Commentary
Why Most Agencies Stay Away from ROI Metrics
- by Mike Le , Op-Ed Contributor, July 7, 2016
Within today’s business culture, e-commerce is a way of life where many brands and retailers directly sell to their customers online.
Taking the form of direct web sales, social commerce mobile apps, among other channels, this wave of consumer traffic heavily influences how CEOs and CMOs look at their ROI and metrics for profitability purposes. They want to know, not just that a customer is visiting their website, but that the consumer is actively purchasing or partnering with them.
However, in many of the RFPs and proposals submitted by agencies to these clients, the focus is still primarily on items such as impressions, clicks or “engagement” metrics. If sales are the key metric that CEO/CMOs care about, the campaign focus should be on solid conversions where a direct action is taken on a webpage such as a user making a purchase or signing up for a newsletter.
With a focus on influencing the “right” audience, building brand awareness or being “top of mind” in the eyes of the consumer, many agencies skirt around providing clients with more concrete quantitative-driven results. They peddle the belief that a “deeply affected” and ‘influenced’ audience will be more likely to make a purchase later by simply getting the brand in front of them.
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But Really, why Is That?
The honest answer is that achieving true conversion metrics is difficult. It is much harder to achieve conversion goals, and much harder to explain.
Harder to explain: Committing to “views” and “visits” is far easier to explain and communicate to clients than the algorithm behind what really makes a conversion happen and the variables involved. In digital advertising, a “view” is widely accepted as industry “currency,” especially when many clients are familiar with traditional advertising.
Harder to achieve: In order for an agency to achieve conversion goals instead of “views/visits” goals, they must be able to ensure that the right type of visitor lands on a client’s page. That’s because only relevant visitors can then take a specific “conversion” action. Thus, the expertise required to run a successful conversion campaign is high.
On the other side, if the goal is a view or click, agencies often look for lower cost-per-click channels to maximize the number of clicks and impressions. But the cheaper the traffic, the lower quality it is. The grey zone is that it is often difficult to evaluate the quality and relevancy of a “view” or “visit.”
Harder to commit: When committing to using conversions, one must rely on various unknown factors that are usually out of the agency’s control, such as price, promotion, distribution, and require a lot of testing to get it right.
Harder to communicate: It is difficult to handle the client communication through the ups and downs of conversion-oriented campaigns. That means that when results are down, clients often panic and have trouble explaining these results to stakeholders or higher-level management. When results are up, clients want more – even if they are not feasible or achievable given realistic parameters.
Mohammed Ali once said, “When you are right, nobody remembers. When you are wrong, nobody forgets.”
Thus, agencies would ask: “Why make life complicated when we can all agree to some easy metrics?”
It takes courage to go after results, not easiness.
Setting up conversion targets takes extensive testing and time and relies heavily on a lot of variables. Many of these variables are unknown or often unstable. But in life, nothing worth waiting for comes easily.
This challenge is worthwhile for agencies and clients to go all-in for it, because that is the only approach that delivers a real business result.
Clients and agencies need to be working together to take the current state of business to the next level.
Here are some best practices for clients and agencies to run a successful performance-oriented campaign:
Give agencies room (and budget) to complete fundamental testing and use a “test and scale” approach.
Estimate what your conversion KPIs are early, but be flexible to adjust them after you start testing.
Communicate and ensure that a client’s IT team can be prepared and be quick to respond to changes ‘on-the-fly’ – especially on landing pages and during the conversion process.
Communicate early with higher management on the client side to ensure that approvals continue with little discrepancies throughout the longevity of the campaign. And importantly, allow for a campaign to have longevity.
Create a frequent and healthy flow of transparent, open and honest communication between the agency and the client team, to quickly clear any problems that might arise.
Clients should work with agencies that are willing to take on the challenges of creating campaigns with conversion goals. They should also be willing to give agencies room to work deeply, efficiently and effectively in order to obtain real results.
Aiming for easiness, rather than effectiveness is harmful to all parties involved.
The conversion-centric mindset pushes people to think. This mindset pushes people to analyze, to test and to take risks by allowing the process to get down and dirty in uncovering what really works and what does not.
Conversions are the only metric that truly matter.
This is a great article that encapsulates the current state of the agency, client relationship. Mike Le is making the case for agencies to go beyond the traditional client relationship and become their client's trusted advisor. To help clients dive deeper into their marketing analytics and discover the roots of their success. To have higher quantitative aspirations. It is a noble goal and one that would build stronger and longer relationships.
Alas, I am sorry to say that this is a difficult challenge for both marketers and agencies to live up to. Holding company-owned agencies are not at liberty to take the risks that full ROI disclosure will bring. The risk of losing the client will lead to job losses.
On the client side, the constantly changing competitive landscape has left many CMO's overworked and overworried. They live in a constant state of panic. So they fall back on what they know: discounts and easy metrics.
In most cases, they are not even sure what to ask from their agencies.
It really is disheartening because, as Mike Le, rightly points out, there is so much more that a brand can do to achieve their goals.
For those few lucky marketers who will take to heart Mike's message, it will lead to better results, better relationship with their agency and a more peaceful sleep at night.
I agree, Ted. In the old days---before all of the merging and purging that created the giant agency holding groups--- individual agencies like BBDO worked closely with clients who were amenable to help develop new products, explore alternative marketing concepts, etc. as well as creating ad campaigns and handling media. I fear that those days are gone and clients are certainly focused now on squeezing the most service out of their agencies at the lowest cost, with reviews of agency creative and media performance posing a constant threat to the agency/client "relationship". Not that the agencies were perfect then or now----but they have a lot to offer if treated with some respect and fairly--as partners, not just service suppliers.
Toally agree, I even wrote a little bit on this thinking today:
https://lnkd.in/bq2BMvP
Great conversations!!
Mike Le knows what he is talking about. He has a proven track record with his clients. The unfortunate reality is that many marketing firms do not want to live up to this scrutinization. It is not only difficult but many companies can not afford it. What I mean is that there are many incompetent people in the field and this would showcase their ineptness. I think if more companies followed Mike's advice they would stand out from the poor companies and people would be willing to pay a premium. Isn't it cheaper to pay a little more and get results than pay a low price and get nothing?
The good companies qualify their clients. Make sure they can help them before working with them. If they are successful, their clients will be their best advocates and they will be successful.
I would go so far as to say that companies should guarantee their work (with parameters) and if the client gets no value they should not be charged. Wouldn't that be a great world? Clients taking minimal risk. I can tell you that the companies that would follow this business model would be much busier and more profitable (if they are good).
It frustrates me that there's not middle ground. One of the incredible deceptions of data is that once it exists, clients tend to want it to be more and more ironclad. Detail provides the perception of utility - but quite often it's not useful.
Yet on the other side, agencies have a 30 year track record of excusing bad ads with "at least it's good for the brand" (which they usually aren't).
The way I view it is this: (a) ROI goals are entirely valid and are very important. Agencies should encourage broad ROI goals. (b) But, ROI is incredibly difficult to calculate in the real world. So the goals shouldn't be incredibly specific nor should they be the single way the agency's value is determined.
Advertising is a poor fit for the absoluteness of measurment required by programs like Six Sigma - programs which seem to dominate corporate cultures.
So despite client side executives obsessed with making everything "quantifiable", a client should be free within their organization to evaluate the agency by getting a "rough sense" of how well the ROI's are delivered, whether they feel the agency is bringing value and their A-game, and arrive at a judgement of whether the agency continues to be delivering the value they need.
Mike Le, this is an excellent topic. Only disagreement I have is the emphasis on ROI Metrics being "hard" on any scale or purpose. It's actually now very easy when backed by an algorithm that provides a GSI or Guaranteed Sales Increase for every product advertised in any media. With a GSI in a place an advertiser gets a guarantee their ad will produce a specific increase in sales. The advertising company then runs their ad. When the advertiser makes the guaranteed increase in sales they pay for their advertising. I recently posted a video working the GSI Algorithm math equation on youtube, that shows exactly how its done. It’s right there for the world to see and use.
https://youtu.be/mAQd-LLLMio
So for those companies that are genuinely interested in increasing profits and stock prices the opportunity has never been more readily available.
Courage and analytics are the coin of the attribution realm. Excellent post Mike. Too often the in-store/branch digital signage that speaks directly to patrons and customers at the point of selection or service receives too little credit for its contribution. Yet that new or regular consumer touch point on the path to purchase is proven to deliver brand affinity, conversion, cross-sell, upsell and improve the attractiveness of the location as a destination. When optimizing the media investment, digital place-based media at or near the shopping location is a key factor on revenue achievement.
Excellent Topic