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How the conversation economy changes performance expectations and compensation of agency partners – David Doty and Tom Finneran

While most marketers believe they are successfully adapting to the conversation economy, David Doty, senior vice president of thought leadership at the Interactive Advertising Bureau, and Tom Finneran, executive vice president of agency management of the 4A’s, believe many may be making it difficult to achieve optimal results.

Some of the ways companies limit their success include failing to set objectives or effectively incorporating social media.

Not all brands lend themselves to conversation, but all brands have the ability to encourage conversation, explains Doty. Social media is here to stay; the key is to create relevance and affinity for your products. To succeed, a marketer must know what he or she wants to accomplish rather than simply calling his or her agency and requesting them to Twitter or set up a Facebook fan page.

Doty offered five social advertising practices for the conversation economy:

  1. Social media is effective in the middle of the conversation—the consideration phase
  2. Social endorsements are most influential on purchase intent
  3. The value of social media should be measured by engagement
  4. Banner ads are not that effective, but creatively developed ads that uniquely fit the digital space can be
  5. Earned + paid = audience reach

Effectively using social media addresses only part of the problem. Finneran pointed out that two-thirds of companies are using compensation models, which fail to accommodate the extremely labor intensive and increasingly complicated task of creating integrated marketing communications.

“The table has expanded,” said Finneran. No longer is it just the client and agency, now we must work with multiple agencies, Web site platforms providers and media outlets. But typical compensation models remain cost based and fail for several reasons:

  1. The emphasis is on cost not value
  2. Agencies don’t share in benefits of efficiency or effectiveness
  3. It creates conflict between agency and advertiser
  4. An agency’s earnings potential is capped

Instead Finneran recommends using a new model—whether it be valued added or value based—the focus needs to be taken off of purely cost.

Coca-Cola and Procter & Gamble are two leading marketers who have adopted new models.