eTip #44

Tips for Improving the Agency/Client Relationship

The world of marketing is evolving rapidly and this is impacting the agency/client relationship. CMOs are demanding more from their agencies and this is driving opportunities for agencies to transform their business models and service offerings. For this issue of eTip, we interviewed agency advisor and marketing strategist Steve Patti, on the matters of improving the agency/client relationship.


BMC: What is your experience in working with advertising agencies?

Patti: I find many agencies at a crossroads similar to the mice in one my favorite books entitled “Who moved my cheese.” That is, the business model that has worked so well for 50+ years is no longer delivering revenue and profit growth, nor keeping their most talented staff intellectually engaged. Client marketing teams are being required to do more than ever to uncover buyer insights, construct complex marketing technology platforms, integrate online/offline campaigns and deliver measurable results. This is a brave new world for traditional agencies and their partners/owners are grappling for how they fit in (if at all). Making matters worse, there are thousands of out-of-work freelancers for PR, creative, media buying, etc. who are willing to work at one-third of agency rates plus crowdsource sites that have shown brands that accessing routine design deliverables is a mouse click away.

BMC: What advice would you give ad agencies for growing their business in 2014?

Patti: Rethink your business model and decide whether you want to be positioned as a production shop or a strategic advisor to your clients because you can’t be both. The traditional ad agency model is built on hiring (relatively) cheap labor and then generating a 2x to 3x margin multiplier on hourly billings. Each function in the agency has to “carry its own weight” as a profit center and the production workflows are arranged in silos. This approach doesn’t work anymore except for only the largest madison avenue ad agencies. For smaller agencies, this model sets them up for continued downward pressure on their profit margins as creative, media buying, and production are viewed as near-commodities by many CMOs. Because today’s CMOs are dealing with complex marketing technology, changing buyer journeys, increased metrics expectations and more competitive markets, they are seeking strategic advisors to help them develop and execute the right strategy. This requires smart (higher cost) marketing talent and a consultive approach to engagement. This leaves most agencies with a choice of whether they want to redesign their business model towards hiring experienced marketers who collaborate in teams to solve business problems (supported by a shared digital/production team) or continue on the 50-year old ad model. Even if you are going to “stay the course” as an ad agency, be aware that this shift is happening and the implications for your decision.

BMC: What important trend have you seen emerge in your work with advertising agencies?

Patti: Understanding buyer insights. Too many brands (and their agencies) are guessing what marketing tactics to execute to generate sales and then course-correcting midway through their campaign life cycles based on analytics and conversion data. It’s far easier to invest the time and money upfront to find out how your best customers go about buying your product or service, than to waste 6 to 12 months (or more) in trial & error campaigns. This concept of creating customer journeys has become very important among leading marketers. A similar concept that was popularized a few years ago is buyer personas. While customer journeys reveal the steps a customer takes to evaluate and purchase, buyer personas provide a demographic & psychographic profile of the individual buyer along with their trusted media sources and peer validators for making their buying decision. Research can be conducted to uncover both of these simultaneously and the results are powerful. The pain points and motivators revealed in the buyer personas drive your message strategy for PR, website, content, ppc and other forms of advertising. The validators revealed in the buyer personas drive your word-of-mouth or influencer earned media strategy. The customer journey provides your marketing campaign blueprint from which you can validate its accuracy via assisted-attribution tracking (eg. Google multi-channel funnels).

BMC: What is the most common mistake you have seen with branding agencies?

Patti: This biggest mistake is confusing brand identity with brand strategy. Brand strategy typically contains four stages: (i) Insights Discovery, (ii) Brand Development, (iii) Brand Adoption, (iv) Brand Integration. It’s during the brand development stage that architecture, positioning, naming and visual identity are defined. It amazes me when an agency claiming brand expertise defines it as a logo, tagline, color scheme and brand standards guide. What this does for the educated brand marketing leader is reinforce that the agency can’t think outside of a design-centric paradigm and it further distances the agency from the brand in terms of subject matter credibility. Unfortunately, a fair share of marketers get this wrong too.

BMC: Last words of wisdom in regard to marketing success in 2014.

Patti: Realize that it is impossible to keep up with the volume and variety of marketing information that is published every day. So instead of becoming overwhelmed, define your area of expertise and then own it. Similarly, there is no perfect marketing strategy that is simply waiting for you to find it, instead you must become comfortable with the idea of testing every day and continually modifying your assumptions about cause and effect for lead generation. This can be unsettling for many and requires setting expectations with senior management that lead generation is a journey (literally) and not a destination. Just when your email and PPC click-thru-rates are on the rise, your social media engagement may decline. It’s a never-ending battle to identify changes in buyer behavior and then adapt your marketing campaigns in real-time to accommodate it. We are in a new age where the annual marketing plan has been reduced to quarterly windows and monthly metrics are now monitored daily.


Steve Patti is a CMO and agency strategist (www.stevepatticmo.com). As an entrepreneur, Steve built a $20MM global marketing firm to serve the Fortune 500. As a CMO, Steve has built Challenger Brands to compete with the Fortune 500. Steve’s industry experience includes technology, healthcare, financial services and consumer products across North America and Europe. Steve holds a BBA, MBA and has been recognized through dozens of marketing and community service awards.

 

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