Slippery and expensive

It seems to me that marketers are finding themselves in an increasingly difficult position these days. On the one hand we are under greater pressure than ever before to deliver impressive and crucially, provable ROI on every campaign, whilst at the same time the changing nature of marketing itself is making this more and more of an uphill struggle.

Dave Mance recently summed up the problem of the changing nature of response like this:

Apparently, people no longer call a number or fill out a coupon. Instead they look at our ad then a few days later go on something called the internet and have a little look around their website and then still don’t buy anything.

This is especially inconvenient for us below-the-liners because we’re traditionally judged on ROI. Previously, it was easy to justify spending money with us because you could point to a number of brochures requested or products sampled as a direct result of our work. Now all we can say is, “Cor, loads of people have been on your site lately, that’s probably thanks to us and not the work of all your other agencies or a gazillion other random unmeasurable factors”.

The advent of social media has further complicated the ROI issue, and there remains little consensus on standard metrics for measuring the success of social media campaigns.

Presumably it’s this type of uneasy truth which led to the claims made in a Cranfield School of Management study that marketers are "unaccountable, untouchable, slippery and expensive".

So what’s the answer? How do we justify our worth in an increasingly complex communications landscape?

This article from The Economist reports on the recent implementation by Coca-Cola of a ‘’value based’ compensation system’ for its advertising agencies. Rather than paying them on the standard agency model of billable hours, they will pay for results achieved.

‘’Value based’ compensation systems’ are common in some industries – banking is the one that springs to mind - where the real money is earned in the form of large performance-based bonuses (and also non-performance based bonuses, if the last year’s headlines are anything to go by). And this is fine when you’re just talking about hitting a figure. But the problem for an industry at the intersection of creativity and commerce is how to objectively measure the value of work. The Coke model

guarantees to cover advertising agencies’ costs, plus a bonus of up to 30%. The bonus depends on a number of metrics, including the agency’s overall performance, and the sales and market share of the products being advertised.

The reality is, of course, that most agencies don’t literally charge billable hours – they take a view on the commercial value of the job. If your creative team has taken 10 minutes to come up with an idea, this doesn’t necessarily make it any less valuable than the one which took 4 days to tease out. So in a way, ‘value based compensation’ is simply transferring the value call to the client. And in a way I can see the advantages: everybody knows where they stand, the client feels they’re getting value for money, it’s a great incentive and if we’re confident in what we’re doing then why shouldn’t we be comfortable with it?

It will be interesting to see if this model catches on. And if it does, who’s pushing it - agencies or clients. Because slippery and expensive is not where we ought to be.