B2B Marketing Zone

Agencies Under Pressure to be More Digital

Agencies Under Pressure to be More Digital

Agencies Under Pressure to be More Digital

The economy continues to dig its way out of the recession, and businesses that hunkered down for years are beginning to market themselves again. And many of them are realizing that the marketing world in 2016 is a very different place than it was in 2008 when last they really invested in their marketing efforts.

Marketing has changed more in the past five years than in the past 50. For example, consider these channel developments in the last few months:

  • Mobile: According to comScore, mobile now captures two out of every three digital media minutes in the US. Yet responsive websites are just beginning to propagate across the web. Last year, only 20% of Internet Retailer’s top 500 mobile retailers had adopted responsive design websites.
  • Search: Google’s Hummingbird algorithm may now serve listings it thinks users want – based on what part of the funnel they’re in.
  • Social: Has been legitimized in the past ten years; the number of Americans using social media regularly has moved from 7% to 65%.  But proving effectiveness beyond vanity metrics is still challenging for organizations without visibility into true multi-touch attribution.

And, according to Scott Brinker’s 2016 Technology Landscape – an annual compendium of marketing technology vendors – there are now 3,874 marketing technology solutions in the marketing tech stack, an 87% growth (!) over 2015.

This is heady stuff for marketers, let alone business leaders. And increasingly, those company leaders are turning to agencies to catch up, keep up, and move ahead of their competition.

Digital Work Drives Agency Growth

According to AdAge’s Agency Report 2015, digital’s share of US agency revenue reached 40% in 2014.

ad age reports

The digital surge has been good for the economy, and for agencies of all kinds. In 2014, U.S. digital-media ventures added an average of 54 jobs each day — five times the job additions at traditional advertising agencies, according to AdAge. And that trend is accelerating today.

  • Media agencies’ growth mirrored the growth in online ad spend, with growth in programmatic media buying helping them grow 4.4% y/y
  • PR agencies grew 5.3% through increased understanding of, and implementation of, social media strategies and tactics
  • Health care marketing services are enjoying a huge resurgence (up 10.3%), as anyone who watches prime time television can attest
  • Digital agencies grew an average of 9.8% y/y

Digital, Defined…

Quick quiz – do you, or someone in your agency:

  • Know what Google’s RankBrain does?
  • Understand Facebook’s EdgeRank works, and how to explain it to clients?
  • Get excited by tracking results of Google’s right-hand rail changes?
  • Have the ability to get clients’ sales and marketing teams to agree on a behavioral and demographic lead scoring methodology?
  • Know how to improve clients’ Quality Scores for better SEM/SEO?

If not, I suggest you have a lot to learn about being a “digital” agency.

I’ve seen too many agencies declare their digital competencies without backing them up with real results. If you’re not truly versatile in at least a dozen disciplines of digital marketing, you’re likely going to be passed over for an agency with people who are.

What’s It Take to be a Valuable Digital Agency? 

According to Peter Levitan of WPP (who’s purchased a few agencies in his time), digital agencies tend to have a baseline value of 8x EBITDA.  In comparison, typical agencies are valued at 2-5x EBITDA.

In his LinkedIn post last year called 8 Tips For How To Sell Your Ad Agency To WPP, he stated: “The digital sweet spot is a firm with technological prowess, owned IP, strategic vision and industry leading expertise in a hot category like mobile, social, etc.”

To deconstruct his sweet spot comment a little, technological prowess is true, geeky, hands-on-the-keyboard competence of a cohort of agency employees.

Owned IP requires legal rights around things like applications, brand names, algorithms, valuable domain names, websites, etc.

Strategic vision allows you to anticipate new trends months and years before they take off. (That’s tough in the breathtakingly fast moving digital realm.)

And finally, building industry-leading expertise in a hot category like mobile, social, etc. is achieved through hiring and developing team competence and processes in modern digital disciplines.

Each of these example disciplines requires extensive practice and deep understanding to get them right and to launch programs effectively across the myriad of channels available to consumers and marketers today.

Agencies Under pressure to be more digital blog_table

In a modern marketing organization, these disciplines bleed across essential marketing foundations like brand, messaging, and product positioning, which are familiar territory for traditional marketers and agencies.

Digital disciplines require those foundations to be in place in order to build effective, integrated campaigns for the multi-channel, multi-touch, multivariate world we work in.

That’s why traditional agencies are buying up and/or pairing up with digital agencies.

The Agency as a Key Business Partner

At the same time, the digital disciplines (and modern marketing ecosystem) also break through organizational boundaries into sales, customer success and IT.

Crossing organizational boundaries requires the digital agency to understand a new business reality: digital is a key boardroom topic. A 2015 Forrester survey found that “37 percent of firms place ownership of digital strategy at the ‘C’ level, with a further 44 percent looking to a senior vice president (SVP), executive vice president (EVP), or similar role to direct digital plans.”

And in their 2015 Deloitte Tech Trends Report, researchers described the role of the CMO as “Partnering to implement new marketing tools with hooks into back-office data and transactions, while retooling to offer agile delivery for new digital solutions.” Sound like a traditional marketing role?

And they challenged the CIO to build their strategic digital and business acumen. “First, they should put their internal technology houses in order; second, they should leverage advances in science and emerging technologies to drive innovation; and finally, they need to reimagine their own roles to focus less on technology management and more on business strategy.”

The role of Customer Success was defined as “Defining customer personas and journeys and exploring how experiences can be improved via existing and emerging technology.”

The more business leaders invest in digital, the more agencies will have to deal with competing priorities, different lexicons, and (most certainly) challenging egos.

Deloitte researchers said, “Marketing has evolved significantly in the last half-decade. The evolution of digitally connected customers lies at the core, reflecting the dramatic change in the dynamic between relationships and transactions. A new vision for marketing is being formed as CMOs and CIOs invest in technology for marketing automation, next generation omnichannel approaches, content development, customer analytics, and commerce initiatives.

This modern era for marketing is likely to bring new challenges in the dimensions of customer engagement, connectivity, data, and insight.”

In practice, a digital agency must be seen not only as a key business partner to the CMO – but to the CIO and rest of the C-Suite as well. A good digital agency must have the business acumen to educate and engage business leaders in their language, addressing their concerns and developing the connective tissue that conjoins their disparate systems.

How do you measure up?

Business leaders generally care about three things when it comes to digital marketing: relevance, revenue and results. As a result, agencies of all stripes are being held to a new, highly measurable standard, and are being asked to prove the effectiveness of every activity – from strategy to tactics – they embark on for the client.

…More on that next month.

5-common-mistakes

Digital Marketing is more important than ever before, but there are a lot of digital marketing mistakes that many businesses are still making. Download our eBook, The Five Most Common Digital Marketing Mistakes and How to Fix Them, to explore the 5 most common mistakes and learn how to avoid them. We’ll also give you the best practices on testing, optimization, creating the right marketing mix and content strategy.


About

Janet Johnson is a marketer for technologists and a technologist for marketers, and Partner at O’Johnson Partners, a modern marketing consultancy. She's spent most of her career on the client side, managing agencies, marketing teams, programs and promotions for Fortune 100, SMB and startups.


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