5 Reasons Why Brands Don’t Spend (as much) on Digital Marketing

Having been in the digital industry for quite a while, I’ve seen growth of the industry in terms of services, available platforms as well capabilities in terms of analytics and automation. However, why is it that brands still haven’t shifted their advertising and marketing spend to embrace digital as a channel?

Image credit: okoone.com

Shouldn’t it be the norm now for brands to do so, given that the industry has advanced and matured over the years to the point where it is now no longer termed “new media” but “mainstream media”? Yet, most brands only dedicate a small portion of their total advertising budget to digital channels and campaigns. Here are some of the reasons this could be the case:

Where do you even start?

The digital landscape is fragmented. VERY fragmented. There are many components and parties that rely on each other to make things work. Creative agencies, media agencies, publishers, ad serving, tracking, etc. In fact, it’s so fragmented, that there are providers that provide overlapping services to one another, and it can be totally confusing for someone to grasp what each service provider really does. Just to give you an idea, here is an image from chiefmartec.com on the marketing technology landscape.

(click here to view full image)

Believe me, I sometimes get confused as well after looking at this chart. For brands who want to invest in digital after seeing this, you can understand why there is confusion and doubt.

Don’t know the ingredients to make that sauce

Digital channels or media as a whole are made up of 4 main pillars: Display, Search, Social and Mobile advertising. Those are then fueled by content, which relies on optimization platforms and analytics to get the right balance. The question is, what is the right balance? How do you choose your digital media mix? How do you choose what platform to be on? What services to use? It’s like cooking. You first have to know the ingredients and cooking methods in order to make a particular dish. This is where the majority of brands rely on agencies to provide them consultancy on how to go about doing it. The challenge is always working with the right (and competent) agency, who knows your business well in order to recommend what you need to fulfill a business objective. But in my opinion, that in itself has its own set of challenges. (Read more here)

RTB, DSP, DMP, CPC, CPA, WTF…

Digital jargons are scary. There are so many metrics and measurements that are being used to the point that brands (and also agencies) sometimes do not really know what metrics they should be looking at. It doesn’t help that every year, that jargon list grows. Brand owners who do not know how to justify these metrics to stakeholders would tend to stay away, hence playing it safe by only investing to what they know (i.e. traditional media) – they fear the unknown. Again, the best way is to keep abreast with what’s happening in the digital marketing world. Agencies should play a bigger role here by educating brands through workshops and training, so that brands are constantly updated and know how to look at these metrics and make sense of it.

“I don’t want to know what I don’t know…”

In this case, it’s more like “I’m afraid of what I will know”. For digital, (almost) everything is trackable. Hence, for a brand owner, it could be something that may work against them. I once asked a client why they did not want to run a particular campaign on digital. They said it was too technical for them, and everything is trackable to which, should the campaign not do well, it would be hard for them to “hide” the evidence and justify to stakeholders! But then I asked, why do you think it would fail in the first place, given we have tools that can optimize the campaign? What if you can show your bosses that you can actually track and show proof of success? To which they became interested and asked me to explain more. The main thing here was more the case of the client not knowing the benefits of investing in digital. All it takes is a little education and effort to try it out to be able to understand its benefits.

Digital is expensive!

This is kind of a chicken and egg situation. Digital investments can initially cost a lot to start. With cost of creative development, cost of media, setting up of platforms, re-occurring cost for services, etc., you could also see why brands tend to sway away from this. However, most of these are initial one-time setup costs. For example, if you want to run multiple creative ads online using display advertising, you would initially have to pay a hefty fee for the design of dynamic ad templates. But once those dynamic ad templates are created, it doesn’t cost much to have multiple ads running off those templates. You could then update these creative in almost real-time whenever necessary. Which other traditional medium lets you do that? Similar to having a mobile application or building a website, the initial setup does seem expensive, but in the long run, the cost will justify the investment if you do it right.

Is It Better to Hire In-house Talent Than to Rely on Agencies?

A very controversial topic, seeing that I spent more than half my working career in advertising and media agencies. Now that I’m part of a client side marketing team, I somewhat understand why clients are generally frustrated with their agencies which makes them not loyal to one agency which often result in calling for agency pitches every now and then.

Mad Men - Photo taken from www.telegraph.co.uk

Here are some examples on why this may be the case:

Focus on the client’s business

While agency teams rely on multiple clients to survive, it may be hard to get an agency team to only focus on your business. Admit it, even though agencies say they have “dedicated team(s)” to service the account, most agencies often assign more than 1 client account to any one person so that a resource is fully utilized during down times. While I’m not saying it’s wrong to do that, it also implies that the resource does not have full focus on a particular client’s business in order to fully provide valuable strategies and inputs.

Not able to see the bigger or overall picture of client’s business

In order for agencies to fully understand a client’s business, it is sometimes necessary for them to also be involve in other parts of a client’s business, and not solely focused on Marketing alone. They have to understand how Sales, Marketing and Product departments work together as well in order to get a bigger picture of the overall business. This is somewhat how consulting firms such as IBM, Accenture and McKinsey operate and service their clients. They get to see a larger picture of organizational functions and processes in order to give better recommendations for a client. Sometimes it’s frustrating for a client because agencies do not understand the overall business.

In an article by Rezwana Manjur, Deputy Editor for Marketing Magazine Singapore, she made a comparison between agencies vs consulting firms. She said “Traditional agencies are generally more focused on creating campaigns to drive awareness and sales in the short term. Digital agencies are still more right brain oriented and work closely with the marketing teams alone. They are driven by a creative idea and the associated media plans to amplify the reach of the campaign. Consulting firms, on the other hand tend to be more left brain in their approach. Their scope of work could entail working with departments such as marketing, sales, customer service, HR, finance and such.”

The key here is being able to give long term strategies to shape a brand, rather than just campaign ideas that just focuses on short-term gratification, even if it means driving sales and numbers (and awards). In order to do that, agencies need to see the bigger picture.

Turnaround time

One of the biggest factor of why a client would rather have in-house think tanks would be exactly this reason. Agencies requires the time to be briefed, come up with creative ideas, run through their strategist, copywriter, creative director, etc before they come back to you. On the other hand, if you have an in-house team, they would have already been briefed in daily meetings and thus would also able to give an almost immediate feedback to the team.

Then comes the “what-if” situation of the agency’s proposal / idea not sitting well with the client. It then goes through the whole vicious cycle of “back to the drawing board” and again time taken to come back with a fresh proposal. Time taken to do this may vary of course, but agencies often feel the pressure and rush (hence all those late nights) in order to meet the client’s deadlines. In my years in agencies, I hardly (or maybe never) get the “go ahead” from clients on the first proposal. It’s 80% okay, and 20% of tweaks most of the time if you’re lucky. Again I feel that this turnaround time has a lot to do with how agencies work in sharing of key resources (creative person, strategist, account manager, etc) as most of them are working on more than one client account, which contributes to prolonged turnaround time.

So is it all doom and gloom for agencies?

Not for now. While most of the above are reasons to consider setting up an internal team, agencies do also offer some value, especially if they are part of a large network. If the client’s business involves creating presence and impact outside of the local market, this is where agency with global networks thrive. Clients get to leverage on getting insights and service from an agency that has a local setup in that particular country to better understand the market.

Agencies also heavily invest in tools and research to come up with proposals and insights. This is an area most clients won’t have the capability (or time) to do. Tools that help do predictive modelling, media planning or even to budget media spends are expensive to deploy on the client’s end that does not justify being purchased in most cases, simply because it’s not the client’s main nature of business. With the use of these tools, also come another set of talents which client teams do not have expertise on.

To hire in-house or not?

In summary, I feel it really depends on how much control a client wants over their brand. If you look at companies like AirAsia, Proctor & Gamble and Unilever in some markets, they have already started to develop in-house capabilities and teams. P&G invests in their own digital platforms and teams in order to have some control of how they want to position the brand(s), while relying less on agencies compared to a few years ago.

I feel that agencies need to give more valuable capabilities in order to stay relevant, something that clients can’t emulate even with an in-house team. It can be products, platform or even services, so that clients need agencies as much as agencies need clients.