Posts Tagged ‘advertising agency’

Agency strategic planners are key to outcome-based compensation agreements.

As I’ve written about many times before, the advertising business stands at the edge of an opportunity to realign the interests of agencies with the interests of marketers by fundamentally redefining the agency-client financial relationship.  By moving from a time-based approach to a value-based approach, agencies will be in a vastly better position to provide “excellence” in everything from strategic planning to execution.

Planners are in a pivotal position to make this happen, because increasingly successful agency-client relationships will be defined by the agency’s ability to identify, test, and measure brand success drivers.  In other words, in order for marketers to pay agencies for value created instead of hours worked, planners will have to work with C-level clients to define the brand’s leading indicators of success.

Ask marketers point blank what metrics they care about, and they will almost always give the same answer: sales.  But sales is a lagging indicator – an after-the-fact measurement that looks in the rear view mirror.  The more important question is what are the factors that predict the success of the brand; the leading indicators of success?  In agencies, the planner is best suited to answer this question. Most leading indicators never appear on a financial statement, but they have predictive causation with profitability––that is, they will drive the numbers that ultimately appear on the financial statements.  The correct leading indicators will predict the lagging indicators.

Leading Indicators	Lagging Indicators
Diagnostic	Predictive
Backward-looking	Forward-looking

Once identified, a brand’s leading indicators of success can form the basis of an outcome-based compensation agreement between the agency and the client.  By paying their agency for outcomes achieved rather than hours worked, clients are assured the agency’s best efforts and best thinking because the agency has all the right incentives.  If the client wins, the agency wins, which incents the agency to devote their best talent, apply truly creative strategies, provide unasked-for ideas, and solve problems in unique ways.  It redirects the dialogue away from efficiency (concerned with hours and costs) to effectiveness (concerned with achieving results).

Planners are central to making this all happen because they are in the best position to objectively identify the drivers of brand success – the foundation of effective outcome-based agreements.

Without sacrifice, your agency has no strategy

As a agency brand, would you rather be moderately appealing to a large group of prospects, or intensely appealing to a select group of prospects?  Most agency professionals would say the latter.  But most often, their business strategy centers on the former.

In life and in business, our natural tendency is to go broad instead of narrow, to want the most and the biggest.  Diversification feels safer and smarter.

The problem is that if your approach is to “keep your options open” and “not limit yourself” then you actually don’t have a strategy.  By definition, having a strategy means deciding to do one thing but not another.

The fact that most marketing communications firms don’t have a clear and differentiating positioning is usually for one of two reasons:

Reason 1: Unwillingness to think

The leaders of the business simply haven’t devoted the necessary time and attention required to understand how their brand creates value. They simply assume that trying hard and “being your best” are the keys to success.

The English economist David Ricardo is credited with saying “Profits are not made by differential cleverness, but by differential stupidity.” What he meant was that most business executives simply don’t make the effort to think through what actually may be obvious differences in their business model and value proposition.

Reason 2: The desire for universal appeal

Because most businesses would rather be liked than disliked, loved instead of hated, they are extremely reluctant to say or do anything that would cause anybody not to like them.  But of course the very nature of a positioning strategy is that your firm is right for some people but not all people.  Someone but not everyone.  So successful brands are able to plot their position on the spectrum of love and hate.  To be on either side of the spectrum is desirable; to be in the middle is death.

Brand experience expert Kathy Sierra observes in her blog Creating Passionate Users,

“You don’t really have passionate users until someone starts accusing them of “drinking the Kool-Aid.”  Where there is passion, there is always anti-passion… or rather passion in the hate dimension.  If you create passionate users, you have to expect passionate detractors. You should welcome their appearance. It means you’ve arrived. Forget the tipping point — if you want to measure passion, look for the Kool-Aid point.”

Said another way, the brands with the strongest supporters also have the strongest opponents; Microsoft, the New York Times, the Red Sox.  This means you should stop worrying about being pleasing and start worrying about being polarizing – not necessarily in a negative way, but in a way that clearly sends the signal “we’re not for everyone.”

Most companies — particularly in professional services — desperately want to be loved. They don’t like the idea of admirers and detractors, so they don’t want to take a stand.  What they don’t understand is that being lovable doesn’t get you loved.  What gets you loved is standing for something.

Southern California’s DGWB does this very clearly with their commitment to what they call “values-based marketing.”  They seek only clients that believe what they believe: that for the brands to be successful, consumer values and brand values must be aligned. By “flying their colors,” DGWB knows that some clients will resonate with this approach and some won’t — and that’s exactly what they want.

Think of it this way.  If you’ve done a thorough job of differentiation, your agency brand is defined by the features or clients you don’t have.