Traditional Madison Avenue advertising agencies have taken their share of lumps lately. More companies are spending bigger bucks to advertise online than ever before. Overall spending on advertising is expected to reach $279 billion this year.
That’s a 5.4 percent jump over 2004. However, Internet advertising is forecast to grow 15 percent over last year and hit nearly $8 billion by the end of the year.
The trend has been building for years, but now many traditional ad agencies are scrambling to change or be left behind.
Ogilvy & Mather is one of the world’s largest ad agencies, with annual revenues of $752 million, and is among those that have quickly adapted to the changing online environment. The agency’s OgilvyOne is a leader in customer relationship management and interactive advertising. As general manager of consulting for OgilvyOne North America, Michelle Bottomley is at the forefront of the seismic advertising shift and is responsible for the data, strategy and direct channels (teleweb, email marketing, partner marketing) practices at the agency.
She joined Ogilvy in 1998 to lead the direct and interactive marketing engagements for the firm’s travel and transportation accounts. Two years later she branched into other areas and launched the relationship marketing practice. During her career, Bottomley has led targeted marketing initiatives on behalf of a number of brands including American Express, Cisco, DuPont, Enfamil, FM Global, Ford Motor Co., Jaguar, Nestle and Unilever.
Prior to joining Ogilvy, Bottomley was vice president of marketing at Epsilon, an American Express subsidiary, where she led teams responsible for the development of marketing data warehouses, statistical analyses, loyalty marketing programs and data-driven marketing communications as the client service director for Amtrak, BizTravel.com, Dayton Hudson, Enterprise Rent-a-Car, ITT Sheraton, Nordstrom and Walt Disney Attractions. Bottomley also managed comarketing partnerships between American Express, Amtrak and United Airlines. She began her direct marketing career at Bronner Slosberg Humphrey (Digitas).
Revenue Editor Lisa Picarille spoke with Bottomley to discuss the current state of advertising, what’s happening with big brands online and why the Net has become such an attractive option for advertisers over the last couple of years. They also discussed what Ogilvy has done to adapt to shifting client needs and where advertising – both traditional and online – is going over the next few years. It’s definitely not a one-size-fits-all world when it comes to advertising online, Bottomley says.
LISA PICARILLE: Do you think traditional creative agencies have lost their way and their relevance?
MICHELLE BOTTOMLEY: The need for a clear and compelling brand proposition creatively expressed is not going to change. Great traditional agencies define an ownable and compelling brand proposition that reflects the passions and strength of the organization. Being able to define the soul of the brand and establish a unifying message architecture that can be expressed through every communications touch point is among the most important marketing challenges and the core strength of a traditional creative agency.
LP: Why have most agencies been slow to adapt to the change brought by online?
MB: For the most part, agencies, and certainly Ogilvy, [are] leading the revolution to make online or digital marketing a more prominent part of the communications mix. A key debate in the next two years will be the role digital media plays in the overall mix among agencies, their clients and the major media-planning-and-buying organizations.
Agencies need to push this forward through understanding the target and developing innovative digital brand-building ideas to reach them, but clients and media organizations will need to reallocate existing budgets to bring these ideas to the marketplace. In 2004 Ogilvy launched VERGE, a series of conferences for the agency and clients that feature top thinkers and companies in the new media space, to forward progress in this area.
LP: What is Ogilvy doing to adapt?
MB: Ogilvy’s 360-degree branding is a philosophy and approach that integrates marketing communications to build client businesses. As an extension of our 360-degree branding philosophy we are working on ways to integrate the best of the advertising world with the best of our direct and interactive capabilities in the areas of creative, production, strategy and analytics.
This integration will improve our ability to target smarter and bring ideas that embrace broad and targeted media, including online, to our clients, as we have done already with the Dove Campaign for Real Beauty. This campaign has driven considerable business growth for Unilever, and lives online, on digital billboards, out of home and in print in the United States and around the world as one campaign.
LP: How has the change been received by your clients?
MB: Very well. Our clients will always ask for big brand ideas, but more and more for the use of nontraditional media, which includes digital marketing via online, digital phones, digital billboards, etc. – media that can surround the targets where they live, work and play. We believe that digital media are a tremendous opportunity for brands to deliver unique messages and offers to their targets and achieve superior ROI from their marketing investment.
LP: How hard of a pitch is it to convince big brands of the importance of the online adspend?
MB: Not hard at all, and it’s been getting better. Big brands such as IBM and Ameritrade have long understood the importance of digital marketing and have incorporated it as a significant portion of their marketing plans. Our largest clients are pushing digital marketing further through the use of behavioral advertising, personalized messages, long-form video and dynamic marketing responses to interactions and to improve conversion of hand-raisers to buyers. There is more experimentation than ever before around bringing the right targets into the marketing funnel and nurturing those leads to accelerate conversion to sales using a combination of digital marketing.
LP: What about branding? A few years ago most concluded branding couldn’t be done online. Has that changed?
MB: Some of the most relevant branding is happening online – in the context of where the target is already going for trusted advice and information. IBM led the way in this area through their sponsorship of the Olympics and U.S. Open years ago, using online to broadcast events and scores “powered by IBM.” Online marketing has helped brands move beyond product-specific advertising to creating branded experiences as a way to foster an emotional connection. BMW films were famous years ago for attracting and swaying the right audience online through edutainment – building the brand – while sparking hand-raisers to come in and test drive.
LP: Are big brands increasing online ad spending?
MB: Yes, and even a few percentage points from traditional budgets start to show big increases in online spending.
LP: What about the traditional ad formula doesn’t work online?
MB: The old model of one-size-fits-all messages has evolved to include more use of search and contextual messages based on where the target is seeing the ad or where they have been before online. There is more testing now to optimize clickthrough rates and conversions using search, contextual messages and behavioral advertising alone and in combination.
LP: How has the adoption of broadband changed online advertising?
MB: The adoption of broadband by more households means we can reach more people with rich media, giving marketers the opportunity to blend edutainment into their online advertising as a way to attract more eyeballs and convert them to prospects.
LP: How has online advertising changed the type of account executive agencies hire? Do they have additional talents not seen in traditional advertising?
MB: Account executives equipped for the new world understand the art and science of marketing in a way they didn’t before, owing to the fact this media is so targeted and measurable. We look for account executives experienced with target definition and brand building along the customer journey from awareness to hand-raising and repeat purchase.
LP: How important is online advertising to Ogilvy’s overall strategy?
MB: Hugely important.
LP: Define what it means to be an ad agency in 2005.
MB: Being an agency in 2005 means being flexible, assembling the right people with expertise from a number of areas to solve big client challenges. Fewer are the days when the advertising team would create the brand idea and express it as a 30-second spot to be adapted by the direct team using mail and the interactive team online.
More are the cases of bringing specialists from all three areas together up front to develop innovative ways to define and express the brand proposition in the marketplace. This is one of the best times ever to be in the agency business.
LP: What’s the downside of online advertising – for client and for consumers?
MB: While the nuisance factor of one-size-fits-all pop-ups can be a downside for consumers, the advances in technology are allowing marketers to be smarter about how to engage the consumer online without appearing to be advertising.
LP: How do brands get heard above all the noise on the Internet?
MB: Be relevant, and seek to build a dialogue with the target in a way that opens and nurtures a relationship and value exchange.
LP: Describe the state of online advertising two years from now.
MB: Two years from now online advertising will expand to really be considered digital marketing and include digital billboards, digital phones, interactive TV, digital billboards, retail signage, etc.
Smart marketers will use these channels to enhance the brand experience, delivering more relevant messages and offers – and reflecting target response and prior relationships to refine that relevance in a synchronized way across these digital channels. Measurement of this relevance and synchronicity will provide marketers the opportunity to optimize the yield of their marketing investments, focusing on those digital channels that bring in the best leads and the combination of channels that optimize conversion of those leads at the most favorable ROI. This is among the best and most challenging times to be a marketer.
LP: What are the major hurdles for companies that have never done online advertising, and how do you convince them it’s right for them?
MB: More and more brands understand the needs of their customers and finding a way to deliver on them online. This doesn’t need to look like product-centric advertising, but instead creating branded experiences that provide a call to interact with the brand. A major hurdle for companies that have never done online advertising can be perceptions around channel conflict; for example, whether a dedicated salesforce would perceive direct communications as threatening their ability to represent and deliver the brand. In this case a tremendous opportunity exists to reach the target online and can take the form less of product-centric messaging and more of creating branded experiences online.
LP: In what ways does online advertising impact the advertisers’ ability to establish relationships with their customers?
MB: Online advertising provides a great entree into a relationship with a brand. Those brands that have been able to provide a compelling offer and deliver on that with an ongoing stream of highly relevant communications are the ones beginning to unlock the potential of this medium.
We have to think of online advertising as the start of a conversation, and the more we understand from that individual the better we can make the follow-up conversations. Smart marketers are mapping out the relationship pathway from online advertising to relationship nurturing as a way to convert more of the leads at the top of the funnel into qualified prospects and ultimately customers. Thinking about online advertising as one component of the overall marketing mix with a very specific role, with defined follow- up treatment, takes little time up front and delivers big payoff in the form of a lead pool and new customers.