Digital, Data & Direct: The future of the advertising business!

By BKV in Media Strategy on April 7th, 2011

The world of advertising and marketing is evolving at a whirlwind pace. And the pace keeps accelerating!

Today’s debate focuses on the question, “What is an advertising agency?”  The Atlanta Business Chronicle has divided the advertising business into two categories: brand agencies, which they call “Advertising Agencies,” and “Marketing Services Providers,” their term for agencies that do more direct and/or digital marketing.

Very simply, this is wrong. But it is an understandable error, as we all grapple with the new world of advertising.

Why is it wrong?

Let’s start with the traditional definition: an advertising agency creates and places ads for client companies.  Historically, advertising has been placed in a wide range of media — radio, newspapers, television, magazines, outdoor boards and more. Its ultimate purpose (with limited exception) is to generate sales. Sometimes sales are driven through brand impressions, combining effective media buying and good creative concepts to make consumers aware of and positively disposed toward a product, so they will buy. Today, this is called brand advertising or “branding.” Other ads ask people to respond right now! Call this 800# now! Send in this order form now! Or, rush out to your local retailer for a 3-day sale. All driven by different principles, but it is all advertising.

Now, agencies that do primarily interactive or digital work — the newest and most exciting advertising medium of all time — are suddenly not advertising agencies, they’re “marketing services companies.” This makes no sense. It’s like going back into the ‘50s when television was emerging and saying: agencies that do TV are really marketing services companies, because TV isn’t a traditional medium. (In 1953, it truly wasn’t!)

Put in this context, it’s easy to see why creating two categories of “agencies” is wrong. Regardless of medium used, companies creating and placing ads are still advertising agencies.

Here’s where the plot thickens. The advertising agencies of today and tomorrow are radically different than yesterday’s agency. Those that don’t adapt will become dinosaurs and die. But the fundamentals are still the same: ad agencies create and place advertising in various media.

Your success depends on the 3Ds

Today, ALL ad agencies need three core components to survive. The future of advertising is the 3Ds: Digital, Data and Direct.

The first “D” is DIGITAL.

Show me a brand agency lacking strong digital capabilities and I’ll show you an agency that is in its last years of life. Digital must be the core of all agencies that wish to prosper. Consider these facts:

  • Paid search and display (formerly called banners) are the most cost-effective way to produce results in the media world today. It should have a place in EVERY media plan. 
  • You can’t do an effective campaign in any traditional medium without an interactive component. People need to be able to get more information on a website, or to order on a landing page. For example, all successful DRTV advertisers see a significant lift in response when paid search terms are used.
  • New media are emerging all the time…mobile, social and more. These are extensions of the digital environment. Soon there will be little difference between commercials on TV vs. the computer.

The second “D” is DATA.

Most good agencies have collected data for years. Pure direct marketing agencies have a leg up because the intensity of the data they collect delivers more value than the typical “brand” agency. For example, a good DRTV agency tracks calls back to each individual spot, so they know which spots work — and which don’t. They make instant changes to the media plan. They know conversion rates by different types of spots, which tell them how much it costs to make a sale. They track ROI, something every client loves. Direct mail advertising has always been data-rich, with tracking lists, offers, segments, overlays and much more.

But the data available to interactive marketers is mind-boggling. Data is the heart of the interactive business. Today, all agencies engaged in interactive marketing should:

  • Use sophisticated software to track clicks, conversion rates, sales rates and cost-per-sale. 
  • Tie phone calls to bid management tools and more, which has given rise to a key competitive tool: analytics departments.
  • Have the ability to do predictive models (or have a source that knows how).
  • Attribute sales to the right medium.
  • Know how each medium impacts another that may not come out in simple cost-per-sale or response analysis.
  • Know how to build and maintain customer and prospect databases, using them to segment their best customers for special marketing efforts and more.

The third “D” is DIRECT.

 

This one’s tricky, because most traditional agencies have little or no experience with direct and the “new” pure play interactive agencies don’t have a clue. However, it’s understandably deceiving. Most pure play interactive agencies are tracking results and offers, living in a data-heavy world, speaking directly to consumers and getting instant feedback. It’s understandable that they’d consider themselves direct marketers. But their campaigns would drive better results if they employed basic direct marketing techniques proven effective by many true direct marketers…people like Stan Rapp, Bob Stone and more.

A lifetime ago I worked at McCann-Erickson. I knew an excellent art director there who could put together a great-looking direct mail package, but he wasn’t a direct marketer and he knew it. He would often have me critique packages he worked on. It’s easy to create a gorgeous package that violates years of direct marketing knowledge. For example, do you know:

You can dramatically increase response by using the offer properly and in the right locations?  (Put the tease in the right spot!)

  • 85% of people only read heads and sub-heads?
  • The value of a PS?
  • The value of a “you” letter as opposed to an “I” letter?
  • Why use captions under pictures?  (People love them!)

These direct mail techniques can be adapted for other media…print, DRTV and more. In fact, this knowledge translates well into digital marketing. New direct response breakthroughs are being recorded all the time.

Today’s knowledge drives tomorrow’s profit

Our agency got into digital marketing in 1997. It has been the engine that has driven our growth. Our percentage of billings for digital marketing creeps up each year and today, it is more than 60%. Billings haven’t gone down in other areas; in fact, they’ve gone up! But interactive is outpacing the rest. 

Our competitive advantage as we’ve entered the digital age is a foundation in direct marketing. We rarely lose a new business pitch to a pure play digital agency, since we bring the know-how to put true direct marketing principles into practice. When we take over an account from such an agency, we generally show dramatically improved results. It’s easy to over-rely on bid management tools. They’re a necessary foundation and we use a great one too, but it is only the start. I know horror stories about poor use of copy in paid search, improper testing, poor use of DR principles on landing pages and more. 

Your agency will succeed in tomorrow’s world if you take two simple steps: 

  • Accept the fact that direct marketing is one of the driving forces behind MOST forms of future advertising.
  • Go to school on it!  It is never too late to learn. Make direct marketing principles one of the foundations of your agency and you will reap big rewards.

Finally, remember this mantra: GENERATE CUSTOMERS COST EFFICIENTLY TODAY AND BUILD YOUR BRAND ALONG THE WAY with impressions driven by a campaign that cost-justifies itself based on ROI!!!