"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Christopher Skinner, CEO at MakeBuzz.
I’ve said before that IBM and other consultancies control the future of digital media because they can get better access to both client and media data.
In ensuing conversations, some argued that great CRM agencies had access to both types of data and that agencies could evolve beyond operational execution to become a bigger part of a marketer’s core value set.
Sorry, but I still disagree. Unless agencies can offer clients a path to new customer creation, impact their bottom line and get a seat at the boardroom table, the consultancies will win the day.
The Path To Being A Commodity Business
One agency executive I am close with told me that fees his agency received to manage several billion dollars in auto advertising for a major manufacturer numbered in the millions. On a percentage-of-spending basis, however, the fee amounted to roughly 2%. Grocers make richer margins.
Unfortunately, that’s where a lot of agencies are headed: They’re becoming complete commodity businesses where they are entrusted to execute strategies that come from the marketer and are paid commensurate with their strategic contribution.
While planning guaranteed media, marketers pay for the manual work of entering data in spreadsheets and ad servers before collecting the best creative plans their publishing partners can put forth. In programmatic RTB, marketers pay an agency so they don’t have to build new software capabilities every time someone tweaks an API or wants to add a differentiated inventory source to an exchange. GM wants to make cars, not run a trading desk.
But there is little value in execution anymore. Eighty percent of programmatic revenue from RTB technology comes from retargeting, Eric Picard recently wrote. That’s a lot of venture investment and software development to show a prospect a pair of basketball sneakers. It also represents a huge opportunity to agencies: Marketers are willing to pay transactional fees to drag existing customers over the line, but how much are they willing to pay if you could create a new customer?
The answer is a lot. But how do agencies have conversations with marketers that result in new customer creation?
In order to make an impact on a company, you must talk about how you can grow their business. You must offer a compelling marketing framework for drilling into new markets and uncovering where the greatest potential for profit is located, neighborhood by neighborhood. And, to be truly successful in 2014, you must also know how to leverage digital media for branding because that’s where those new customers increasingly spend their time.
Get A Seat At The Boardroom Table
A long time ago I complained to a mentor that I wasn’t capturing the attention of my customers. They weren’t spending enough time listening to my ideas or willing to invest enough in my marketing ideas to make an impact. I was told that, unless I was getting a seat at the boardroom table, I would never make a big difference.
To do that, he said, you have to be responsible for 20% or more of a company’s revenue. Eventually, I got there with a few clients. And guess what? The conversations we had in the boardroom were all about marketing frameworks — and never about smarter media execution.
If agencies don’t want to be disintermediated by consultants like IBM and McKinsey, they'd better start figuring out how to get new customers and have the types of conversations that take place at the boardroom table.
Follow MakeBuzz (@MakeBuzz) and AdExchanger (@adexchanger) on Twitter.