Earlier this year, we published parts one and two of this Auditing Digital Marketing series, which addressed the ‘infrastructure and applications’ and ‘promotion’ pieces of the ecosystem, as they map to our audit checklist. In this third installment, we’ll discuss ‘vendor management’, which is the single most important piece of the digital ecosystem puzzle.

The role of agencies, consulting firms and, increasingly, marketing technology in an organization’s digital operations is a major concern these days. The martech category continues to grow rapidly, with new vendors entering the sector each week, further cluttering an already crowded space. And concerns about “kickbacks”, with digital advertising at the center of the controversy, seem to have prompted the review nearly $30 billion worth of advertising agency business from the likes of BMW, Procter & Gamble, Johnson & Johnson and Unilever earlier this year.

It is against this backdrop that general managers, CMOs and CIOs are making decisions about how to optimize their digital operations: finding the right insourcing versus outsourcing balance, technology tools and platforms, and vendors to help them executive successfully. A CMO once told me, “The most important thing I do each year is decide which vendors stay or go. These decisions make-or-break my performance.”

With that in mind, we offer the following considerations for getting the most out of your digital vendors.

Understand The Vendor Landscape & What You’re Buying

Just as is the case in every other industry, professional services is being disrupted by digital technologies, too. For corporate buyers, this means it’s increasingly difficult to discern the difference between vendor types, and how they can or should be slotted into needs categories. Vendors providing digital solutions can be organized into three groups: ad agencies, marketing services provider, and marketing technology companies.

Ad Agencies develop creative strategies (ad campaigns) to help clients sell their wares, and then buy media across different channels (TV, radio, print, digital) to distribute the campaigns.

  • Value proposition: creative talent, end-to-end marketing support, cost certainty
  • Engagement structure: multi-year retainers
  • Players: WPP, Omnicom, IPG, Publicis
  • Clients: the world’s largest advertisers
  • Digital Tools: DSPs

Marketing Service Providers deliver specific point-solutions that are typically inextricable from a digital technology category. Many provide a cluster of offerings, but rarely is able to satisfy a corporation’s end-to-end marketing needs, as an ad agency is able. Common examples are search marketing agencies, content marketing houses, and data analytics shops.

  • Value proposition: tactical and technology know-how & support
  • Engagement structure: 12-month retainer, project-based
  • Players: cottage industry of mom & pops
  • Clients: SMBs and start-ups

Marketing Technology Companies offer software-based solutions that address a specific management challenge, such as marketing automation, data management or personalization. This relatively new technology category has mushroomed into thousands of vendors in recent years, and is characterized by modest, monthly fee pricing structures, which is in stark contrast to the historical model of enterprise-class software purchases (large upfront fee + 20% annual license for updates and support). Marketing technology’s growth is an example of the oft-cited “software is eating the world” phenomenon coined by Marc Andreessen, and has created a whole new set of management challenges as well.

  • Value proposition: enterprise-class software solutions for 1/10th the cost
  • Engagement structure: monthly, quarterly
  • Players: thousands of specialty shops + Adobe, Salesforce, IBM
  • Clients: everyone

Perhaps the most important thing to remember when evaluating partners is the level of ongoing support you can expect to receive from the different types of companies:

  • Ad agencies are built to do whatever it takes to make a client happy, and factor that into their fee structure
  • Marketing services providers are also client-service oriented but are specialists, and therefore limited in the ways they can make contributions
  • Marketing technology companies sell software and go away after the invoice is processed, no matter how appealing their engineering team or knowledge base might seem during the sales process.

Become a Procurement Wizard

Being able to get your preferred vendor through the procurement process is job number one, especially at large corporations, where the process can be daunting and cause some vendors to run for the hills before a relationship ever begins. As one industry observer writes, “Procurement departments and others have been busily grinding down fees for decades now”. Mid-sized and small shops don’t always have sophisticated sales teams, and will need hand-holding to get them through the process. Conversely, you don’t want a procurement group saddling you with the low-cost vendor that may not be the right solution. So getting closely involved is usually worth the effort.

At mid-sized and small companies, buyers might need to insert a heavy dose of education into the process, since many digital tactics are new line items and require new budget approval. Presenting senior finance managers and even CFOs with competitive benchmarking and ROI cases usually does the trick. Mature vendors will be able to do this, too, but newly launched firms often lack the sophisticated and need your support.

Manage Vendors Using an Integrated Portfolio Approach

The very largest companies can afford one-stop-shop relationships with full-service agencies, and they’ll do this job for clients. The rest of us need to fend for ourselves.

Integrated vendor portfolio management is especially pertinent to digital operations because of the Frankenstein-like manner in which this sector has evolved over the past decade: build a website, add a CMS, launch a pay-per-click campaign, pursue organic search optimization, mine for analytics, integrate with a CRM, etc. Digital tactics and technologies also often cut across traditional functional lines of a corporation — primarily sales, marketing and IT. So it’s not unusual to have digital ecosystem with dozens of technologies and vendors involved but only loosely stitched together.

A first step to addressing this situation is as simple as orchestrating a “digital congress”, with all of the key players in attendance. Getting everyone working from the same playbook will require a plan and a dedicated resource — and Scott Brinker has addressed the different kind of approaches in detail — but phase one of the effort can be accomplished with quarterly conference calls and in-person meetings 2x/year.

The benefits can be considerable. Digital marketing performance can improve as much as 30% with coordinated vendors and tactical integration, according to McKinsey analysis. The likelihood of technology redundancy and waste will decrease, too, as it’s common for disparate units to be using the same tools but with different licenses.

Another byproduct of employing an integrated management approach is that it promotes stability across the digital ecosystem. We all know the first thing to go following a soft quarter or big customer loss is vendors, because they’re the easiest to get rid of. It’s in the digital executive’s best interest to raise their profile to champion their contributions, to help the organization understand their roles and importance in the operation.

Beware of the Chameleon Vendor

Lots of vendors with an offline heritage have successfully staked out their digital territory over the past decade. They made investments, retooled infrastructure and staff, and evolved. Think of that print company that now builds great websites, or the database software company whose offering is now completely cloud-based.

However, just as many vendors resist change, yet are able to cover up deficiencies resulting from obsolete techniques at the center of their offering. Superior customer service, glossy reports, and convincing presentations can make it difficult to identify a laggard.

Being A Good Client Is Good Business

Agency-bashing has become competitive sport in the wake of the kickback accusations back in March, so it’s an easy time to jump on this bandwagon. But I advise clients to think about the issues in a different context.

Negotiating is a part of the engagement process and driving for a bargain is fair game. But once the paperwork is filed, it’s time to transition to partnership mode.

This week, Heineken’s former CMO shared lessons learned about how to get the most of out an agency relationship in Your Agency Hates You and You Don’t Even Know It. Her advice is part common sense, part the result of lessons learned: be open and forthcoming, share information freely, be inclusive in problem-solving, and provide candid and specific feedback.

When it comes to digital, skilled professionals have myriad options these days. They have alot of control over the companies and clients they work for. I know one agency executive who wrestles with 25% annual turnover with a staff of 1,000, meaning 500 of his employees are always either “coming or going”. This is not unique to his firm; it’s an industry-wide challenge.

You of course want the best-and-brightest, so treating the client-vendor relationship as a collaboration is probably going to get you more of what you want – which is the best performance possible.

Tim Bourgeois is a partner at East Coast Catalyst, a digital strategy consulting firm in Boston specializing in digital marketing and media audits. He is also the founder of ChiefDigitalOfficer.net, a global community of senior digital professionals.