A wise old lady once told me, ‘Allen, change always remains constant’. She spoke about how in her time, the world had fewer resources, more conflict, poorer relationships and grew further away from God. Looking back at 2018 and forward to 2019, the picture is in line with the same old adage that change is the ‘K’ constant.
How did growing digital budgets lead to shrinking commissions?
There was an improved global economic outlook in 2018. Africa’s largest economies have been slow to catch up with this upward trend with both Nigeria and South Africa experiencing GDP growth rates of just 2.7% and 1.4% respectively.
In the tough economic times of 2018, digital provided the tonic that marketers were looking for. Low costs per contact, attributable returns on investment and an ever-growing universe meant digital weightings in the media mix have appreciated significantly. This is great news, but it would be premature for the collective digital marketing agency fraternity to break into ululations, song and dance.
One trend has emerged that requires further introspection from agencies, the emergence of the hybrid trading desk. Up until recently, it was common place for agencies to transact fully and autonomously on behalf of their clients, offering little control or transparency over their veiled digital media buying operations. This was the age of the agency trading desk.
Today, however, East Africa’s biggest brands spend more and as such, want more control. The hybrid trading desk model has forced agencies to align with client-side buying and monitoring platforms where both the client and agency jointly set out objectives and measuring methodologies. This may sound encouraging from the perspective of clients and agencies working together better, but it has led to diminished returns for digital marketing agencies.
There was a significant drop in commissions from the highs of 20% in the early 2010s to as low as 5% or less in 2018. These returns will only continue to diminish in 2019, as brands shift more of their digital media capabilities in-house. According to Campaign, a UK publication, Vodafone has shifted two-thirds of its digital media buying in-house – largely biddable media, which includes search, social and programmatic. It is also indicative that this comes at a time when nearly a third of its £600 million marketing budget is spent on digital. Vodafone controls key telecoms units in Kenya and Tanzania.
In Kenya we have already started to see the telco giant Safaricom, a Vodafone affiliate, consolidate its efforts in building a hybrid trading desk with job postings going out for digital media executives throughout the month of November. Could we see the emergence of this brand’s trading desk in 2019, completely cutting agency out of all media relations? Only time will tell.
When did customer segmentation become irrelevant? Welcome big data!
In the years that marketing has grown, we have seen a steady progression in media approaches from mass communication to personalised communication. To this end, big B2C brands over the last few years have dedicated their efforts to customer segmentation. Many reaped benefits from this approach. Customer segmentation, however, experienced a short peak in East Africa that began to decline somewhere between 2014 and 2016 when the region began to migrate to digital TV broadcasts.
D-day for the migration has been set for June 2019 by the ITU and this trend should certainly come to the fore around this time. Customer segmentation as a discipline in media can only thrive where you have a critical audience, mass built around certain homogenous media consumption habits e.g. watching the evening news at nine, live in a certain residential income banded area around Dar Es Salaam and having a TV set. This is the kind of information that a media planner relied on to understand how to target a customer segment. With the fragmentation of traditional media, and the growth of digital as a medium, this kind of data is becoming too sparse to correlate and form into segmentation data.
Enter big data. 2018 saw a significant shift by brands and media owners away from customer segmentation to purely data-driven approaches. StarTimes is a great example of a once traditional player in the sector that is evolving. In May this year, Michael Dearham, StarTimes’ senior vice president, quipped that strategic partnerships with leading telecoms would expedite OTT business consolidation and growth.
Partnering with ad-serving engines would fast track their plans for RTB, via programmatics instantaneous auctions. Given Africa’s leader status in mobile-share of web traffic, and the fact that global ad growth is driven by mobile, this has the added advantage of enhanced ad-measurability and more targeted delivery.
StarTimes accordingly placed greater emphasis on the mobile market in the ensuing period. This is a natural move by the DTT player as they have the supporting data on millions of consumers in their audience base. By manipulating this data, they are able to help brands reach the right consumer, at the right time, with the right message, without the need for the draconian consumer bucket segments that traditional above-the-line would have relied on before digital migration.
Vodacom South Africa, a partner to Safaricom in Kenya, and Vodacom in Tanzania similarly realised the value of big data in the Vision 2020 strategy to become a digitally transformed brand. Mickey Mashale, chief sales officer for Vodacom’s enterprise business unit, said Vodacom’s previously segmented customer approach would also undergo a change, evolving from traditional segmentation and customer value management to a more comprehensive big data-led approach, which would allow for a more detailed understanding of customers. Expect to see greater and more significant shifts to big data in East Africa in 2019.
Did the agency model die in 2018?
A bold statement requires a bold qualifier. Mainstream corporates in Africa are quickly shifting from ‘marketing’ to ‘growth’. To understand where we are headed as agencies and professionals in marketing, we need to look at shifts in the US market. Enterprise companies such as Coca-Cola, The Hershey Company and the Kellogg Company have all hired a chief growth officer in recent months, even replacing the chief marketing role.
According to US publication, the Wider Funnel, this shift from traditional marketing to a focus on growth requires technical know-how and a strategic mindset. It makes the customer experience essential to a marketer’s success; experimentation ensures the customer’s preference trumps all other opinions and assumptions. Out of the 455 CGOs in the United States, nearly half of them are in smaller start-up companies, the type of organisations that tend to act as disruptors in their industries.
Disruption is a key precursor in the rapidly growing African economies. Brands in Africa to this end have formed innovation teams and hired strategic heads of innovation to lead the charge from marketing to growth. It is only a matter of time before we start to see the emergence of the CGO role on the continent and the death of the CMO role. Safaricom in Kenya is one brand heading in that direction, with the formation of the strategy and innovation, regional expansion and knowledge management (research and insights and big data) role, speaking to their penchant for market leadership through disruption.
But what does this mean for agencies one might ask? A whole new skillset is required for the marketing or media agency of 2018 to see themselves into 2019. Much like the clients we represent, there will be more focus on growth strategy in 2019. Typically, African agencies have suffered from a lethargy in strategic thinking and alignment owing to something at OMD Worldwide we have hypothesised as the ‘smile curve’ of marketing agencies.
What this simply means is that traditionally, clients only paid for our low value agency services such as implementation and buying. We subsequently offered our most high value services, such as insights and optimisation, for free. This meant that our agency skillsets then moved more away from our high value offerings with capacity being built in the low value implementation side of the business.
As an agency we have realised this shift and how it will potentially affect our growth in 2019 and beyond. 2018 has been spent building capacity in our high value agency services. We have also adjusted our pricing models to focus more on outcomes e.g. sales and conversions, as opposed to the old agency model focused on inputs, such as time. We now call ourselves a digital transformation agency with a focus on strategy, product innovation and communication design.
In 2019, as more and more emphasis will be put on sustainability and growth, agencies will have to adapt. Global management firms such as Accenture, McKinsey, and Deloitte have already realised this shift long before marketing agencies did, forming formidable digital marketing units. They have since mopped up most of the viable talent and are now encroaching on what was traditionally media agency space. Expect 2019 to bring more of the same.
As the sun rises on 2019, it is clear that digital transformation is no longer a novelty reserved for the few switched-on brands and agencies, but rather a mandatory pass into the hallways of the digital economy. Digital transformation in 2019 is the tool that will gear all players in this fine industry to think disruptive.
Let’s embrace the disruption that will come our way in 2019 with open arms!
Allen Kambuni is a disruptive digital native with a penchant for connecting businesses to consumers. As a co-founder and managing director of Bean Interactive, he has worked with some of the biggest multinationals and Kenyan brands, helping them unlock opportunities in the digital economy.
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