experiential marketing effort being leveraged today. According to Fast Company panel of Marketing gurus, we’ve entered the age of “One-On-One Marketing,” face-to-face, buyer to seller. In the mid-term, this is where the marketing industry’s focus will shift, to Brand Experience/Engagement as the starting point for evert successful marketing campaign.  


Just a thought.

Sunday, 18 October 2009

Apple's "iTablet" Will Usher in the Age of the New Marketing Model

Some time back I put up a video on my personal blog that presaged the development of the "iTablet" by Apple. Daniel Lyons now has a post on Newsweek.com about it ("it" does not exist that we know of for certain, but it is the next natural step for Apple to take) and there are some very simple, but impactful insights he offers up:
"These devices will play video and music and, of course, display text; they will let you navigate by touching your fingers to the screen; and—this is most important—they will be connected to the Internet at all times. For those of us who carry iPhones, this shift to a persistent Internet has already happened, and it's really profound. The Internet is no longer a destination, someplace you "go to." You don't "get on the Internet." You're always on it. It's just there, like the air you breathe. This device is also your TV, your stereo, and probably your telephone too."
Read Dan's short article, it's speaks to your future, and mine. What it says is "STOP trying to put pre-internet marketing effort online and open your minds to the new possibilities." That's all Hulu and YouTube are -- broadcast TV models whacked onto the Internet. They're really not anything revolutionary, they're just tactical efforts that 'legacy media' folks can kind of wrap their heads around.

Maybe you can't do imagine what the new marketing can look like, maybe I can't either, but there's someone out there who will, and soon.

Wednesday, 14 October 2009

Hurdles in Developing a New Ad Agency Revenue-Sharing Model

Maurice inquires:
As part of my internship at a London agency I've been tasked to put together a paper on new business models in advertising. I was reading about the failure of honeyshed.com on your blog and was curious if you had any more opinions or examples on this topic? I would be grateful for help in particular with information on actual financial figures (profits/losses) of agencies launching products and taking equity shares in clients.
Stumbling blocks in the evolution of a new agency revenue sharing model:

Well Maurice, you’re likely figured this out, given what you’re focusing on, but essentially, as I spoke to last week in the post about large margins, the key to any new revenue model is not simply being inventive, it is being inventive in a way that will pay out the BIG money, as the dinosaur agencies used to enjoy. In the old model the media department got 1-2% of the spend, while the creative ‘mother’ agency got 13-14%. Once the latter began to get cut to 10%, then lower, all the “cream” (profit) was eliminated. (Every 1% of a dinosaur agency’s $1 bn in global commission billing represented $10 mn in profit lost.)

Cutting out ‘non-essential’ departments like Strategic Planning led to the agencies being even more narrowly focused on what they’d always been: developers of :30 TV ads. Once the Internet revealed that consumers had never wanted the endlessly repeated TV ad “push marketing model”, traditional ATL agencies had essentially painted themselves into a corner. ATL billings are inevitably going to plummet (note: marketing spending will not) as “push” is gradually, but steadily, rejected by consumers. Even the purchase of so-called “profit centres” like digital shops, DM shops, etc., only further highlighted the dinosaurs’ inability to let go of their ancient mindset. Percentage of billings is no longer a viable model, yet charging for ‘hours worked’ is going to turn agencies into little more than salaried providers of a commodity, but the latter is exactly the direction the big spending clients are pushing agencies towards. 

The only way to tap into the big money is to charge for brilliant ideas that build huge sales, first locally, then around the globe, tapping into the upside and sharing the downside of our clients’ businesses. The problem today is that the clients are all in charge — they can withhold the commission percentages, but don’t need to share revenue because they have all the agencies over a barrel. There is so much competition, and such a depression in spending due to the economy, that the plethora of small start-up agencies are willing to work for very little and give up any control over the IP they’re creating, allowing the “current best approach” developed by a small independent agency in Durban (for example) to be re-used around the world by the global client without royalties. The agencies best poised to ‘push-back’ and make demands for concessions in revenue sharing are the same ones tied to the old model (and totally reliant upon it for survival).

The Virgin luggage example at Anomaly is a red herring. There’s nothing wrong with being entrepreneurial and stepping outside the core of our business focus (which is fundamentally developing creative marketing efforts that help drive our clients’ sales), but it doesn’t solve the real problem: how to get back to being very well paid for doing something other businesses cannot. Make no mistake, the ad agency structural model (a large group of diverse creative types with support staff) continues to exist because it cannot be duplicated client-side (human nature decrees that true creativity evaporates once it’s brought in-house), nor can the breakthrough creative product agencies produce be consistent if only freelancers are contracted to develop it. There is no replacement for the creative hot-house that an ad agency is, first and foremost.

I had Tim Penner, P&G Canada’s President, in response to an offer to do some creative/innovation inspiring seminars, write to me about “...my already very creative people (here at Procter).” Of course it is human nature to believe we’re each naturally creatively gifted, but the type of creativity possessed by people carefully pre-selected for their analytical abilities is distinctly different than the type of creativity exhibited by agency Creative Departments. Successful marketers use agencies because they acknowledge they cannot duplicate the results they get using only their own staff. That means agencies naturally posses a unique selling proposition, a clearly differentiated product that other types of companies cannot duplicate.

The Honeyshed example, while brave and entrepreneurial (if poorly handled by an agency who did not challenge its own methodology), is not really a solution to the big problem the agency business is facing. Creating new media vehicles isn’t the answer, getting a slice of the big profits is. Until one big client with really big marbles (P&G comes to mind, and they are definitely off experimenting with this, but a successful start-up could leverage this idea to expand globally) and a similarly gutsy agency (of any size, really) “gets it” that it is only when you offer a really big carrot that you get a major effort/investment from your “partners,” will this new business model become reality. Our world needs just one ‘best in class’ model to springboard off.

The amazing thing is that agreeing to a commission of 1% on net profit means nothing before a breakthrough new campaign, or brand, or business model has been invented. At Day Zero, it is 1% of nothing, just potential. Given the power of big ideas (and the fact that the majority of new product launches fail), it only makes sense to agree to a deal like this, yet the big publicly-held players shake in their boots at the prospect that they might have to share profits outside of their organization and shareholders for years to come — yet they think nothing of licensing technology for decades, or buying big ideas, like Procter buying Gillette or the technology to make Pringles or Febreeze.

So I apologize, Maurice, I don’t have any specific examples at the moment, but if you find some, do share!

Thursday, 8 October 2009

What Click-Thru Studies Can Tell us About Early Experimentation with "Push Marketing" Tactics on Social Media

Comment on MediaPost to: "Share And Share Alike: Consumers Willing To Divulge A Little Will Divulge A Lot"

So, 're-framing' these latest statistics to turn them into 'actionable' marketing insights:
  1. People are willing to forgo privacy to get freebies, as they always were by, for instance, risking getting put on direct mailing list by submitting their home addresses to get coupons for brands they like. 
  2. Their willingness to risk privacy invasion is dissipated by brand recognition and the trust associated with brand familiarity.
  3. The majority (85%) of people online are very interested in brands, and in learning more about brands they like, as long as the brand info is relevant and/or entertaining. 
  4. Opting-in (voluntarily declaring a brand preference) builds commitment to a brand. 
  5. Frequent and valued (relevant and entertaining, i.e. not the same thing replayed endlessly) brand reminders build familiarity. 
  6. People don't like being manipulated by marketers (sent off someplace they weren't expecting/wanting to go). 
  7. When something is new, like a new technology (clickable ads or the newest social media), average folks are open to experimentation, trying new things out.
  8. As the novelty wears off people stop being sucked in by marketers largely 'push marketing' related tactics (ad clicks decreased from 32% to 16% over 2 years).
  9. A small group of risk-takers or heavy-users (could be labeled "geeks", "intensely curious industry insiders", "shopping channel addicts", or "niche users", the 8% responsible for 85% of all clicks) will interact with technology almost obsessively, driving up the apparent effectiveness of something that few people actually find very interesting (92% of average users responsible for 15% of click volume). 
What does all this tell us?

Internet behavior, when it comes to advertising-related stuff, is exactly the same online as offline -- in other words human nature has changed in no way since the arrival of the Internet. People never liked or wanted anything that resembles 'push marketing,' but they do like and want brands that cater to their interests and needs and they'll respond positively (willingly) to 'pull marketing' efforts.

New ('emerging') media like 'social media' will go through an initial period during which average people will allow unscrupulous and often breathlessly prophetic, evangelistic, entrepreneurial types who are essentially 'push marketing enthusiasts', to misuse the new media and make claims that it these media are the new broadcast channels, ripe for 'push marketing' efforts. Initial, 'trial experimentation' by consumers will give credence to the claims of these push marketers and will result in sufficient dollars being spent by enough sufficiently credible (popular) brands to undermine the long-term possibilities of using these media for genuine 'pull marketing' efforts.

The telephone is also a social medium, although one-to-one, but no one wants to be interrupted in the midst of a call by a marketing effort, nor do they want us using the phone to call them with a telemarketing effort (although about 8% of people out there will take 85% of telemarketers' calls...). If "social marketing" is ever truly going to become a viable tactic, it will have to be built around 100% relevant, useful, entertaining "PULL" efforts, without the faintest malodorous whiff of "push", I suspect.

Wednesday, 7 October 2009

TV Ads Aren't Going Away, They'll Just "Fragment" From a Single :30 to Many Versions on Many Media Channels

Some of you have read me going on about the future of marketing and have dropped me into the "TV advertising is dead" camp.  I beg to differ.  My point has always been that it is merely repetition/frequency that is dead, video advertising (as opposed to the single channel-specific "broadcast TV") is going to enjoy a long and prosperous life.  This study in this article on MediaPost backs this notion up with statistics on effectiveness/impact (link):

My point is that what the future of advertising/marketing holds for the 'seers', the visionaries who get it, is that we'll have to be generating not a single 30 second ad, but an unlimited variation of a campaign's ads, ranging from 1 second edits to 10 minute advertorials/stories/films, and each of these in 20 versions for different micro-targets on multiple, plus all the other static 2-D, (3-D?), and audio versions to run in other media within each brand's mix.  Sure, this will mean LOTS more work for the Creatives, who used to supervise the production of a single, or set, of storyboards, but they were spending too much time down in the pub anyway!  ;-)

This is a big change in our industry's modus operandi -- but if enough people understand and embrace it (Apple and Lee Clow are pretty much the only ones leading the way), there will be a lot less bleeding in the agency business and a smoother transition to the new marketing model.

Saturday, 3 October 2009

Media Convergence

Nice little tech/social media info piece from the Economist that Nick Kinports posted on his AdMaven blog:


Friday, 2 October 2009

Trimming the Fat From Your Golden Geese Will Kill Their Value

I've talked about how Procter et al are helping to kill creativity at all the agencies and the production houses the agencies work with, even while demanding the opposite.  I've suggested a link between that same phenomena and why CMOs are lamenting a lack of creativity and 'spark' in the entry level marketing people they're interviewing.  I've also suggested that so-called 'social marketing' is a misnomer that should be changed to 'social PR' (link to post).

What's the common thread between all these things?
Money.
More specifically, high margins.

With the introduction about two decades ago of the dreaded Procurement Department and their beloved RFP, which precipitated a shift in agency selection decision-making from CMOs to subordinates of CFOs (yes, a guarantee of poor agency choices -- but that's not my key point), we saw profitability at agencies begin to weep, then bleed, then hemorrhage.  (Once a client begins cutting your margins, they're not going to stop until yours are lower than theirs -- and you'll never have as much access to their numbers as they will demand to yours...)

Once the biggest global clients had cut the agency margins down sufficiently painfully, most agencies did the worst possible thing, they fired most of the Strategic Planners, especially the smartest (most expensive) ones (most agencies never figured out how to turn Planning into a profit center -- and why would they?  Developing marketing solutions for Clients isn't the business they're in -- producing Lion-winning mini-films is.).  Account Service (although I've never seen a 20 year comparison) doesn't seem to command the kind of salary advantage over other industries (financial sector, anyone?) they once did.  The media folk all went independent in the late 80's/early 90's and took the top 1.5-3% of the ad agencies' 15% with them, the first step in the clients knocking their margins to an 'even' 10%, then lower still.

The only talent agencies couldn't cut back on were the Creatives.  When you cut down to the bone, you can't run a creative service business without talented Creatives, but you can with only fair-to-middling talent in most other areas.  (Experiments by clients to bring the Creatives in-house failed miserably, over and over again until they accepted that the 'wild child' will inexplicably die 'in captivity.')  Ironically, the Creatives live a co-dependent existence -- despite their value to the agency industry there's really no other place for them to work, so when agency revenue declined across the board, their compensation no longer continued to climb.  The only exception are the rare few talented enough to become Directors at production houses, then this year Procter announced their intention to cut that industry's margins down to the bone (link to post)...  Great idea to lower their costs and raise shareholders' dividends!

I find it humorously ironic, too, that the CMO's of the multi-nationals feel the really aggressive, strategically-creative thinkers aren't walking in their doors anymore (link to post).  Many of this relatively rare type of individual used to enter marketing via top schools or agencies.  Why don't they choose marketing anymore?  These people go where both the challenge of innovation and big bucks converge.  With pressure on both agencies and CMOs to lower salary costs, they've all been skimmed off by the financial industry, amongst others.
There's a thread here.
Question: Where are the really talented Directors of advertising's :30 mini-films going to go once P&G cuts all the 'fat' out of the production house business model?  These firms are run by aggressive, strategically-creative individuals who are in the business because it is creative, high-pressure (suits their risk-taking, "A" type natures) AND gives them the opportunity to make really big dollars.  Take their carrot away and they immediately go looking elsewhere for work.
So what has this got to do with "Social Marketing" and experiential agencies?
Nobody enjoys a higher margin today, if they're smart, than "Social Media Specialists"!  I mean, how much should they get paid?  It's a new, mysterious segment!  If these firms/individuals aren't making an absolute killing right now, they're doing something very wrong.  It's their moment in the lucrative spotlight.  How much should it cost to develop an app that entices people to share it amongst their Facebook friends?  LOTS!!!  What about the development of a branded iPhone app?  TONS!!!

In the early days of website development, HTML designers who hadn't yet graduated were starting new agencies that made 90% profit.  Clients have no idea what they need to pay for "Social Marketing" services any more than they did in the early days of TV commercial pricing.  (Media pricing has always been about 'whatever the market will bear', not 'value for money.') All clients know is that everyone else is jumping on the bandwagon and the ones who are most active are increasing their share of market, so they better create a budget for it!  "Will $1,000,000 be enough, do you think?"  (Strangely, despite all the CFOs demands for ROI metrics, big bucks are being shifted to "Social" only because the CEO/CMOs are convinced they need to be there.  Hm...)

So what can today's experiential marketing agencies learn from this?  I mean, most of them are stuck in 'commoditized, cost-plus, executional-provider mode'.  It's hardly like they can suddenly raise their mark-up in an environment where, not only are they fighting each other to offer the lowest prices, but the clients can more or less work out their real costs.
Strategic-creativity.  "Added-Value."  Mystery and magic, folks.
For far too long experiential agencies (and many of the digitals) have been confusing "wild and crazy" with "on-brand-strategy."  Simply stopping people in their tracks, even engaging them for a few minutes, ain't the same as building an on-strategy brand experience.  The big bucks are in the nebulously valuable realm of strategic-creativity (where the successful ad agencies continue to make good money), COMBINED with flawless execution in-field.

When more than just the bleeding-edge of the experiential marketing agency contingent begin offering the magic and mystery that the hot shops (and dinosaurs) and new "Social Marketing" agencies do (by investing in strategic-creative thinkers who've proven their chops in other segments), the segment will not only start winning the FRIGGIN' HUGE slice of the marketing mix pie that XM should be garnering, they'll start making the kind of margins that the other agency segments do.  And they'll do it without a proven ROI metric (although having one would guarantee their success!).
"Trimming the fat from your golden geese will kill their value."
That's the underlying insight for clients, here.  When the aggressive, strategically-creative, entrepreneurial types out there who create and run the world's most creative and leading-edge businesses lose the opportunity to "strike it rich," they abandon that pursuit, to the detriment of their clients' brands (and go to work in the 'creative financial sector').

Sure, look for ways to cut costs, for 'efficiencies', but keep in mind that there are some high-margin supply businesses that, strategically, should be coddled and nurtured, not cut to the bone.  (Yes, their principals drive new Porsches and vacation in Patagonia -- that's called "a cost of doing business," a small price to pay for captivating and motivating marketing efforts.)

If, as Fast Company has labeled it, this is the age of One-on-One marketing, then where should all marketing campaign spending be starting? (link to post)  (Hint: it's not digital or social!)

Thursday, 1 October 2009

"Legacy Media" Guys Speak to Addressability, but Forget About the Death of Frequency

Todd Juenger of Jack Myers' MediaBizBloggers is talking addressability on broadcast TV, but he's still speaking like a "legacy media" guy.  I think what's being missed is the fact that no one wants or needs to watch the same ad more than once or twice.  My comment:

Todd, I like what you have to say (most of the time!), but sometimes (as it the case with shifting from demo- to psychographic targeting) to find a solution to a fundamental problem, the first thing that is necessary is looking at the issue from a radically different point of view.

In this case, the entire argument over whether or not viewers will zap through ads on DVRs, whether the ads are delivered to them in a highly addressable way or not, goes away once we accept what the internet has demonstrated to the marketing world: The Death of Frequency.

If viewers begin to understand they are only going to have to sit through any given ad once or twice, versus have it served up ad infinitum, the likelihood of zapping drops dramatically. (I actually enjoyed the Cadbury 'eyebrow dance' spot the first two times!) The only major advertiser embracing this insight at the moment is Apple.

Dramatically reduce frequency, improve hyper/microtargeting through addressability, and increase production budgets to create many more versions of ads and you have a solution to our industry's major stumbling block. But that's just my opinion!   


Link to:  The Death of Frequency

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