CEO, DMS Group, Asia-Pacific
The real question here is can marketers afford not to pay for optimisation? The answer is simple: optimisation has and always will have to be paid for. The differentiators are: where and on what you spend the money; and how you are compensated.
In most cases, marketers spend their advertising budgets via agencies to drive optimisation and efficiency. Agencies spend clients’ budgets across multiple mediums to deliver optimisation and efficiency of this spend. Media owners invest into content and technology to deliver better yields (ie. optimising available inventory and effective spending). So what’s changed with digital and is it that different to what’s happening to the entire ad space?
Take Coca-Cola, which spends some US$3 billion a year on global advertising. They were one of the first (after P&G) to start an industry-wide movement towards a ‘value-based’ compensation model that promises agencies nothing more than recouped costs if they don’t perform - but profit markups as high as 23 per cent if their work hits top targets. This model can create positive behavioural changes between client and agency, but does it lead to a dilution of brand messaging and creative risk-taking? One thing is for certain, the models which exist today are changing and what is adopted will evolve.
CEO Asia-Pacific Aegis
Online has always been the most accountable medium and it is appropriate that clients ask agencies and vendors to be accountable for their advice. But tracking and optimisation is becoming increasingly complicated. KPIs are expanding and the resource required to optimise in real-time is becoming more costly.
Clients increasingly judge digital success based on the entire customer journey, not simply on a single click.
This is not a problem to track. We know when and where the banner has appeared, whether someone has interacted with it, clicked on it, visited a brand website, and we can ascertain the value of purchased goods if they went on to order something online. That gives us a single view of success - where a linear online experience can provide us with enough data to improve our campaigns and provide clients with tangible ROI data. This is simple to do, and clients should invest in it. The cost of tracking can be outweighed by the benefit of optimisation, and most clients understand this.
MD Media Contacts Southeast Asia and India
Broadly, current compensation models are based on historical concepts like media commission, which incentivise an agency to be complacent, as opposed to being smart and savvy. It’s taken a while for marketers to understand this, and even longer for them to change their compensation philosophies, but the trend is positive.
Marketers are more willing to pay for ‘consulting’ services, and understand the 800 pound gorilla in the room is not the agency fee, but the Google payout.
We find that ‘digitally smart’ clients, who understand the effort optimisation takes, tend to be a combination of (a) smaller clients with smaller budgets (b) clients whose business is more impacted by digital, such as those in the finance and travel verticals (c) clients who run ‘lead-generation’ based businesses.
We try and focus on as many of these ‘sweet spot’ clients as we can. We’re also seeing a huge growth in fee based consulting assignments in the broad area of earned/unpaid digital media, as the conventional commission-based yardsticks simply don’t apply here.
This article was originally published in the January 2011 issue of Campaign Asia-Pacific.