CMOs Hold Digital Agencies Accountable for Profitability

There’s a trend that’s quickly turning into the new norm for agency-client relationships: profitability.

It’s a topic that I’ve been discussing for a while now. For context, check out an article I wrote on CMO.com in June 2011 called CMOs Insecure About Delivering On Digital’s Promise.

A recent study by the Horn Group and Kelton Research reinforces that thinking. It highlights recent changes in the way agencies are perceived and measured by top marketing executives. It’s also a paradigm shift from an agency culture of reputation and perceived cost-benefit over execution.

And that shift is happening quickly.

Among other key datapoints, the study I mentioned above also states:

  • 68% of marketing execs say their companies are behind the curve in digital media integration.
  • More than 40% of marketing execs with 10 or more years in their position think the most important quality in an agency is execution.
  • 77% of marketing executives want to work with agencies they would consider to be partners, not vendors, and roughly 70% now have engagements that resemble partnerships with agencies they use. Marketing execs also prefer smaller and more specialized forms over larger, all-in-one agencies.

Starting to see the big picture? CMOs are building digital competencies quickly and learning how to identify agencies willing to dig deep and act like operating partners rather than external contractors.

Defining successful execution

It’s great to talk about the value of execution, but what does that look like when it’s actually working? In our opinion, an agency should step up and take charge of leading innovation in a complex and ever-changing digital landscape. That means challenging clients and asking the tough questions that, while uncomfortable at first, drive positive change. It also means aligning goals and outcomes. If profitability is the primary objective for the client and agency alike, both should be rewarded for finding new, high value customers and ensuring those customers are on board for the long haul.

Bigger isn’t always better

The Horn and Kelton study also reveals that CMOs are engaging smaller specialist agencies more likely to deliver profitable results in the niche areas they serve. That’s meaningful because it supports the idea that these same CMOs are searching for a personal touch (read: partners) and a high degree of expertise in a complex and often confusing digital marketplace.

So where does that leave us? If you’re a marketing executive and you aren’t satisfied with the current performance of your agency, now is the time to shift evaluation criteria to profitability. For most marketers and their businesses, there is too much at stake, and too much changing, to live with a traditional model that is not aligned to your success.