I went to a very interesting New Business Conference this week sponsored by Think LA and Mirren.
A number of speakers from different agencies focused on the common problems facing the industry. The move to more project based assignments versus AOR relationships, declining revenues, the shift to clients having multiple agency relationships, etc, etc, etc. It wasn’t pretty. A sea of laments.
There was a very interesting presentation by Tim Williams from Ignition Consulting on New Emerging Business Models for Agencies. He outlined the days when agencies did things that clients couldn’t do. Setting type, preparing mechanicals, producing TV commercials. Yes agencies did things that seemed like magic potients for clients. Elixirs of creativity. Then came the computer which changed the playing field.
Certainly agencies very quickly jumped on the benefits of technology and the new creative software that accompanied it. But clients could also buy computers and do many of the same commodity things in house. Maybe not originally with the same degree of creativity but how many clients really want creativity? It is more a platitude than an attitude? Most companies aren’t Nike or Apple.
The next day I had an early morning coffee with the CMO of a pretty significant company in Orange County. He had started his long and successful marketing career in the advertising industry. He felt that he could do in house most of the things that agencies could do and do it better. He could do social media, videos, produce ads, hire photographers for product shoots, and update his web site. The 22 year old AE wasn’t going to take him to the next Marketing Valhalla. He really didn’t need to pay an agency to resize ads. Then he said one thing that stopped me.
He said the one thing that had great value for him was ideas. That sounded good for agencies. Then he said something else that wasn’t good. He said that agencies gave their ideas away for free. Now I don’t know what agencies he had talked to or what his agency experiences were but he was right that agencies often give things away for free. I wrote about this recently in a blog called Why Agencies Need to Stop Giving it Away. I have painfully learned in my business that giving away your knowledge for free is not a great way to pay the mortgage.
The conference and my breakfast left me with the conclusion that to grow agencies really need to focus their future services on the things that clients can’t do. I think that menu may change based on the clients you encounter. There is a good chance that what many clients can’t do is to live at the forefront of today’s dynamically changing technology. Many clients don’t have centers of innovation for instance. I certainly believe that agencies have the creative fire power to develop these services and productize them. The scale of agency innovation surpasses most client organizations in my opinion. I still hear plenty of client ahs when I do agency searches.
The problem is that many agencies have commoditized their offerings and can offer little more than their clients can do at less cost and probably with more insight. It’s time to stop billing for low hanging fruit and go to a higher level and get paid for it.
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As mentioned in the article, the problem is that anyone with a PC can replicate, though not necessarily duplicate an ad firm. Skill sets have to be measured. It’s like all the guys on CL advertising their photography services, just because you own a digital camera and have Photoshop does not mean you have the skills needed to remain competitive. And even if you do have the skills, how can you show them off in a sea of other qualified service providers. See the cycle? 😉
As for things clients cant do… we are in a time when an entire business will be built around something new and within months it will be replicated by competition. So in my opinion, this is a non-solution for ad firms.
I just have to say that I agree with you 110%. I never doing anything 100%. Technology today has turned the Marketing Industry upside down in my opinion. Everyone with a computer is a genius all of a sudden. Its the ideas of the future marketers that will make a difference in the quest for creative thinking……..and those creative thinkers need to be careful on how they express themselves because everyone is out there copying everyone else. They need to put in place protective measures to keep their ideas from being stolen for free.
The difficult thing about “selling” ideas is the current focus on ROI for each marketing dollar spent. Clients can’t show the results of an idea until it is executed. Clients want an assurance that what they’re paying you for will have a positive impact on their business. I know many agencies face this hurdle and thus give away parts of the idea to try to secure the business. I agree that the ideas are the secret sauce and there is little magic in the execution but how do we get those with the money to see the value of creative ideas?
Yes it is a difficult dance.
Hank,
One thing missed and your title implies is that the “client” believes they can do it all. Brands fail to realize that agencies bring a wider range of ideas than in house teams ever could. Also while brands continue to rely on traditional media and justifying their spends, agencies are 3 steps ahead when when it comes to interactive innovation. Perfect example is the number of brands still without mobile sites or apps. Not too mention that this post is being read on 3 different devices. Hell some still aren’t social. Most brand budgets still are not big enough to make branding effective but their egos get in the way of the fact they run TV, radio, or print.
Another goodie Hank!
The writing has long been on the wall! Ted Williams has been an insightful and astute advocate of the business model shift all marketing service firms must embrace to survive–let alone thrive. Few will do it and that’s a good thing.
Ad agencies, PR firms, design firms, web firms, social media firms, etc. are in abundant supply! When buyers have abundant supply, their focus is on price. And in any market where there is abundant supply, any price will be percieved by the buyer as too high!
You might be surprised to know how many “sophisticated marketers” are using free crowd sourced research and $249 logo / web design services.
Add to that, the competitve and speculative nature of the “pitch” process that has evolved to a point where an agency must give away their highest value product as proof of their worthiness to get the gig in the first place. And then there is the issue of getting paid in a timely matter. Big brands routinely pay their agency “suppliers” in 90 days or longer… so here is the state of the ad biz in 2013:
– an over abundance of supply (buyers control the conversation)
– ideas are not perceived as valuable because they can be obtained for free embedded in ever cheaper “execution”.
– clients pay whenever they feel like it.
The truth is agencies (of all kinds) say the same things, their positioning and websites are all interchangable, they focus on how many awards they have won as a proof metric of their “valuable” expertise. They show little desire to develop a highly valued and differentiated proposition their clients care about and pay extra for.
In my view there is only one viable option for marketing services firms– SPECIALIZE with a deep and narrow focus!
– in a discipline ( app development, market research, packaging, etc)
– in a niche market (health care, consumer packaged goods, technology, etc)
– in a demographic segment (boomers, women, men, kids, or ethnic specializations)
If agencies want a seat at the grown up table where clients make strategic decisions, they must distinguish their value from the slush pile of alternatives. Be known for the “one thing” and clients will come to you willing to pay a premium for your highly specialized knowledge and expertise.