Atomic Direct, LTD

Far too many “smart” (aka self-conciously cool) agencies these days proudly seek talent from anywhere EXCEPT business backgrounds. They believe, they say, that these fundamental skills for understanding arcane concepts like “profit” get in the way of true creativity. (More on this mis-direction in a future post about an ad biz culture I call “creative correctness”.)

But this outright avoidance of business skills in the agency business has led us to the endless (and frankly silly) discussion about deciding between “ROI” and “brand”.

Bunkum. There’s no contradiction between these two – not when you think like a business. The needs of your business must be met – and that means creating advertising which brands AND delivers ROI.

ALL advertising must return an ROI. Brand is meaningless if it doesn’t generate profit. I don’t care when you need it, at some point brand MUST return an ROI or you shouldn’t be building a brand.

Sadly, this means that all those arcane sociological wonderment theories surrounding brand ONLY have value if they help create profit. Otherwise, they are lovely little theories that agencies use to get their next work – but which clients should ignore.

Of course, it can be tricky to craft an ironclad calculation of ROI. And the reality of a vitally active market makes it difficult to separate an unchallenged advertising profit out of numbers affected by a wide range of efforts. But that’s no excuse. You must create a reasonable approach for estimating ad profit.

ROI Proponents are Also Wrong. It seems that the primary reason we talk about ROI these days is that online enthusiasts are desperate to find a way to steal budget from brand efforts.

As a result, massive venture capital investments have funded a plethora of content claiming that ROI oriented efforts trump long-term brand work. But they don’t. Brand building is extremely valuable.

“Profit Horizon”. A More Useful Construct. As agencies, we need to plan our every activity with a clear understanding of what I’ll call our client’s “profit horizon”.

In other words, if they spend $X today, when and how must profit from revenues driven by that spending cover the cost of the advertising and how much additional profit must result?

There are different types of simple approaches to this…

1. A few companies must have an instant profit horizon. Think of the traditional DRTV phone sales plays. Or, the direct mail instant profit needs. But also, a great many retail situations require advertising to drive immediate sales via store traffic.

2. Quite a few more companies will have a 6 to 24 month horizon. If they spend the money in this year’s budget, it must turn a profit soon. Not in 5 to 10 years, but in the next x months.

3. Very Large Companies May Be in a Position to fund long-term brand development. In these cases, full profit may not need be returned for 5 to 10 years. But even in this case, we should be developing ways from the first day to estimate profit created through advertising.

More Complicated Profit Horizons. Agencies and their clients will be far more successful if they can look at more complicated scenarios – perhaps like this:

Must recoup 30% of advertising cost within 6 months.
Must recoup another 30% of ad cost within the following 12 months.
Remaining ad cost plus a 40% profit on the revenue driven by advertising must be recovered over the following 2 years.

The advertising business serves companies with a 6 to 24 month profit horizon worst. These companies know that their long term health will be better if they step away from hard sell advertising. But as soon as they offer this wiggle room, agencies snooker them into failure. Perhaps agencies refuse to accept business reality. Or, too many agencies may know only one type of advertising. In either case, agencies recommend to these companies the same type of work they’d deliver for Budweiser and Coke – long term branding. And if the company agrees, then they usually go out of business.

Regardless of Approach, Agencies Must Learn Business. I heard a former W+K guy speak a few years ago and suggest that the problem in advertising is clients don’t “get” creative. So he recommended that clients need to learn all the creative subtleties he espoused. In truth, he just sounded frustrated that clients won’t approve just anything – that they ask for results.

I think the opposite: Agencies need to learn how to plan and speak in business terms. And, they should modify their operations in two ways:

1. Add “Profit Horizon” to Creative Briefs. It’s not always easy to describe or calculate. But it must begin to live in the mind-space of your creative and account teams. And that means adding it to the brief.

2. Start Hiring Trained and/or Experienced Business People. Your agency will never succeed at viewing Profit Horizons unless you can engage a healthy discussion about business, with businessmen and women. And that requires being able to read a P&L while talking in terms that the business understands.

Fortunately, when your advertising returns better business results, your agency business should grow. And that helps us all.

Copyright 2012 – Doug Garnett – All Rights Reserved

Far too many “smart” (aka self-conciously cool) agencies these days proudly seek talent from anywhere EXCEPT business backgrounds. They believe, they say, that these fundamental skills for understanding arcane concepts like “profit” get in the way of true creativity. (More on this mis-direction in a future post about an ad biz culture I call “creative correctness”.)

But this outright avoidance of business skills in the agency business has led us to the endless (and frankly silly) discussion about deciding between “ROI” and “brand”.

Bunkum. There’s no contradiction between these two – not when you think like a business. The needs of your business must be met – and that means creating advertising which brands AND delivers ROI.

ALL advertising must return an ROI. Brand is meaningless if it doesn’t generate profit. I don’t care when you need it, at some point brand MUST return an ROI or you shouldn’t be building a brand.

Sadly, this means that all those arcane sociological wonderment theories surrounding brand ONLY have value if they help create profit. Otherwise, they are lovely little theories that agencies use to get their next work – but which clients should ignore.

Of course, it can be tricky to craft an ironclad calculation of ROI. And the reality of a vitally active market makes it difficult to separate an unchallenged advertising profit out of numbers affected by a wide range of efforts. But that’s no excuse. You must create a reasonable approach for estimating ad profit.

ROI Proponents are Also Wrong. It seems that the primary reason we talk about ROI these days is that online enthusiasts are desperate to find a way to steal budget from brand efforts.

As a result, massive venture capital investments have funded a plethora of content claiming that ROI oriented efforts trump long-term brand work. But they don’t. Brand building is extremely valuable.

“Profit Horizon”. A More Useful Construct. As agencies, we need to plan our every activity with a clear understanding of what I’ll call our client’s “profit horizon”.

In other words, if they spend $X today, when and how must profit from revenues driven by that spending cover the cost of the advertising and how much additional profit must result?

There are different types of simple approaches to this…

1. A few companies must have an instant profit horizon. Think of the traditional DRTV phone sales plays. Or, the direct mail instant profit needs. But also, a great many retail situations require advertising to drive immediate sales via store traffic.

2. Quite a few more companies will have a 6 to 24 month horizon. If they spend the money in this year’s budget, it must turn a profit soon. Not in 5 to 10 years, but in the next x months.

3. Very Large Companies May Be in a Position to fund long-term brand development. In these cases, full profit may not need be returned for 5 to 10 years. But even in this case, we should be developing ways from the first day to estimate profit created through advertising.

More Complicated Profit Horizons. Agencies and their clients will be far more successful if they can look at more complicated scenarios – perhaps like this:

Must recoup 30% of advertising cost within 6 months.
Must recoup another 30% of ad cost within the following 12 months.
Remaining ad cost plus a 40% profit on the revenue driven by advertising must be recovered over the following 2 years.

The advertising business serves companies with a 6 to 24 month profit horizon worst. These companies know that their long term health will be better if they step away from hard sell advertising. But as soon as they offer this wiggle room, agencies snooker them into failure. Perhaps agencies refuse to accept business reality. Or, too many agencies may know only one type of advertising. In either case, agencies recommend to these companies the same type of work they’d deliver for Budweiser and Coke – long term branding. And if the company agrees, then they usually go out of business.

Regardless of Approach, Agencies Must Learn Business. I heard a former W+K guy speak a few years ago and suggest that the problem in advertising is clients don’t “get” creative. So he recommended that clients need to learn all the creative subtleties he espoused. In truth, he just sounded frustrated that clients won’t approve just anything – that they ask for results.

I think the opposite: Agencies need to learn how to plan and speak in business terms. And, they should modify their operations in two ways:

1. Add “Profit Horizon” to Creative Briefs. It’s not always easy to describe or calculate. But it must begin to live in the mind-space of your creative and account teams. And that means adding it to the brief.

2. Start Hiring Trained and/or Experienced Business People. Your agency will never succeed at viewing Profit Horizons unless you can engage a healthy discussion about business, with businessmen and women. And that requires being able to read a P&L while talking in terms that the business understands.

Fortunately, when your advertising returns better business results, your agency business should grow. And that helps us all.

Copyright 2012 – Doug Garnett – All Rights Reserved

I wasn’t entirely shocked to see that the Old Spice social media video campaign had won an Effie – a lot of people in the ad business seem to have decided this campaign was the grand epiphany of social media effectiveness. Except, I’d done some reading about the effectiveness of the campaign and found its results entirely unclear.

So let’s consider the “Effie” award from the American Marketing Association. Their website tells us:

“The Effie Awards were founded in 1968 by the American Marketing Association, New York Chapter, as an awards program to recognize the most effective advertising efforts in the United States each year.”

Great description. They must be better evaluated than the curated art shows that most other awards have become (like Cannes, Clio’s, and most others).

What led to awarding the 2011 Old Spice Campaign? Here’s a link to the Effie PDF about the campaign (click here). The PDF regales us with statistics claimed to reflect effectiveness. Mostly they are the usual big online numbers. And I notice:

1. They claim the total cost of the campaign was less than $500,000. Guess they didn’t think it was important to mention the $3M to $10M spent creating the first spot and airing it in spring of 2011 starting with the Superbowl. (TV is highly effective at driving social media action.)

2. Old Spice sales for the product line had already gathered tremendous momentum in 2010. Their brief claims sales were up over 60% in 2010 vs. prior year. Hmmm. That’s a nice starting point for more growth.

3. They report all the expectedly big social media numbers. But I’ve written elsewhere my skepticism about accepting big numbers just ’cause they’re big. (Link here.)

4. Then there’s complete chaos. They claim Nielsen says UNIT sales were up 125%. But they offer a graph with units on the side but which labels the 125% increase as “YouTube Responses”. Huh? Which was it? What’s really going on here? That’s far too sloppy to evaluate “effectiveness” and I’d drop one of my students most of a letter grade for that kind of mistake.

5. The last line caps it all off. Question: “Anything Else Going On That Might Have Affected Results?” Answer: “No other factors”. No mention of the TV campaign, the coupon campaigns, co-op ads or specials at the store? Riiiiiight.

Except, there is this article in AdAge. (Link here.) This article concludes that the Old Spice Q2 sales increase was attributable to the coupon campaign – not social media.

While the social media campaign was on, P&G also mounted a significant coupon campaign for the product (guess they forgot about that when submitting for an Effie). In the end, the Old Spice increase was roughly the same as increases of competitors who had mounted the same type of coupon campaign. And competitors (like Axe) who hadn’t used coupons hadn’t grown.

In other words: Coupon appear to be responsible for the product line growth – not social media efforts. And this means any claim of superior effectiveness needs a huge asterisk right next to it.

What Can We Conclude About the Old Spice Campaign? Clearly:

1. The brief is wrong when it suggests there were “No Other Factors”. Old Spice is part of a highly robust market with co-op ads, coupons, and a lot of retail action. Nothing – NOTHING – operates in a vacuum.

2. The brief is meaningless without a picture of the competitive environment and relative growth during this period.

While I don’t know what process led to the award, it seems realistic to suggest that the award should have caveats – if its not pulled entirely. At least, this is what an award show that cared deeply about effectiveness would do.

What Can We Conclude About the Effies? Not much. This is a single award and campaign. However, they didn’t do serious fact checking (it’s not like AdAge is a tiny and unimportant advertising publication). And they published a write up that is factually incorrect.

So do Effies have any connection with effectiveness? They might not. The Old Spice campaign was very clever, highly unusual, a new application of social, etc…. But none of that matters when you call your award an “Effie”.

The Sad Award Truth. Effies aren’t alone – they just claim to be better. Truth is, there is NO way to create an award that credits effective advertising.

Awards start to fail at one of advertising’s first critical steps: targeting. Effective advertising targets an end consumer. Judges are NOT those consumers and they never view award submissions within the reality in which consumers consider the ads. (Only industry associations for vertical markets can have any hope of judging target market impact.)

Once this failure starts, there is no way for awards to be anything more than they’ve always been: the more carefully crafted ones are curated art shows and the less well crafted are mere popularity contests. To create an award that is anything else would require judges to dedicate hundreds of hours of their time and be supported by a staff dedicated to developing independent judgement.

Still, the Effies could have done better. This campaign might still get an Effie if they’d had a complete submission that showed more effectiveness insight. And perhaps there was data submitted that wasn’t made public. But the public release showed egregious gaps. There’s no way those should be rewarded.

Copyright 2012 – Doug Garnett – All Rights Reserved