Agencies should stop selling efficiency and start selling effectiveness

June 2, 2010 | Author: Tim Williams

The agency business model is built around old metrics of success that have outlived their usefulness.

If you were a marketer, would you prefer to pay your agency for efficiency or effectiveness? Yes, it's a simplistic question with an obvious answer, but the sad fact is that most agencies are still selling – and clients are still buying – efficiency.

Efficiency is based on the old advertising model of exposure, which is measured by such time-honored metrics as reach, frequency, gross impressions, and cost-per-thousand. But what if no one is paying attention? And in today's consumer-controlled marketplace, fewer people are.

No more frequency

As a matter of fact, the Advertising Research Council (ARF) has been lobbying for a few years now to discontinue the metric of frequency altogether. Just because a media schedule achieves an average monthly frequency of 4 doesn't mean anyone was actually paying attention. So when agencies sell media programs based on the concept of exposure, they're selling something of increasingly questionable value.

Effectiveness is what we should be selling. Effectiveness is about engagement, measured by such metrics as attentiveness, receptivity, and page views. Nielsen now evaluates not just which programs are most "watched" (exposure), but those that are most "liked" (engagement). A lot of digital media are sold based on actual engagement.

Solving marketing problems through a different lens

The implications of this for agencies go way beyond the media plan. When agencies approach a marketing problem through the lens of "exposure," they instantly jump to the question "Is the budget big enough to sustain a media schedule?" But if you look at the problem through the lens of "engagement," the budget question is a lot less relevant.

Imagine that a small travel destination comes to you wanting big results. Looking at this potential client with the "exposure" mindset, many agencies would just walk away because the client can't afford much of a paid media program. But if you approach this assignment from the "engagement" perspective, you might create something like the award-winning campaign for Queensland Australia tourism that was executed for a fraction of the cost of a conventional campaign and produced an incredible amount of impact.

Marketing spending will cease to correlate directly with market share

Remember that in a world where many of the major communications channels (YouTube, Twitter, etc.) have a media cost of zero, the real currency of marketing is no longer money, but ideas. Truly. In the near future, market share will no longer correlate with how much money you spend, but rather how good your ideas are.

Because most agencies are selling the wrong thing, they're also charging for the wrong thing. We can get paid for the value we create (effectiveness) rather than the hours we work (efficiency). The question isn't how – some of the most successful agencies and marketers are already working this way. The question is when. When do you plan to start working this way? No one is going to force you – not the 4As, the ANA, not even your clients. It's up to each individual agency to decide they want to be in the effectiveness business and structure their approach for where our business is headed instead of where it's been.