commoditization

Agency Economics, 101

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Sales organizations spend lavish amounts  of time, energy and capital pursuing business at agencies.  But once there, most of us ignore the elephant in the room.

We talk about marginal improvements to performance, brand “safe” environments, effective CPMs and a lot of other minutiae tied to successful stewardship of the latest plan.  We prattle on about our latest reporting dashboard, the premium publishers or content we represent, how we’re more “transparent” than the other guys.  I wonder if at a certain point of this litany the agency folks just see our lips moving and only hear “blah…blah…blah….”

We stay locked onto the marginal, temporary issues of media planning  (insuring that all we’ll ever have is marginal, temporary success) while ignoring the big economic issues that could give our relationship with the agency some much needed urgency and power.

It’s the Agency Economy, Stupid!

This week’s Drift is proudly underwritten by Krux, the Salesforce DMP.  Krux drives more valuable content, commerce, and advertising experiences for the world’s leading marketers and media companies. Clients include Anheuser-Busch In-Bev, JetBlue, Kellogg, L’Oréal, Meredith Corporation, NewsCorp, the BBC, and Peugeot Citroen. Learn more at www.krux.com.

My hypothesis is pretty straightforward.  We are living at a time of consolidation, in which clients and agencies are going to be dealing with fewer companies, not more.  (This trend is masked by the insignificant “testing” that goes on around the margins of planning.)  The winning media companies, aggregators and tech vendors will be those who frame their benefits and align their value with the core economic issues confronting agencies.  There are four:

Account Security: Senior agency executives live in perpetual anxiety over a major account going into review.  That’s a seismic event.  But the more subtle, persistent agita comes from the soft erosion of clients inviting other shops in on a “project” basis.  If you’re not talking about how your services and capabilities can help the agency drive interest and loyalty with the client, you are missing a big opportunity.

Budget Growth: The dirty secret is that margins on digital media buying are thin to non-existent.  The only way the agency stays healthy and profitable is to get its current clients to increase budgets.  Too many of us only stay focused on getting our share of existing budgets, instead of on how we can help the agency access and grow the dollars they get from clients.

Workforce Extension: It’s no secret that agencies are severely understaffed.  Most don’t have the FTEs (Full Time Equivalents — agency-speak for “people”) to do more than keep up with process.  How can your organization serve as an extension of the agency’s own workforce and provide core services — creative, aggregation, marketing, promotion — that allow the agency to drive more profit without more bodies?

Commoditization: And here we sellers thought this was our issue!  The agency — and most especially the planning teams — are swimming against the same currents of commoditization and automation that many of us do.  How can you effectively bundle your services into programs and add value to them so that they can’t be commoditized or automated? How can you help the daughter agency or the planning team hold onto the spending and influence they so desperately fear losing to the trading desks?

Are these conversations you’ll have with the media planner at the 11th hour of the RFP process?  Hardly.  But if you’re not engaging in them at an organizational level and allowing them to drive your strategic planning, then don’t be surprised when the RFPs stop coming and you find yourself frozen out of the agency entirely.

The core content of today’s Drift was posted in 2012.  Despite so much change, how little has really changed.

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It’s the Experience, Stupid!

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Last month in this space I called out agencies for neglecting their own brand identities and enabling an era of faceless commoditization.  Today I’ll turn that same lens onto sales organizations.  Because mediocrity doesn’t break down your door at 2 a.m.;  it creeps in on little cat feet.

In my experience working with hundreds of digital sales teams, they routinely overvalue (and over-compare and over-explain) the specifics of their individual ad products and programs.  And just as certainly, they undervalue the impact of the total business experience their company provides to customers.

The Drift is proudly underwritten this week by PubMatic, which empowers publishers with one holistic platform to sell advertising more intelligently.

Let’s illustrate through a simple test.  Suppose that customers were asked to complete the following statements:

“When we work with (your company name here) they always ________ and never __________.”

“I always recognize the work of the sales team from (your company) because _____________.”

“We would pay a premium to work with (your company) because the _____________ they provide has become irreplaceable.”

Were you to field such a survey, I think you’d find two themes.  First, most customers would have trouble answering:  they’re not getting a clear, strong feeling from your company.  Even if their feelings toward your organization are generally positive, they’re not deep or particularly durable.  Second, the answers among customers who could respond would be all over the map.  As would the answers of your own people, were you to survey them.

The truth is, we do not achieve organizational personality because we do not strive for it in an organized way.  We’re not manufacturing a consistently outstanding business experience for customers because we’re consistently manufacturing excuses for not doing so.  Our business is so fast paced….It’s all about the technology….The customers only care about bottom line performance numbers….yada yada yada. If you’ve been kicking this particular can down the road until now, well…you’re running out of road.

Continually responding to pricing pressure by cutting rates is like selling off pints of your blood.  Works OK for a while but it’s an unsustainable long term solution.  And if you think you’re going to simply invent your way out of the corner, that’s an even taller order.  No, the real solution is right in front of you:  Create a customer experience that’s transcendent, unique and addictive. A given media planner may or may not put your site on a given plan, but long term, it’s the experience that binds one organization to another.  And it’s a variable that you ultimately control.

A quick call out on behalf of my friends at iMedia:  If you or a member of your team are not yet signed up for the upcoming Breakthrough event (October 16-19 at Loew’s Lake Las Vegas Resort), you should get hooked up right away.  Great senior level customers on site and an extremely conducive atmosphere in which to engage them.


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