Direct Advertisers – Go Digital or Die

August 14, 2008

On the face of it, the latest IPA Bellwether survey makes for sombre reading.  The top line finding is that, after one year, the credit crunch has now spread from banking and housing to the marketing sector itself.

Whilst this is no surprise to industry veterans (especially those of us who remember the early eighties recession and 1990 housing collapse), it is the speed of the marketing downturn that has come as a shock.  In short, the last four months have seen budgets cut at their fastest speed since 9/11.  It’s carnage.

However, like every other recession before this one, each economic downturn provides unique opportunities that if recognised properly can sustain agency margins and actually increase profitability.  2008, is no exception and the key opportunity this time round is digital.

The pointers for this are clear in the Bellwether survey.  Whilst budgets for direct marketing have now been revised down to the greatest extent in the survey’s history, digital was the only channel not to experience any cuts.

As the head of an independent UK Top 50 agency, I’ve witnessed these changes at first hand.  Our main agency, Attinger Jack, which specialises in TV and Press for direct sell clients has seen revenues half over the last four years.  By contrast, our sister agency, which we set up a few years ago and is shortly to be merged, has seen revenues double.  This has seen our overall group profitability sustained and improved upon, despite billings actually falling.

The secret?  Our sister agency specialises in digital.  More than that, it specialises in lead generation meaning that whatever the economic circumstances, we can guarantee new customers for clients.  At a time of economic belt-tightening, if an advertising or direct marketing agency can guarantee results, it will ride out the recession.  It’s that simple.

Lead generation is now the fastest growing sector of digital marketing and not just because it focuses on delivering new clients and accountable ROI.  After all, TV and Press direct ads have been delivering new customers for decades.  No, what makes digital lead generation unique is that new customers are guaranteed on a PBR basis (Payment-By-Results).

PBR or Cost-Per-Acquisition (CPA) as it is termed in digital-speak allows clients to allocate a set budget and receive a guaranteed set number of new customers or leads.  It’s bullet-proof because clients can still achieve their objectives yet retain fundamental cost control in the process.  In a recessionary environment, when every single penny has to work even harder than ever before, guaranteeing results by digital online lead generation is a no-brainer, hence its spectacular growth.

When the Bellwether report was released last month, IPA president Moray MacLennan said: “Agencies cannot affect the short term economic outlook, but they can do at least two things; firstly, focus even more closely on cost control and secondly, strive for even more original and innovative solutions so they can buck the trend.”

He’s right of course, but what those ‘original and innovative solutions’ comprise of will be the making or breaking of a number of agencies as we move forward.  We’ve made our call and our experience shows us that the route we’ve taken will pay dividends, literally and metaphorically.  It’s called customer generation, both on-and-offline.