This post is based on a presentation I made last week to the leaders of Enero’s agencies, gathered in Sydney for our annual meeting.
Maybe it’s because I get described as an ‘industry veteran’ but I can’t count the number of times I have heard that us agencies were about to be wiped out by the latest technological shift to head our way.
Whilst there have always been winners and losers, the basic agency value proposition of bringing the ideas of creative people to bear on the businesses and brands of client companies has and will continue to endure. Creative people need to be around other creative people and like to have lots of different problems to solve. In almost all cases, you don’t get that in a business whose business is not the creative business.
But art needs a frame and great strategic and creative output has to find its audience where they are most receptive and, of course, it has to be supremely useful to the company or brand it is trying to serve. Which is where the technology comes in.
Technology changes to date have mostly been external to us agencies in that they most profoundly affected the channels through which we delivered our campaigns. Despite all the huffing and puffing about the relevance of the agency model throughout the time of the arrival of the world wide web, the rise of social media and now the dominance of the big ‘platforms’, great agencies (big and small) have continued to thrive and do great and effective work.
But there is a new wave of technological change that is coming our way, and whilst I continue to believe that we will again adapt and give great value to our clients, this time things will be a little different because the changes this revolution will drive will be internal to our businesses and internal to our clients.
That change, for want of a better term, is marketing automation. ‘Yes, yes, I know’: A phrase to rival ‘cost accounting’ in its spectacular dullness. And there-in lies our first challenge; we like to deal in rainbows and so we sometimes find it very hard to wade through the grey. Well buckle up and put the sunnies down, because this will be a tour of ‘four shades of grey’. I have categorized marketing automation into four areas, each of which I will look at in terms of the impact it has on the client/agency relationship; its scale and trajectory and what I believe agencies should be doing to harness it and to avoid being squished by it!
Single use ‘vertical’ solutions
You may have noticed that every agency’s favourite cheap polling solution, Survey Monkey, recently listed on the Nasdaq, where after some ups and downs it raised US$180 million at about a $2 billion valuation.
At $2 billion, Survey Monkey is now worth 20% of the whole of IPG. Maybe the equivalent of McCann, which sounds crazy for what started as a simple survey app. Admittedly, Survey Monkey has a technology company SaaS (software as a service) style valuation supported by revenues of under US$200 million (and not a cent of profit yet), but the valuation is based on the judgement of investors that, over time, it will come to win a large portion of the $44.5 billion research industry. They think it will get much bigger and fast. And with all respect, no one is saying that about IPG.
Take another long–time marketing automation stalwart Mail Chimp (why all the simian branding?) that handy little solution best known for automating a company’s email marketing. Mail Chimp is still private, but last year did revenues of US$525 million. That’s the size of Ketchum in the PR industry and significantly bigger than, say, LoweMullen.
A newer and still small business, Hotjar, uses cool visualization to show what people are doing when they visit your mobile app or web site and what they think about it. They had 6,000 paying organizations, 80,000 subscribed users and net revenues of US$1 million within six months and made a profit within six weeks of launch. Chances are, that one day soon they will be worth as much as the biggest agencies.
There are a bewildering amount of these marketing automation tools, many of them handily catalogued into ‘stacks’ and reviewed by some dedicated industry visionaries and smart agencies have been using some of them for quite some time to automate and mechanise individual tasks. To date, the biggest challenges to agencies in adopting these solutions has been keeping up with them, training staff and then getting clients to pay for them NOT out of the professional fee. But they don’t change the agency / client relationship in any way and mostly they are additive to the existing model and an efficiency and therefore not a disruptor.
The same is not true of companies like Marketo, HubSpot, Pardot, ActOn and Active Campaign (very NOT a full list by the way) which promise more ‘horizontal’ solutions, linking and automating client’s sales, marketing, customer service and communications functions which makes them very different.
Conceptually, all owned and social content is managed by these solutions as well as sales communications and CRM functions. They are very ‘lead’ and UX focused which may be why they have been ignored by most traditional agencies to date who still see themselves as outside the world of the ‘sales funnel’ and hard ROI. This is not necessarily wrong of course as it’s hard to create emotional differentiation and high reach with an email or gain credibility and third party endorsement through a timely intervention by a customer service bot on your web site.
But more and more companies are implementing these systems as CMOs and communication leaders look to be on the side of revenue growth. And that will pose the question to anyone producing ‘content’ (pretty much everything that is not traditional paid or media relations); “how does what I do fit in”?
If a client has not yet asked you how your proposals align with the systems of one of these vendors, my bet is they soon will. To date, the early adopter clients have been mainly from SMEs and B2B marketers (especially the software sector for whom working this way is second nature and whose product is often accessed via the web). But that’s changing. The websites of these businesses boast financial services, health and FMCG companies on their client roster.
With these companies the ‘scale thing’ is eye-opening: Last month, ‘marketing automation leader’ Marketo was acquired by Adobe for $4.75 billion. At time of writing, investors believe that this single software company is worth 40% of WPP. Again, the revenues are still comparatively small, but Adobe is placing a big bet that many hundreds of millions of marketing dollars will be spent through their platform in the future. I think they are right.
And these businesses are just the newcomers to the sector. The established software forces of Salesforce (who own Pardot), SAP, Microsoft and Oracle all of whom have focused until recently on automating from an operations, CRM and sales function base are widening their offer to include marketing and communication functions. Their current clients are not just start-ups and B2B players, but the biggest companies and brands in the world. If you think they aren’t already making the case for marketing automation at the highest levels in your biggest client companies, then good luck with that.
Having experienced the procurement of a marketing automation solution myself lately, I can tell you that any client that has gone this route has been through some considerable pain and expense to implement it. Smart agencies, will show how what they do and what they produce can align and fit into this system, either using it as a delivery system to the ‘tail’ of their creative or earned media content or, and even smarter, they will be partnering more strategically with their client, interrogating the assumptions about customer journey and experience that are built into smart marketing automation and tailoring their own approaches to complement it.
To do this well, you need trained staff, which is why Enero’s communications agency Hotwire and digital agency Orchard have Marketo certified personnel in their teams. Horizontal marketing automation solutions directly sit between a traditional agency’s outputs and the consumers and businesses they are looking to target. Not getting ahead of this will result in lost business. Committing to it will, increasingly, help win and retain business.
Marketing Automation Agencies
There is now a thriving agency environment devoted entirely to this world of which there are two basic types. The first are ‘creative’ agencies that produce strategy and content customized to an automated environment. The strategy is usually less classic brand strategy and more customer journey, customer experience and hard performance metric focused. So the language is more automated workflows, pre-defined scenarios, customer-driven triggers, single customer view and omni-channel plans than, say, awareness, relevance, saliency, engagement or trust.
And the outputs are usually highly specific and tightly targeted social ads, banners, email, SEO, thought leadership events and ‘surveys’. These agencies are not thinking about TV, press ads or editorial PR (though they are happy to recycle them as owned content).
The other agency sector helps clients choose and implement marketing automation systems, build out their stacks and the business processes and marketing strategies around them. Most don’t pretend to do creative and if they do, it ain’t going to win any awards.
Smart ‘traditional’ agencies will look to partner and learn from these firms, especially the more deeply technical ones who may be glad to pass off the creative content to people better qualified to produce it.
It’s more difficult to get a sense of scale of this sector, but the few I have been tracking seem to be growing fast and doing well. And in some cases, some pretty big ‘traditional’ agencies are developing a reputation for being ‘marketing automation compatible’. That will increasingly be an advantage.
I’ll start with the scale story because, again, it is big. Actually, it’s really big! According to Consultancy.uk, the big international consultancies have annual fees of $240 billion of which approximately 20% ($48 billion) are marketing related. That means they already earn the same in fees from CMOs as WPP, Omnicom, Publicis and IPG combined. You may have noticed that Accenture has been crowned the world’s biggest digital agency recently by Ad Age.
This scale may be news to PR agencies that rarely come into direct competition with them, and it may still be surprising for creative and digital agencies who meet them more often, but not to the extent these numbers would indicate they might. The reason is that they are rarely competing head to head in creative pitches. More often than not, the Consultancies are winning at C level because they have successfully positioned themselves on the side of the revenue growth and digital transformation and every CMO now wants to claim revenue growth and most CEOs are driving some form of digital transformation.
The ability of the consultancies to knit strategy; enterprise scale IT, organisation and culture change and now creative is compelling and simply cannot be replicated by agencies. Their creative skills, probably the least easy fit in their cool corporate towers, have largely been acquired in recent years in the shape of agencies like Karmarama and The Monkeys. They have realised you can’t solve a marketing transformation task without creative, but it is very much NOT their starting point and none of them make the effort to claim they compete on that basis. They don’t need to!
If you spend any time talking to them or looking at their web sites and case studies you can quickly see that their whole approach to brand and marketing is, a bit like the horizontal software vendors, about customer journey and customer experience, but in their case it is supported by high level IP and data and research. It is incredibly compelling.
I still believe that us agencies can and should chisel off much of the brand custodian and communication roles from the Consultancies, but to do that we may have to change our nomenclature. Many people did not believe Byron Sharp and his relentless focus on reach and penetration and concepts like physical and mental availability, but if you were pitching to Mars then you framed your strategy in those terms or at least made reference to them because Mars did follow those concepts. When you come up against the consultancies, you might well want to flex your planning model to include notions of customer journey and experience, because for sure, CEOs and CMOs are being educated by people in more expensive (though more boring) clothes us, that this is the way successful firms do it these days. Smart agencies will adapt to this and, hopefully, smart clients will realise that, long term, great creative work is not consistently found in cultures that have to strain so hard to house truly creative talent.
A conclusion at last…
In talking to colleagues and friends in all sorts of agencies about marketing automation over the last couple of months one thing has struck me. Few can disguise their lack of interest in the subject (it wasn’t all directed at me) and some are openly contemptuous. I remember a similar reaction to the arrival of social media. Whilst the agency model adapted and thrived on the back of that change some careers ended and some agencies failed. My last word on marketing automation to agencies is ‘lose the snobbery’. This stuff is already huge and is (or will very soon) be adopted by your clients. Adapt and embrace it and use its constraints to continue doing creative and effective work which is what good agencies have always done.