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Working vs. Nonworking in Digital Marketing

As I tell people frequently, the driving purpose of the work I do each day is to help brand marketers make the move to the next evolution of marketing. Therefore, one of the core challenges that keeps me up at night (and gets me out of the bed in the morning) is the need to provide marketers with tools and perspective that can help them make what can feel like an enormous change in habit. After years of thinking about marketing in one way, it is incredibly difficult to break principles that have guided us to success for decades. Today I wish to show how new media demands new principles and to blow up the old habit of using strict formulas to dictate the amount of money clients spend on media versus production—or Working versus Nonworking dollars.

As many readers know, in budgeting, brand marketers set aside funds for two broad categories of spending: (1) “Working Dollars”—the price to purchase impressions for an advertisement on a media channel; and (2) “Nonworking Dollars”—funds that are used to create the advertisement itself (e.g., production, editing, agency fees) and measure results before or in market.

Marketers typically wish to minimize total spending on Nonworking dollars (itself a denigrating term), as these costs are mainly perceived as a drag on ROI. After decades of work in traditional media such as TV and Print, many marketers have established guidelines for the appropriate budget percentage allotted to these Nonworking costs—usually 10% to 15% of total costs.

Unfortunately, we increasingly see brand marketers pass up opportunities to grow their businesses and change the marketing game for the better through new forms of media. By following old heuristics, many are giving up opportunities to optimize Search and Display, and are under-investing in Mobile, Social, and Websites, which can generate superior, Earned media engagement. Here’s what I believe is breaking down these historic principles:

1. New digital media is altering the formula that brands historically have applied to guide spending.

According to research by Exane BNP Paribas (adapted into the chart above), traditional media is holding at around 12% of total spending, yet newer media forms push that number up significantly. Search and Display (e.g., banners) rise to 15% to 20%, and recent efforts in Mobile and Social shift up to 55% to 60%. Search and Display have been used by brands for more than a decade each, leading to efficiency gains and a gradual decline in Nonworking percentage. However, these new media will stay higher than traditional media because they typically include in-market measurement and refinement. Brands should adjust their expectations and budgets accordingly for Search and Display.

2. Mobile and Social are even higher in Nonworking percentages because they represent the rise of Earned media that breaks from the traditional, Paid media model.

Generally, brands’ efforts in Mobile and Social do not simply turn over to paid media placement, thus breaking the age-old formulas that have been applied. Brands active in Mobile have focused on producing mobile-friendly Web pages and useful or entertaining apps. And in Social, marketers are building platforms to connect directly with consumers (e.g., active Facebook pages). None of these activities is transitioned into a typical media buy, so under the guidelines of historic habits they are labeled as Nonworking. I have seen brands decline to spend the tiny amount of money necessary to update their Facebook pages because of this self-imposed rule.

3. Although Nonworking costs may rise, Earned media offers a greater ROI than traditional, Paid/Working media.

Our research with several major brands/categories proves that Earned media engagements beat Paid media interruptions in nearly every measure. For example, Paid media does not account for the vast majority of impressions that are not noticed by consumers, while Earned media only counts those who lean forward and give attention to the marketing. Paid media must be repurchased continually, while Earned media can generate repeat visits and CRM activity. Further, the fragmentation of media consumption means that CPMs on Paid media are rising, and brands must produce more ad units across more media channels—thus lifting the Nonworking percentage even for traditional media.

4. New media offers the opportunity for scaled, Earned, and Owned media for brands that invest in creating content.

Brands that break the Working versus Nonworking mind-set and create valuable content platforms are reaping new levels of success. Examples include the Kraft 15 million person email database and successful iPhone app, Old Spice’s Twitter/YouTube videos generated 35 million views in seven days, General Mills’ Box Tops for Education with 30 million engagements per year, and Coke Rewards with more than 10 million members. And a recent Syncapse study suggests that a Facebook “Like” is worth $136 for the average brand thanks to low-cost, earned impressions, engagement, and word of mouth.

Conclusion

Chances are high that your brand or your clients have had at least a few discussions about how the next evolution of marketing is testing these tried-and-true formulas. My hope is that you have hard conversations about this change and make the adaptations that are required, rather than resting on old models that might help you sleep at night but won’t move your business forward.

3 Responses to “Working vs. Nonworking in Digital Marketing”

  1. Peter I. says:

    Thanks for this. As an independent consultant in digital marketing, explaining why you have to pay more for strategy and measurement vs performance in earned/social media has always been a little tricky.

    One sticking point I have is how earned media offers “greater ROI” than paid media. While I think this is true in many cases, I don’t think it’s universal. Given the real resources that go into something like effective ongoing social media management, there are definitely cases where search and CPA can beat it in a strict ROI sense (including many ecommerce scenarios).

    I think much of the value of earned media will always be hard to measure but it will also be equally hard to ignore. I once heard David Meerman Scott say that whenever he gets told that you shouldn’t do anything without measurable ROI he says “you buy health insurance, don’t you? What the ROI on health insurance?” We’re still in the ice ages on a lot of digital measurement so being instinctual and paying for the experience of people that know what works is possibly your best ROI.

  2. Bob says:

    Good points, Peter, and thanks for the comment.

    I didn’t mean to imply that “all” Earned media is better than Paid, but on balance that is what we are seeing on projects we have worked on.

  3. Florian says:

    Do you have the exact source for the graph? Very interesting!

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