Irreverent Thinking

Unashamedly lifted from Jeff Lanctot (original is here) as it is so of the minute, so topical, so right on. I’ll make myself feel better by saying I am helping to spread Jeff’s wise words

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Agencies: Change or Die

May 6th, 2008 by Jeff Lanctot
I’ve recently listened to and participated in several conversations regarding the evolving role of the ad agency. Most marketers and agency types seem to agree that a radical change is necessary. I agree, but I think that change is going to be a harder one to make than many realize.

For many agencies, incremental change feels comfortable. It tacitly acknowledges the greatness of days gone by. It politely suggests that they can get even better. It gently nudges the business forward. The leisurely and familiar pace with which agencies change is also the very thing that threatens their future.

The most effective agencies must live squarely at the intersection of marketing and technology. They should be sprinting to that intersection. Not just digital agencies, but all agencies. As all media becomes digital, any agency that doesn’t view itself as a technology company should commence reflecting fondly on the good ol’ days. The road ahead is likely to be significantly less fulfilling.

Agencies need to make this shift in order to not just lead, but to stay relevant at all. The most engaging customer experiences will be created by designers working collaboratively with developers. The most powerful campaigns will be delivered by creatives that embrace social networks and media planners that understand auction theory. And the most successful agencies will rely on data platforms that give marketers a single view of the customer across all marketing touchpoints. Increasingly, technology is inexorably linked to marketing.

Of course, consumers have already rushed ahead, embracing new technologies without the apprehension and hand-wringing that has marked agency dalliances with the digital world. From Tweens to Seniors, consumers are sharing, publishing and collaborating. They are the new voice of authority in the marketing world- a voice that once exclusively bellowed from the windows of Madison Avenue. Just as they must embrace the role of technology in the business of marketing, agencies must now view customers as colleagues. The passive “target audience” of yesterday is now an active participant in shaping how brands are perceived.

There’s no middle ground for today’s agency. Make small, incremental changes and comfortably drift toward a date with irrelevance. Or make the hard choice to radically reinvent the industry, with the promise of becoming more valuable to marketers than ever before.

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End of post

I have been using OpenID now for a year or so. It’s really good/useful because it lets you have a single identity across multiple websites, which massively simplifies the login and register procedure and also makes me feel warm and safe that this data is held centrally by ONE trusted company. Not having to worry about whether I will trust a site encourages me to sign up.

The problem I have is that not every site supports OpenID In fact very few do, and those that do tend to be a bit geeky!

It would be a real shame if OpenID was thrown on the pile marked “geekdom” and didn’t make it into the mainstream.

The now famous viral explosion of BlendTec’s “Will it Blend” site nicely explains why and how the consumer is taking over the market. Without the use of an agency, or even a marketing department, the founder of the company created a YouTube Channel and started uploading videos of odd things being stuffed into his company’s blenders. It ignited like rocket fuel. The shock video nature of the idea, along with the anti-marketing approach, was summed up in this explanation of how one of the best viral campaigns of 2007 was created:

“Once the concept was determined…..we began to create a strategy about how this should work.

We spent $50 on a white lab coat and a few items to blend, set up the camera and invited Tom to demonstrate some extreme blending. Kels took the footage and created the first episode of Will It Blend along with the music and the basic format. Ray Hansen created the website along with the blog, RSS and the suggestion of what to blend next. Many of the catchphrases simply evolved from the first day of filming. I had determined that the campaign would be called Will It Blend. “Will it blend? That is the question” was an unscripted comment by Tom.”

No agency, no committee, no idea of success (or not). Love it? I do!

As most of us know, the cost of advertising online is generally going up. We also know that different modes of advertising generate different conversion rates. We also know that demographics can form a significant element in conversion rates. It’s all rather depressing really; we all looked for transparency and a complete understanding of our advertising streams in this new Internet world but, in reality, it is just not happening in a useful way.

Problem Case Study

We have a client who pays a maximum “cap” on his advertising contract with a major advertising network. The overall spend is pretty substantial and runs to a few million per annum. He is facing increasing pressure on advertising budgets as his “cost per acquisition” is starting to spiral. With the advertising network placing millions of adverts in a blind network, you have to think that there are ways to improve the overall performance; one such way is matching the demographics of the sites used with the ideal demographics of the client. This is a good idea, except that demographics are not that accurate and, in our example case, the client gets over 20% of his business from the “unfavourable” 1/3 of the demographics. By cutting out these “undesirables” he would potentially see a 20% drop in turnover. But then again, these undesirables cost over 3 times as much to convert to customers than the desirables. So, how do you solve this problem?

Lets just break open this can of worms and see what the challenges are:

1. The client uses a blind network to advertise on, and can put a “stop” on poorly performing sites. This would drive down the overall cost of the advertising, the average cost of sale (whatever that means in this context) AND the total sales. So, 2 good things and 1 very bad thing.

2. The client has the problem that 20% of his sales come from undesirables and these cost 3 times as much to convert as desirables. Is this because 2/3rd of this sector are wasters or is it simply a case of requiring a far higher level of investment to get them to become customers?

3. The increasing cost of acquiring undesirables is making it almost impossible to increase the advertising budget to the desirables.

4. Their website converts at a staggeringly good rate (over 10%). Is this high conversion rate needlessly driving up the cost of conversion by having to pay for more undesirables?

5. The client has a Cost Per Acquisition contract with the agency and this contract gives a (broadly) fixed rate of acquisition, regardless of subsequent conversion into sales.

Hopefully you can see the dilemma here. But there are 2 alternative solutions to this:

1. Move the agency contract from CPA to CPS (cost per sale) - this drives the agency to generate not acquisitions but actual sales. This is, classically, a good solution as the agency is then driving at the same end-goal as the client but it has its own set of problems. Shifting the risk of converting acquisitions from the agency to the client means the agency will require a greater return on the investment. It also means that the agency has 100% visibility of the success of the client and therefore needs to be an integral partner and not a supplier; not every agency or client is comfortable with that level of collaboration and it can be potentially open to some “over selling”. It’s a difficult track to walk down but for most clients this is the only option open to them.

2. Provide a different experience for differing traffic streams. In other words make acquisition a far simpler task for visitors that match the demographics and a far tougher task for those that don’t. This gives you the best of both worlds. If a “perfect” visitor arrives at the site it becomes incredibly simple for them to be pushed through the process because a) they are more likely to respond to the sales messages do so and b) they have a far better chance of converting to a sale and so offer greater value to the client. If an “imperfect” visitor arrives at the site the acquisition process is more long-winded so it weeds out the “less than motivated” and also ensures that when the acquisition process is complete the client knows a great deal more about them so can better target the sales messages used in the future.

Makes sense? I thought so. We are going to try this with two clients who spend in excess of £5m on online advertising.

As an aside (sort of), Acorn provide an embedded web-service that could pull one of 50 or so demographic types that exist (according to them) in UK. All you would need is the postcode so for site visitors you know little about can suddenly be seen in a wonderful techicolour clarity on the acquisition of a postcode. We’ll be trying this out as well.

As organisations become ever more fleet of foot it becomes clear that the “old world” approach of making huge, long range policy decisions is no longer appropriate. For some time now I have been advocating a “test, test and test again” approach mixed in with a quasi-Kaizen methodology when it comes to improving the performance of websites. This is borne out of being able to have a complete view of what happens when we make changes to a site (thanks to our VITES™ platform); when combined with statistically correct sample sizes and A/B testing, this gives you the clearest (probable) indicator of how successful a change is.

I note that a search on Google turns up some interesting results, with some companies, such as Nike, embracing the idea, and no less than Forbes Magazine citing it as the reason for the wealth of creativity that comes out of our US cousins across the pond. Thomas Edison was once quoted as saying “I HAVE not failed. I have just found 10,000 ways that won’t work.” This approach has its problems which need to be addressed, but the greatest problem is with its name- Trial and ***ERROR*** - which states clearly that mistakes will be made. Sadly most of today’s inwardly-focussed corporates seem to lack the courage to take this step. Even worse are the companies that make sweeping changes without trialling them first; in the case of AOL a $75m loss in revenue.

The companies that do test fly; the ones that don’t end up stagnating and die.

The moral?

To succeed you have to fail occasionally

PayPal is widely maligned but for me it has got one huge thing in it’s favour - I know it, it’s in my Pod!

I spend my time preaching about the value of consistency and familiarity but seldom do I get such a violent reminder as I did a few weeks ago. Having bought a few things on eBay I was going through the process of bulk paying for them when I was stopped dead by one item that required me to go through a “channel partner”. This was a nightmare; I wanted to go click, click, click to pay for my stuff in my familiar way and now I had to look, search, read, learn.

Yuk!

Keep it simple = keep it familiar (unless you can improve on it - lower sellers fees is not an improvement, ever)

I used to do it a lot, quite often they were there “just to brighten the page up” but mostly they were pointless. I’ve recently started using mobile broadband and get frustrated when people stick huge images on web site so maybe I just carried that thinking across and am being more considerate.

Or it could be because I am still learning WordPress and the Typepad platform I used before was easier (for me) to insert images

We have been successfully using our VITES platform to control the flow of visitors through site for a number of years now. We have tended to use it to drop the visitor into a profile which deals with them according to individual attribute (gender, age etc). As a result we have been building big matrices of attributes that are starting to get a little cumbersome.

Recently we adopted “personas” to better understand the needs of site visitors and this is a simple way to work out how we deal with visitors. Yesterday, Andy (our systems guru) suggested we directly map the personas onto the profiles! This reduces the complexity of the VITES profiles enormously so we are going to implement this on one of our current build sites.

I’ll keep you posted on the outcome of this, it will be a great experiment and everyone at Connected reckons it’s a great leap forward. So do I.

If you don’t understand or haven’t come across VITES or profiling then have a read of this.

Our new corporate site has been live now for some months. It replaced a larger and more expansive site and is now a simple 4 page affair with some links to various other places (including here) and also to our VITES software platform site.

The problem for me is that it is drawing mixed responses. Some people seem to love it with the likes of David Pinchard (founder of TopInterim), a very senior and well respected marketeer who I have known for 10 years, saying it is “great” and that “less is more”.

On the other hand I have had comments that is lacks substance and doesn’t say enough. It is true that the audience will probably know of us but that does worry me. Should it? What do you think of our corporate site? Please do tell me, warts and all.

I’m really very fortunate to work with some of the most forward-thinking companies in the UK, but sometimes they just plain don’t understand this Net thing.

This week I had a meeting with a large client who has spent over £10m on his web strategy since 2005. Big money, big ideas and huge amounts of success. Ace.

As part of the (large) strategy is a very successful forum, it’s the only one in their space and it stands large and dominating. They rarely have to moderate it and have a great community of about 6,000 registered users and around 50,000 lurkers every year reading 20,000 posts. It cost less than £5,000 to setup in 2003 - what a bargain!

It’s a great opportunity to communicate to their ‘family’, their customers, their messengers. It could be the most influential element of their brand. In the world of semantic trust, social networking, link-sharing and search engines it offers a unique (in their marketplace) opportunity.

Last year they spent less than £500 and 1hr a week looking after it. Not surprisingly it’s dying. That is dysfunctional marketing.

Put simply, they just don’t get it. What a waste.