5 Changes Ad Agencies Must Make ... Now

We don't need the headlines to tell us that ad spending is down. Most of us are uncertain about how the economic downturn will affect our client relationships and, of course, our revenue.

One thing is certain: The call for accountability on all ad spending is clear. Measurability and proof of ROI are no longer expected just of online advertising. Agencies that specialize in traditional TV, radio and print also must prove that what they're doing is working to keep the ad dollars flowing.

Where there used to be a wall between ads that build brand and those that drive response, today there is an edict to prove return on investment for every ad dollar spent. While perhaps precipitated by a troubled economy, this shift to an ROI-positive advertising approach is exactly what the ad industry needs.

Here are five changes agencies can make now to put them more in line with an ROI-positive approach that both builds brands and drives results --- changes that will help make their fees and revenue less vulnerable to client budget cuts:



1. Become partners with your clients by tying a portion of the agency's compensation to results. Go further by doing the same for agency team members. Everyone should be motivated to achieve the campaign goals.

Without this level of accountability, agency/client relationships suffer. Attaching some level of quantifiable accountability provides an enormous amount of peace and mutual respect within a partnership. This establishes concrete criteria by which the campaign will be measured and its success judged. To do this, consider all expenses and factor in the campaign's results to calculate a cost per new customer.

For this to work, the client needs to offer the agency inside access to key company-wide performance indicators. If no advertising were running, how many calls, website visits, or in-person visits would the company receive from prospective customers? From what geographic areas? How many would result in sales?

2. The creative talent must work hand-in-hand with the analytics team. Creative must drive sales, and agencies must be able to prove return on investment.

Of course, everyone wants their creative to be effective at generating sales or meeting some other business objective. But, in practice, most creative agencies are not deliberate about tying those ads to specific results.

What I'm calling for is actually a major shift in an industry with an entrenched culture of keeping creative divorced from precise measurement. In the new age of accountability, anything that cannot be proven -- with numbers -- to lift the bottom line, is in danger of being cut. Advertising is about growing business; numbers ultimately determine success.

3. But don't think you have to sacrifice the brand on the altar of results. Force the analytics team think about the brand. A successful campaign will both build brand and drive sales -- in fact, you can't do one without the other.

As you get clear data on what's working and what's not, it's easy to slip into short-term thinking -- relying on the numbers too much and ignoring the bigger picture. That can destroy the long-term value of the brand.

One of the huge benefits of an ROI-positive campaign is that it becomes self-supporting. Brand awareness is built through the frequency afforded by increased media budgets that are rapidly scalable due to this positive ROI.

4. Members of the creative team should review and analyze results regularly to optimize ad placement as they go. They should know where and when they're getting results, and know the cost of each new customer.

Gather the data from your campaigns and compare it to your baseline. Analyze it and make the incremental changes as you go. Make note of the peculiarities that may have existed for that time period, and make allowances for those.

The result of this work is that you'll become confident in the decisions you make daily about how to most effectively allocate budget across networks, shows, days, dayparts, and even your creative mix.

5. Include performance goals in the creative brief. Designing an ROI-positive campaign begins when the creative process begins.

If a campaign is designed (from start to finish) to combine the specialties of both creative brand-building and precise measurement strategies, it can generate positive ROI -- whether it's for TV, print, online or any combination.

The good news is there's a significant opportunity today for ad agencies that can offer their clients both strategic counsel and creative development -- and ROI-positive advertising. Contrary to popular opinion, "strategic" and "creative" are not mutually exclusive. Clients should insist on both, and agencies that develop both disciplines will set themselves apart in an increasingly competitive marketplace.

5 comments about "5 Changes Ad Agencies Must Make ... Now ".
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  1. Jeanne Landau from 800response, May 28, 2009 at 8:53 a.m.

    In response to #2 above...
    "2. The creative talent must work hand-in-hand with the analytics team. Creative must drive sales, and agencies must be able to prove return on investment."

    One way to prove return on investment is to use a trackable direct response tool in advertising campaigns, particularly for traditional media like TV and radio. Toll-free numbers are track-able, but so are vanity 800 numbers, like 800-FLOWERS. And, not only are they trackable, but they're also more easily remembered by consumers, hence the elimination of a person having to look up a number online and get sidetracked by an advertiser's competition.

    Vanity 800 numbers are proven through market research studies to deliver an 30-50% higher response rate when used in ads, over numeric phone numbers - either an advertiser's local number or a numeric toll-free number.

    To sweeten the pot, toll-free vanity numbers are trackable. Call tracking data allows account managers and the creative team to monitor ad campaigns and measure cost-per-lead and ROI.

    Furthermore, the tracking reports you'll have access to also deliver consumer data, like addresses and demographics such as average household incomes and average home values for an areacode/market. With this data, agencies can gain further knowledge on their clients' target consumers, and make more strategic moves when developing new campaigns and media plans.

    All in all, as agencies move toward the positive-ROI approach, as mentioned in the article, having a response tool that resonates better with consumers, delivers higher response rates to ads, as well as critical data on the callers, makes using vanity 800 numbers in clients' campaigns seem like a good way to go. To top it off, they're affordable and the costs are justified by the 30-50% increase in leads.

  2. Jeff Goldscher from Aquarius Sports & Entertainment, May 28, 2009 at 11:39 a.m.

    Interesting points. Hardest part is finding clients willing to embrace agency as "partners" - sharing all critical data to measure a positive-ROI approach. If client tracking schemes are flawed, it's hard for the agency to be truly accountable.

    Trackable DM isn't as easy as it sounds - leads often come in "off the transom", with either vanity or unique phone numbers in use. What about online? If branding comes into play, that's a hard thing to measure using DM techniques.

    Not suggesting these ideas aren't valid or possible, but in the real world it may be harder to execute.

  3. Amir Haque from DonatWald+Haque, May 28, 2009 at 1:13 p.m.

    Thanks for all your comments. A key point for me is that what's really necessary here is a reinvention of the traditional agency-client relationship. Like any professional services firm, an advertising agency is in the business of delivering value to clients based on its expertise. By design, that expertise is focused in an area where it doesn't make sense for a client to invest resources and develop the level of specific skill that the agency has. In the new generation of agency-client relationships, the value exchange will be recognized and the two companies will invest in the partnership. And I mean investment both in terms of capital and information sharing. The larger the client, the more challenging the issue and the bigger the makeover, but I don't believe it's impossible. In fact, some of the biggest companies and agency relationships have the best models for how this can work.

    As agencies add to this partnership by having some skin in the game in the form of performance-tied compensation, tracking is always an issue. Even in the best of circumstances, there is no such thing as perfect tracking. It's fuzzy and needs to be modeled and there needs to be a long term iterative commitment on the part of both the agency and the client to make it work. There also needs to be widespread buy-in to the methodology and an embracement of it's imperfections.

  4. Sharon Cohen from SafetyMate, Inc., May 28, 2009 at 3:05 p.m.

    the only problem with these "vanity numbers" is for cell phone users who do not have the standard number to letters shown on their smart phones. something to think about when putting those vanity numbers out there...

  5. Karen Waller from Spot Media Group Advertising Inc., May 28, 2009 at 4:35 p.m.

    This is GREAT!!!! We have been preaching to the choir for years about tracking/ROI and accountability. Our company has done this steadily for over 6 years by taking our clients weekly comps and showing over 5-10% annual increases. I love the statement that yes, the agency should be compensated for this growth. Great Article and anyone interested in how we function with our tracking, we have no problem contracting out to track for other agencies as our process is in place and/or offer the proven tracking system for a fee. Great article............

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