For the past couple of years companies have been obsessed with measuring their marketing ROI. As it turns out, it would be wise for agencies to do it for them.
That’s the conclusion of a new report from Forrester Research that surveyed marketing and agency executives. For now, most marketers (76%) don’t measure the ROI of their lead agency. According to the survey, 69% say it’s because ROI is just too difficult to measure. But with marketing departments under pressure to demonstrate their value, the report, entitled “Help Wanted: 21st Century Agency” warns that if agencies don’t help clients with measurement, they could lose business to management consulting firms such as IBM, McKinsey and Accenture. “Agencies will lose their strategic advisor position to firms hired by strategy or procurement,” says the report, by Peter Kim, senior analyst at Cambridge, Mass.-based Forrester. “Without metrics and accountability, agencies cannot prove why a switch shouldn’t be made.”
This missing measurement piece could also prove problematic for ad agencies because marketers don’t necessarily believe their agencies provide great value. While 93% of agency executives interviewed by Forrester believe their contributions drive their clients’ marketing success, far fewer marketers (63%) feel the same way (see chart).
Alan Middleton, assistant professor of marketing at Schulich School of Business, York University in Toronto, says in Canada “ROI concepts have not caught on with either clients or agencies,” save for a few exceptions. “The traditional ad agencies are scared of being held accountable for any real measures of effectiveness and hide CPMs and aided awareness numbers.” He says ad agency executives blame the fact that accurately measuring ROI of advertising is a tough, if not impossible, assignment. “That is true, but just because it was difficult to measure gravity, doesn’t mean Isaac Newton stopped,” says Middleton. He thinks ad agencies should look out for not so much the large management consulting firms, but more nimble specialist firms with a focus on marketing measurement including Custometrics, Kneebone and Venture Communications, all based in Toronto. “If I was an agency,” says Middleton, “I’d open a metrics de–partment or sign a deal with a group like Custo-metrics.”
The other key discipline in which agencies have been losing work to specialist shops is interactive. According to Forrester, interactive/digital is the number one category for which marketers use an external specialist agency. That has led to digital firms even winning “traditional” agency work. (Case in point: Agency.com created print and outdoor ads for IKEA in the U.K.)
“You talk to the larger interactive agencies and they have hundreds if not thousands of employee positions open right now,” Kim says, a fact which he says underscores just how much work they are doing.
With an ROI and media agnostic focus, Forrester says traditional ad agencies would be in a better position. After all, the survey found marketers and agencies agree on the agency’s role as a strategic partner, brand champion and business driver. “They look at the organization with a fresh perspective and bring decades of experience to meeting our challenges and goals,” said one respondent, a vice-president of marketing at a large bank. But for many ad agencies, at the moment their job is likely a lot less secure than it’s been before.
Chris Daniels is a freelance writer in Toronto
