Has digital marketing moved from high impact to high risk - and how can procurement help?

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Digital may be the fastest growing channel, with spend on digital marketing set to consume around 50% of total advertising budgets in the UK, but how much of that investment is reaching the right audience? With up to 35% of all web activity fraudulent or artificial and 54% of online ads not even seen by a human – the truth is that between 40% to 60% of global digital spend is potentially wasted.

This is no longer simply an issue for marketing – CEOs and CFOs are becoming increasingly concerned by the lack of business transparency regarding the commercial impact of digital marketing. From wasted investment to the risk associated with brand damage, digital has fast moved from high impact to high risk.

From creating business relevant marketing priorities and metrics to achieving transparent agency activity, what role can procurement play in facilitating a best practice approach that will enable companies to attain control over digital expenditure to drive down risk and, critically, realise tangible value.

Face the facts

The secret is out – up to 60% of digital marketing spend is wasted and, as a result, failing to deliver the promised ROI. From bots to viewability, fraud to simple confusion, in the worst case just 40% of digital investment is reaching its target. So what next for marketers – most of whom have enjoyed a good decade of digital excitement, enticing the CFO and CEO with promises of unprecedented measurability? As the business increasingly wakes up not only to the lack of digital ROI but also the ongoing disconnect between digital activity and business objectives, it is clearly time for new thinking.

One of the biggest problems facing marketing is, ironically, a lack of digital transparency. Despite digital’s promise of delivering unprecedented measurability, the truth is that significant money is being wasted due to poor transparency of both day-to-day activities and the actual contribution made by digital marketing to wider business objectives. 

Much of this wasted investment occurs across the diverse number of specialist agencies, brokers and intermediaries that have been commissioned by companies unsure how to progress against a backdrop of media fragmentation and huge shifts in connectivity, attitude and behavioural changes. This reliance has been important to support the development of new digital strategies. However, the combination of a lack of in-house digital expertise and confidence, especially with traditionally trained marketers, and the rise in the use of automated targeting and ad buying methods, such as programmatic buying tools, has created a lack of transparency in digital investment that is beginning to seriously damage the credibility of marketing.

Time for change

This is not just about money; with opaque campaign metrics and a lack of control, especially in a multi-agency model, companies are also incurring longer term risks, including damage to both brand and share price. Marketers need to change their approach – but when agencies are the first port of call for advice and guidance, how will any company gain that essential independent view into the state of the market? Right now, agencies are attaining massive digital profits and leaving their clients bearing the burden of risk. This model can only change if marketers begin to take a more savvy approach to digital marketing – and that requires an mediator that can sit between a business and the agency, broker and media buyer to level the playing field.

However, while strong negotiation is critical, simply using blunt, unsophisticated procurement techniques to push down costs and leave agencies with limited profit opportunities will not work. It will not improve the reputation of the digital marketing industry; nor will it enable a company to realise the full potential benefits on offer. The key is to get a workable balance – and that demands a best practice approach based on open communication and trusted partnership.

There are two vital components of this model. Firstly, building communication and collaboration across the business, from marketing and finance to IT, to gain a far better understanding of the overall commercial goals and the way in which different aspects of the digital marketing mix can support those goals. Secondly, taking these objectives to an agency or agencies and developing a new, workable relationship that delivers better value.

Facilitating communication

The truth is that digital works – but not all digital, all the time. Companies need to understand requirements and determine priorities before embarking upon any agency discussion. Once understood, a company can take this set of objectives to the agency or agencies, and embark upon an open discussion about how this can be achieved. On the agency’s side, this requires a recognition that measures need to be clear and transparent – the opacity of the past is simply no longer acceptable.

Organisations need to understand how money is being spent, how commission structures work and where a brand is appearing. In addition, marketers also need better insight into the latest tools and technologies - and their potential for the business; what should be measured and how each of the channels within the digital area connects with commercial outcomes. Clearly transparency on the agency side is an essential component of these new measures of success.

Sophisticated procurement can play a fundamental role in every aspect of this process – from liaising across the business to determine priorities, to negotiating with agencies. Critically, procurement can deliver the impartial expertise required by those companies lacking the internal digital experience and confidence needed to both determine priorities and negotiate with agencies.

Marketers need to take a step back and stop chasing every new digital opportunity. The fact is that despite the huge amount of wasted digital investment, companies are still gaining value – just imagine how much value could be attained with a more focused and accurate approach. Digital is still relevant, of course; but not all digital, all the time.

In a maturing market, it is time to accept the truth about digital marketing and to move from irrelevant and opaque measures towards a highly transparent model that enables companies to stop wasting up to 60% of the marketing investment. But this is not just about wasted digital marketing spend; it is about business value. When a poorly placed advert can have a detrimental impact on a brand, reputation or share price, no company can afford to get this wrong.

To reduce this risk companies need to gain control over this digital investment – and that requires not only transparency but a clear focus on delivering against business, not simply marketing, objectives.  It is clearly time for a best practice approach that will deliver a clear understanding of the priorities, and opportunities, closely tied into commercial objectives, and truly enable companies to realise the full value from the digital investment.

John Butcher is category director marketing, at Proxima.

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