Perhaps the most well-known and often used quote in the marketing industry is this one:
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
It’s attributed to John Wanamaker, a famous 19th-century American retail merchant. And like many business owners back then, Wanamaker had trouble determining the true return-on-investment (i.e ROI) of his marketing efforts. He couldn’t, for example, accurately calculate if taking out newspaper advertisements directly resulted in more revenue at his stores. He had a feeling some of his ads were working – customers were coming in and making purchases – but he couldn’t quantify their exact impact on his business.
Amazingly, over a century later, many business owners and marketing executives today still face the problem Wanamaker had. More specifically, large Fortune 500 companies invest many millions of dollars annually with marketing agencies but do not hold them accountable for any revenue generated by that investment. Why? Because, like Wanamaker, these agencies and their clients often lack insight into the critical relationship between marketing and sales. They don’t know where their marketing budget is effective and if any of it is resulting in waste. Put another way, they do not understand the true ROI of their marketing dollars.
And it’s this persistent ignorance regarding advertising’s true ROI, combined with fast technological change, that is playing a key role in the massive disruption taking place in the marketing industry today. Business decision makers for the world’s leading brands are becoming increasingly frustrated with their marketing agencies as they push for a greater understanding of the ROI of their work.
The thing is, as BlueIn Group has discovered, it doesn’t have to be this way. Today, in certain industries, you can accurately determine a marketing campaign’s exact ROI. At BlueIn Group, we know if a marketing investment directly results in a new customer generated for a business. That’s why we were founded on the simple but powerful idea that companies should only pay for the new customers we acquire for them. In this way, there’s no question if any advertising dollars are wasted. We know exactly, for example, if a digital ad campaign results in a positive ROI. If we didn’t, then we wouldn’t exist. Our business model demands that we deliver true value to our partners. The same typically can’t be said about the business models of traditional stand-alone marketing agencies. Their fees are usually based off a percentage of their client’s marketing budget, billable hours, or a combination of the two. And, regardless of revenue generated for the client from their work, these agencies still get to keep their fees.
Charlie Munger, the famous American investor and partner of Warren Buffett’s, once said: “Show me the incentive and I will show you the outcome.” To BlueIn Group, the outdated business models of traditional marketing agencies present a clear misalignment in economic incentives. Think about it this way: A traditional marketing agency is incentivized to have their client increase their marketing budget or pay for more employee hours because that’s how they’re paid in fees, regardless of the business outcome for their client. The more budget or more billable hours a traditional marketing agency can secure from their client, the more they earn regardless of how successful their work is from a ROI perspective. And this leads to unavoidable waste and a less than optimal result for their client’s business.
That’s why here at BlueIn Group, we’ve adopted a purely performance-based model. We only earn a fee when we have driven a new customer for a partner. This ensures our incentives are aligned in the best way possible. Our competitive advantage over traditional marketing agencies is that we integrate marketing and sales so that we can find, sell, and deliver new customers. Combining these two critical, business driving disciplines allows us to understand and optimize the entire customer acquisition process. We can see the full marketing funnel – from an ad clicked online to the sale made. And that means we can maximize the quantity and, importantly, the quality of the customers we deliver.
What’s also unique about the marketing practice at BlueIn Group is that we spend our own ad budget – not a client’s ad budget – to drive their results. This means that we take all the risk upfront; if we spend our own ad budget and do not drive new customers for our partners, we’re stuck with the loss. This means our partners do not have to spend a single cent until we’ve given them the result they’re looking for. That’s unlike traditional marketing agencies who work with their client’s ad budget – not money out of their own pocket – and are often not held responsible if their management of this ad budget fails to produce results.
All of this, taken together, comes back to marketing and advertising’s most fundamental purpose: to drive more sales. David Ogilvy, who was a marketing executive in the mid 20th century and is popularly known as the “father of advertising,” understood this very well even without the advanced technology available to marketers today. One of his more famous maxims is this quote: “Your role is to sell, don’t let anything distract you from the sole purpose of advertising.” At BlueIn Group, those are words we live by. We’ve found a better way to understand the true impact of marketing on a business. Join us as we continue to reshape and redefine what it means to be a modern agency.