It’s no secret that instead of making a beeline for the usual main course of traditional marketing, hungry CMOs are now getting stuck into several side portions of performance-based marketing and advertising that can guarantee a healthy ROI.
While it’s great that advertisers are designating bigger chunks of their marketing budgets to more alternative advertising, could more be done to wipe out wasted ad spend altogether and whose responsibility is it to help eradicate this grey area?
We spoke to a handful of people from across the performance marketing space to ask them for their views on industry relationships, advertiser perceptions, CMO pressures and agency challenges.
Our hit list included chief operating officer at media agency Maxus UK, Tim Irwin; chief development officer and managing partner of global communications, media and marketing brand, Havas Media, Darren Goldie; VP of Audience on Demand (AOD) EMEA at VivaKi (part of the Publicis Groupe), Geoff Smith; head of agency business at programmatic display ad solutions company Sociomantic Labs, Alistair Wong; managing director of performance marketing agency R.O.Eye, Gavin Male, and commercial director at digital marketing agency Lowe Profero, Neil Ramsden.
Starting with the basics of the current relationship between agencies, advertisers and tech providers, Ramsden said the typical UK agency and advertiser relationship has grown increasingly integrated. He says as the economy is picking up there is definitely more potential to try new innovative technologies and tools compared to a year ago.
“Clients’ skills have developed in the digital space with increasing ‘in-housing’ of digital media activities such as PPC,” Ramsden said.
“Agencies are finding themselves moving toward a consultative role whereby data, analytics and strategic advice are becoming the most valuable part of our offering.”
He also agreed that CMOs are under more pressure from advertising bosses to prove ROI and said while agencies and CMOs fear budget cuts if marketing spend is not used up in the allotted time, this is negated by an effective marketing plan and budget management across the year.
Justifying value
Ex-Google employee Wong, who spent more than seven years at the US internet giant, stressed the importance of how advertisers now need to be sure they’re working with performance marketing partners that can help them gain the ‘right kind’ of new customers – while also helping them to grow their relationship with their best existing customers.
“Meanwhile, agencies need to work harder than ever to retain business, justify their value and show they are doing full market due diligence to source the best tech vendors for their clients,” Wong said.
“While we see a majority of agencies committing to these objectives, not every agency manages to have a finger on the pulse of the innovative tech that populates this ecosystem. Agencies need to recognise whether incumbent partners may be limiting an advertiser’s future growth capabilities.”
Irwin said the advertiser and agency relationship changed fundamentally a few years back with the development of ecommerce. He says the use of performance marketing to drive sales has now morphed into an ‘essential business service’, rather than a ‘nice to have’ marketing element.
The grey area
On the subject of the relationship between advertisers, agencies and tech providers and if a more cohesive and transparent approach is needed to reduce the grey area of wasted ad spend, Male said the importance of all three working together cannot be underestimated, and added that there is no black and white in any consumer buying journey.
While fortunately for clients the technology and big data is getting better and things are more trackable, Male said the ‘grey area’ is definitely not going away.
“The whole world of digital crosses over on multiple occasions in any transactional journey whether this is through different platforms, devices, cookies or apps. It is a very grey process and as user habits change it gets greyer,” Male said.
“As an agency we see part of our role as playing with the palette of grey with the aim of making it more black and white and we’ll use a range of technologies to help achieve those goals, but never to the detriment of the user journey or sale.”
He stressed it’s the client that is calling the shots and if they see a value for having and managing a separate tech company and agency, then that is their prerogative and it is down to their suppliers to be professional and provide the best possible service or product that they can.
“The potential conflict exists when the agency, generally employed to provide a specialist skill set that the client is lacking, believes that there is a better solution for the clients need,” Male added.
He says as with all types of technology, the market is continually evolving and changing and it is down to the specialist agency to ensure they are putting the best potential suppliers in front of the client to allow them to make an informed decision – ‘without being led by the sales patter’.
Smith said agency scepticism does still very much exist from an advertiser point of view – which he said is why open and honest relationships with clients is needed. He argued that if you ‘start to hide behind a curtain in any way’, it becomes very difficult to gain a client’s trust.
“As an advertiser, you need to know what you’re buying and how can you do that if your media partner is not open and transparent?” Smith begins.
“Advertisers need to know what their agency trading desk business model is. At VivaKi, our only aim is to get the best possible outcome for our clients. It is why we work on a percentage of spend model so clients know exactly what they are paying for. We are very open about what we charge.”
More seamless journeys are needed
Wong said at Sociomantic they frequently advise marketers to avoid creating a fragmented customer journey.
“Our industry could take its own advice by helping to create a more seamless journey for our own customers,” Wong said.
“From advertiser to agency to tech supplier, a disjointed process can complicate even the best intentions when it comes to innovation adoption. But the fact of the matter is that each programmatic player here shares the same desired result: relevant, intelligent and personal media consumption, attained at sustainable marketing costs.
“To achieve this, advertiser, agency and tech vendor need to be a part of the same conversation, constantly learning from another and helping each party become more agile in their capabilities – it’s truly a team effort.”
He said disjointed relationships can create room for misunderstanding, perhaps leading to extensive and complex implementation processes – which in turn drives up costs for advertisers in the long run.
Wong firmly believes that agency and tech vendors owe it to one another and the advertisers they serve to determine potential weaknesses and how best to collaborate and complement one another’s strengths.
“If this doesn’t happen, an advertiser only need look at the extensive list of other available agencies and tech suppliers found across the performance marketing spectrum,” Wong added.
“The most solid advertiser-agency-tech collaboration is driven by ideas produced from an open environment rarely found yet always sought after in this space. If each partner commits to this level of communication, underpinned by client results then all can benefit.”
Smith said the fact that it’s possible to track pretty much everything in digital doesn’t necessarily mean it will demonstrate true ROI.
“Not everything that can be measured is important, and it’s vital for advertisers to understand what really drives performance,” Smith explained.
“For example, achieving a lower CPC may on the surface give you ROI, but if half of your clicks are fraudulent then your budget it wasted. Buying on a CPM and optimising towards performance KPIs is likely to give you a better quality of inventory.
“The reality is there are no guarantees in terms of performance and anyone guaranteeing on a CPC is likely to feel the pressure to perform and this could encourage fraud.”
He also stressed that it is ‘vitally important’ that all digital activity is tracked through a single platform to understand where the performance is coming from.
Pricing transparency
As advertisers become more clued up and demanding on ROI, Ramsden said this has also led to more openness and transparency around pricing. He says there is always the trade-off between pricing and transparency, but ultimately an agency can only work on a piece of business if it breaks even/is profitable, so it can be seen as a self-regulating industry.
“I think it benefits both parties to have a fully transparent pricing model; savvy clients realise that agencies need to have a fair profit margin on a client to ensure the best teams and resources are working on their account,” Ramsden begins.
“Not being transparent on costs is no longer an option and actually more of a hindrance to great work.”
But can ROI in ecommerce marketing always be measured and is the technology there to do this? In Goldie’s words, ‘you become what you measure’.
He said the performance marketing industry will find it difficult to show growth though limited measurement even though its impact on the business, in most instances, is positive.
Goldie added that publishers are introducing the same programmatic platforms as agencies but have less input in the creative and strategic direction of the marketing activity.
“It is very important as an agency to work with publishers from the outset and their third party technology partners (such as PubMatic or Rubicon) to generate more behavioural insights and audience detail to inform planning,” Goldie said.
Under pressure
Smith said if a company is buying cheap inventory and marking it up in a non-transparent way, if they can actually drive the CPA well under target, they have the option to increase the cost of the media without the client knowing, in order to make a greater margin.
“However, if that company was working on a straight percentage of media spend, then they will do their best to come in as far under CPA as possible in order to drive up budgets in the future,” Smith explained.
“In terms of performance for a client, this model should drive significantly better results. For advertisers to learn about this space it’s important to have a transparent partner and know that they are not hiding anything.”
London-based Irwin, who said CMO’s have always been under pressure to prove ROI and that these days it’s easier than ever before for them to do it, believes it is possible to measure ‘everything’ and attribute some sort of ROI – not necessarily a financial one.
“Clearly for ecommerce activity we can track to sale and measure real ROI,” Irwin begins.
“For other performance activity we can track to whatever outcome is being asked of the consumer – test drive, brochure request etc.
“For ‘brand’ activity we can measure the econometric effect of the digital spend. So in all cases we can measure the value of the investment.
“However, equally in all cases we need to consider attribution modelling to accurately understand the real influence of each digital touch point. Just measuring last click is not enough.”
‘Playing god’
Male, who has offices in Manchester, London, Berlin and soon New Zealand, stressed there does however come a point when resource versus reward has to be called into action and that it can be possible to ‘over engineer the system’.
“Attributing any sale always relies on someone at client, agency or tech provider ‘playing god’, and making a decision on a relatively arbitrary basis as to the value of some action or click – and with every consumer journey being different it is always the cumulative effect that makes that sale or transaction go through,” Male added.
Wong, who said it’s unrealistic to expect advertisers to merely pursue marketing techniques with a guaranteed ROI since a business’s different needs ought to be addressed by varying, suitable strategies, said there is a fixation with the last-click attribution modeling in the UK.
“This relatively narrow view fails to factor in the total ‘assisting’ touch points a consumer encounters before a successful transaction,” he said.
“Through smarter attribution settings and intelligent analytics evaluation, marketers can monitor the success of all channels, and their impact, without necessarily requiring demonstrable ROI (at least in terms of performance marketing’s conventional definition).”
Big tools, small budgets
VivaKi recently published a study which shows that by opening up campaigns to full-funnel marketing tactics, conversion rates were 80% to 110% higher than when unique users were touched by only lower funnel tactics such as remarketing.
Smith said it’s about understanding the full end-to-end user journey and questions if you are only focused on the ‘low hanging fruit’ (e.g search and remarketing), how much incremental new business are you really driving?
“If you only pay for conversions how can you drive new customers? Should advertisers be thinking about retention more? Advertisers really need to think about the whole conversion funnel if they want to boost their overall sales,” Smith added.
While the technology is there to track ROI, this can be prohibitively expensive for small and medium advertisers, Ramsden says.
“As an agency, in terms of the main challenges faced when it comes to tracking online ROI, it’s the cost of the tools to prove effectiveness – sometimes proxies are made for smaller clients where the cost is prohibitive compared to budget levels,” Ramsden said.
On the subject of if advertisers need to challenge their agencies more to prove ROI, or if this is something agencies need to be pushing for, Ramsden said agencies are the key champions of this as ultimately it justifies the advertiser’s experience.
“Maybe advertisers need to look at a larger investment in ROI tools as part of the overall marketing mix to prove further ROI effectiveness?” he added.
With such a huge focus on scooping that all important sale to prove ROI, are marketers becoming too consumed with quick-fix marketing tactics?
London-based Goldie feels there is often far too much reliance on short term measures rather than longer term changes in customer behaviour or buying propensity. He says these long term measures are often available through eCRM programme indicators or loyalty data, and that marketing needs to widen the net of measures and tighten the criteria to ensure nothing slips through.
He too also said that CMOs fear budget cuts if marketing spend is not used up in the allotted time, regardless of ROI. “This is why big format TV is so popular,” he added.
“In the future this will be easier to trade programmatic as premium brand inventory which will make things easier.”
Goldie said defining measures before starting and challenging the traditional media measures to ensure they map correctly to the clients’ business objectives, are the main challenges faced by agencies when it comes to tracking online ROI.
Also on current challenges, Smith said as VivaKi is just one part of the digital marketing plan, they aren’t able to always get the full picture of where they sit in terms of attribution and whether they are losing out to other channels.
“We find the best campaign outcomes are achieved when advertisers share this visibility and work with us as a long term partner,” he said.
CMOs have the power
Wong, who believes the beauty of performance marketing transpires with long-term growth, says issues such as the fear of budget cuts or squandering marketing cash for fear of losing it, are avoided if each party are acting towards the same desired result.
“Instead of being constrained by financial planning and guidelines, today’s CMOs have the power to take their company forward with constructive and bold decisions, innovative strategy and campaign management all aimed at delivering new revenue streams and customers,” Wong said.
“If done well, performance marketing is a sales channel – businesses that ignore the emerging technologies supporting this channel are, put simply, missing out.”
Are CMOs in the driving seat when it comes to achieving ROI? What lies ahead for the tech provider, agency and advertiser relationship? Comment below and let us know your views…