In the decade and a half that I have been working as a corporate man, I have come to realize several things:
1. One has to know the rules by heart - whether they are rules for setting media weights, for conducting statistical tests, for creating statistical models, for running research.
2. At the same time, one has to know when those rules can be bent, circumvented, pushed to the limit, or even broken.
Knowing the rules is easy - one just has to open a textbook on media planning and advertising, or attend seminars on the latest research techniques, or recall one's college stats classes. (Or use Wikipedia!)
Knowing when to bend, to push, to break the rules? That's an entirely different thing. And that is the more difficult thing. It takes experience, wisdom, and courage.
Why would you want to break the rules in the first place?
Because, as Seth Godin writes:
[Just to be clear: I don't have anything against rules. Going by the rulebook is good - to a certain point. Remember point (1) above: Know the rules by heart. You have to study the rules and know them. So you know when and how you can break them.]
Traditional media – such as TV, radio, presses, and outdoor media – have been traded on reach, GRPs, and frequency. The most basic of dictums in media planning is “reach X% of people at least Y number of times in order to effect a change in their behavior, as cost-efficiently as possible”.
This statement is in essence based on a “trade-off” between the number of people one reaches and the information complexity that a medium can carry and deliver. It is the foundation of media economics – and why TV ad lengths rarely go beyond 30s or 45s, why presses are limited to full-page/full-color, why radio ads are usually 30s or 60s, and why outdoor ads – which are probably the most wide-reaching and high-frequency media [and cost-efficient too!] – can’t communicate information details.
The ‘trade-off’ between complexity and reach is also the reason why media planners think of audiences in need of as constant “learning” through “effective-frequency”-based planning.
The tradeoff is based on several assumptions that have been taken to be reflective of reality in the marketing world:
It’s time to create a new currency for media planning. It should be one that takes into account not just the number of people reached, but the information’s complexity and the ‘quality’ of the reception amongst its intended targets. It must also be one that takes into account the possibility of “non-linear jumps” in the information transmission.
Potentially.
I am not an expert in epidemiology nor the models that epidemiologists employ in explaining and predicting how diseases, such as measles, the flu, and colds, evolve across time. It appears – from remnants of my university days that the models in epidemiology could potentially help in the creation of a new currency.
One of the most common ones is the Susceptible-Exposed–Infected-Recovered [SEIR] model, which can also be extended as follows:
The equations are far more complicated than the usual Reach = GRPs x Average Frequency that we are used to.
And one could argue that “wait, that is a process – not a currency”.
And that is the point.
A currency for media planning needs to be based on how information flows – or at least how specific media or channels contribute to the process.
Technology in the hands of consumers and of audiences have changed the way media are used and consumed. It has also changed the ways information is transmitted, digested and internalized, and retransmitted.
We can’t forever be stuck with the old “GRP” and “reach” framework given the new realities that we are now facing in communications planning.
Reach is simple – but given the complexities we now face, it has become simplistic. And incomplete.
A couple of months ago, I presented to the leaders of the organization I am connected with. The topic was simple: accountability in the marketing world and how we can be prepared for the emergence of payment-by-results.
Seth Godin now writes about "everyone gets paid on commission" - which at first glance, made me wince because the "C" word was sort of like anathema to me.
But after reading what he had to say about commissions, it was not entirely about "commissions" as we know it in the ad and marketing world: it's about delivering results - and getting paid for it.
Ad agencies started out as "media space brokers" - and that's the reason, I believe, why they were called "agencies". In the same manner that travel agents get a commission from the vendor (the airline, the hotel, the vacation packager) for every trip they book, ad agencies were also paid based on the amount of media space they book - it used to be 15% of the gross amount or 17.65% of the additional amount.
The name got stuck - in spite of the fact that ad agencies started to move towards "hour-/time-based" fees - which supposedly would allow agencies to recommend to "not advertise when the time is not right", something that would have been unheard of in the world of commissions.
It is supposed to be something that should benefit both clients and their agency partners.
Now, we are moving towards payment by results: Agencies get paid based on the results that they generate for the clients' business.
This - I believe - is what Mr. Godin is writing about: being paid for the results that you generate.
However, implementing this in the world of marketing and communications is that easy. Here are some of the barriers that I can think of (and feel free to add more):
1. Agencies think that they have no control over other factors that affect sales (or profits or any other business metric/KPI). A valid reasoning - if agencies are supposed to be measure on sales or profits, it follows that they should have influence over how the business' marketing communications and marketing operations programs should be created. And not all clients are ready to give agencies that seat on the decision-making table.
Clients have yet to truly realize the value (yes, in spite of the history of advertising) that agencies can bring to their business - and most clients still see agencies as "go-for-it/do-it" companies.
The onus is on both agencies and clients: Agencies have to demonstrate that they are willing to be measured against sales and real business metrics (and circumvent this thinking and #2 below) - and clients will have to give agencies far more than just a "go-for" status and be real business partners with them, in the same way that they treat consultants from McKinsey, Booz, and Accenture.
2. Agencies think that their business is not about driving sales - but influencing people to buy by reminding, encouraging, and inspiring consumers to buy. Which I think is not entirely valid.
Sure, some campaign briefs talk about creating awareness and driving engagement. But no marketeer in her right mind - and definitely no CEO in her right mind - would want to spend money just to create awareness for her brand and drive 'differentiating brand experiences' that do not get translated to sales and profits.
Agencies need to rewire their brains - and accept the fact that all the things that we do from 9 to 5 (or beyond) point to one thing: driving sales, revenues, and profits for our clients' businesses.
Sure. Getting there entails creating awareness and driving engagement and loyalty to a brand. But what use is awareness and engagement and loyalty if it does not translate to sales and/or profits?
Marketing investments are (1) expense lines on the clients' balance sheet - that is a fact that we have to accept, and (2) investments - and therefore ought to deliver returns that would allow the client to further her business.
[There is some truth - of course - to this objection. "If a client wants to decide on whether to pursue a geographic expansion or not, can an agency help?" "If a client wants to do pricing promotions with key retail accounts, does the agency have the expertise to advise?" "If a client wants to create a new product with R&D, can agencies advise?".
My response: Agencies should be able to do so. If the expertise doesn't exist, then agencies ought to resign the business - after all, agencies ought to know the business they are managing inside and out.]
3. Clients are not sure what metrics they should be measuring. Should clients be measuring revenues? Number of transactions? Value per transaction? Profits?
I think part of the reason why we never got to really implementing payment by results is because clients themselves are not sure what to measure in order to judge their agencies.
My response: It depends on your business model and the short- and long-term goals of the business.
Dell - I would reckon - would be very much interested in immediate response per campaign in the form of number of transactions and value per transaction, because their business model is built on JIT deliveries to consumer and efficient corp-to-consumer relationships. Microsoft's could be very different.
P&G, Unilever, Coke and PepsiCo brands could very well be focused on immediate short-term sales - whilst at the same time ensuring long-term business goals are reached.
Immediate response to and sales relationships with promotions (price-offs, new packaging, new innovations, brand extensions) amongst consumers AND amongst key retail accounts are probably the best metrics for short-term effects.
For some, it's about profitability - ensuring that they are profitable, since sometimes, revenues and profits are not entirely linear.
Whatever it is, clients - and their marketing and finance teams - ought to start thinking what metric they should be monitoring - and judging their agencies on.
I believe marketing needs to change - and the current economic scenario has hastened that need for change. The area of marketing accountability needs to be fully entrenched in each and every agency and client organization.
That means embracing what Seth Godin is suggesting: Everyone gets paid on commission - on results.
We've heard that adage so many times. I myself have used that in trying to convince clients to take on a new idea that I deem to be groundbreaking, creative, and would be a "first of its kind" execution.
But my viewpoint has changed.
After having learned more about risks and its management and mitigation (albeit from a financial perspective), I changed my mind.
It is not true that the more you risk, the higher the reward.
I am not sure who coined this - but I am guessing finance people.
What is interesting is that it's also being used by creative executives (and media planners, like myself) to sell concepts that are rather risque and controversial - all under the guise that "you can't bore your consumers into buying your product - you can only excite them". (I believe that's a paraphrase the great David Ogilvy.)
But the model - as depicted above - has some problems:
1. It assumes that for every unit of risk that a client takes, it generates a commensurate amount of return to the client.
It may not be a one-to-one relationship - but it is linear nonetheless: for every 1 unit of risk you take, you get some unit of reward.
I don't think that's realistic.
There must be a point beyond which taking on more risks won't generate as much returns or potentials for rewards.
2. It also assumes that the more risks you take, the expected the returns ought to keep on coming - so one should keep on taking risks.
So if the amounnt of risks that a client takes approaches infinity, the rewards also should approach infinity.
Again, I don't think that's realistic.
There's only so much "reward" that one can get - unless one believes in The Secret, which states that "there is an infinity of abundance out there".
OK. Before you tune out, let me visually show you what I mean:
I believe that the above more accurately represents the relationship between taking risks and the possibility of a reward or returns on investments.
Let's break down the possibilities in this visual representation:
1. If you don't risk, you don't get anything.
The curve starts at zero - which means, if you don't take a risk, you won't get anything. I think we can all agree with that one.
2. The relationship between risks and rewards/returns is not linear but is a curve that is similar to the "diminishing returns curve".
Focus on the top half of the figure: There must be a point beyond which taking on more risks won't generate any additional potential for return. There is a 'decreasing efficiency' or 'decreasing risk-to-reward conversion'.
Let me illustrate:
If I took on some "b" risks ("b" being a number), the returns I get would be much higher than if I had taken some "a" risks. However, if I took on "d" risks, the returns would not that different had I taken only "b" risks.
That's the law of diminishing returns - nothing lasts and goes on forever, basically
3. For every risk one takes - regardless of the amount - there is an equivalent possibility of failure.
The first, linear model assumes that if you take risks - there is no possibility of loss, no possibility of a backlash. It's all good - and it lasts forever!
This model, however, acknowledges the real meaning of risk: to take risks - any amount of risk - means being open to both possibilities of failure and of success.
If I took on "a" risks, the possibility of success is there - but so is the possibility of failure. If I took on "d" risks, the possibility of success is also there - but so is the possibility of failure.
The possibilities between success and failure may be imbalanced - but that is not the point: The point is, for every risk, there is a possibility of success and the possibility of failure - simultaneously. Otherwise, it is not risk.
(In this visual diagram, I have made the possibility of success a mirror image of the possibility of failure. But it may not necessarily be so.)
Let's stop the idea that "the more risks you take, the more rewards you get so let's get creative..." I think it is irresponsible of ad and marketing professionals to recommend this approach: There are no guarantees that if you risked a lot, you'll get as much as what you risked.
Let's also start thinking in terms of risks in advertising and marketing: If we are to elevate marketing discussions to be more than just "advertising and promotions", we need to accept, take on, and include in our thinking and philosophies the concepts of risks.
When we talk of "ROI" or "accountability" or "ROMI", we need to talk about not just "thresholds, creativity, optimal budgets" - but also risks.
The concept of risk may have originated from finance. In fact, the charts above are from finance's portfolio management theories.
It's time that we treated marketing investments as investments.
It's time for clients to start asking their agencies and 'media brokers' to think like real brokers and financial analysts and consultants. It's time that agencies to start thinking in terms of investments - in the real sense of the word invesment.
