Why Agencies Are Worth Their Price

By Tim Williams

Is an agency that is twice the expense of an in-house unit (even when accounting for internal overhead) worth the price?  Actually, yes.  The right kind of agency is actually worth 11 times the price.  Here’s why.

Marketers are often focused on the features of their product.  They know how it’s built, how it works, and how its features compare to every competitor on the market.  Marketers – and their sales forces in particular – have a deep understanding of the rational reasons people buy their product.

But it’s their agencies – the objective outsiders – who understand that every purchase decision is emotional, not rational.  Agencies know how to identify and leverage the true emotional benefits of the brand.

How you say it is usually more important than what you say

British ad pros Les Binet and Peter Field studied 880 case studies from the IPA Effectiveness Awards and published an insightful (and sometimes surprising) study “Marketing in the Era of Accountability.”  One of their key findings:

“Emotionally-based campaigns are not only likely to produce very large business effects but also produce more of them, outperforming rational campaigns on every single business measure.”

This study showed that advertising that appeals to the emotions is 11 times more likely to be effective. And it is agencies that have the objectivity, expertise, judgment and talent to inject marketing campaigns with the right kind of emotional elements.  Like it or not, the most talented craftspeople in marketing still work for agencies, not marketers.

The job of marketing is effectiveness

More marketing activities are moving in-house because of perceived efficiency.  But if you’re head of marketing, your job isn’t efficient work but rather effective work.  You can be efficient resizing a print ad, but the underlying advertising campaign itself had better be effective based on an understanding of how and why customers really buy.

Of course some agencies are much better at this than others.  The new Effie Effectiveness Index reported this year that “After analyzing finalist & winner data from 40 worldwide Effie competitions, Procter & Gamble is the most effective advertiser, McDonald’s is the most effective brand, Omnicom is the most effective advertising holding company and BBDO Worldwide is the most effective advertising agency network. Sancho BBDO of Bogota, Colombia is the most effective individual agency office. Wieden & Kennedy, based in Portland, Oregon, USA is the most effective independently held advertising agency.”

Agencies will never know as much about the rational features of a product as its maker does.  But they inherently know more about the customer that buys the product, along with the psychological and social benefits of buying and using the product.

There’s evidence from a study by the University of Miami School of Business that the design of an annual report can greatly influence the valuation of a company.  Just applying and understanding the psychology of color produces measurable results in corporate communications.  These intangible factors actually create value that clients can take to the bank.

The consultancy McKinsey famously promises its prospective clients that it will produce three times more value than the fee they propose to charge.  That’s because they have the self-confidence that the work they do will be that effective.  Good agencies should have that same confidence.  The numbers prove it.