A Radical Idea to Keep Ad Agencies Relevant
First published B&T – Dec 2017.
As widely reported, KPMG has appointed a former ad agency (Carmen Bekker) suit to head up their marketing advisory consultancy.
Last year I did a series of 4 articles on existential threats to advertising agencies
Identity
Credibility
Competition
Remuneration Structure
Loss of identity and credibility are a sure way to ensure competitors will move on you. Even in the 1980s, Chartered Accounting firms were eyeing marketing and communications as a logical fit to their already expanding suite of services.
I can recall a discussion with the Managing Partner of Arthur Andersen as far back as 1985 at a wedding of friend. The partners of the Big 8, as they were back then, were incredibly aloof. They didn’t think they sat at the right hand of God, they felt God was in their seat.
In a dismissive and arrogant tone, after telling him where I worked, he stated marketing and advertising were “all bullshit”. I replied, “We make the money, you just count it”.
The mainstay of accountants’ business was audit and tax. Computers were integral to their business long before they were common place in agencies. So, MIS (Management Information Services) was soon added.
A massive advantage Advisory firms have always had over ad agencies is who they report to – the CEO and board. The partners are generally well known and respected by “the big end” of town. The C Suite is often mentioned as the desired client target. The Big 8/6/4 have always operated at this level and above.
In addition, their MIS business gave them access to the most sensitive of client data and information.
Trust is another of latest topics of industry focus. These guys have had and maintained this in spades at the highest levels of client organisations. 30 years ago, Agency senior management had similar access. Sadly, we lost our position at the top of the table many years ago and now mostly deal with middle management. There are exceptions, but the partners in the Big 4 have far greater access to the client decision makers.
There is an old saying that has held true since commerce began, “business is about 2 things – relationships and money”.
As mergers and rationalisation occurred (PwC was once Price Waterhouse and Coopers and Lybrand for example), their voracious appetites for fees grew. Their aim was to be the trusted advisers for business, a one stop shop.
With their breadth and depth of existing services, access to and trust at the highest level of client decision makers and emergence of the digital economy, it was only logical that marketing and media would be on the menu as they “ate” their way through every consulting service businesses that would boost their revenue base. The ad industry played into their hands, making it much easier for them to come after big chunks of business that were once clearly the domain of agencies.
It is only relatively recently that we have woken up to the huge threat posed by not only the Big 4, but second tier firms and Management Consultancies.
I have mentioned many times the separation of media and creative made sense financially at the time, but has opened the door for Advisory and Consulting firms. A classic MBA style move. The quantitative staked up, but the subtle qualitative factors were overlooked.
Times and technology change and the industry must change and adapt accordingly. But change does not mean moving away from our core area of business – advertising.
Have a look at the “service” offers of many of the large agency groups and advertising in rarely mentioned. As the media, or conduit to the consumer, fragmented, agencies had to act accordingly.
But advertising is still a combination of media plus message – what is the most cost effective and impactful media combination to reach the client’s target and what are the messages (strategic and tactical) messages required to both sell and build/maintain the optimal corporate image?
The latter is the client’s responsibility. It is not up to the agency to tell the client how to position their brand. The basis of a client brief is to advise the agency who they want to reach and want they want to say.
The 4Ps of marketing still hold true i.e.
Product
Price
Place
Promotion
Screw up the first three and no amount of outstanding promotion will lead to success. (Yes, some say there are now 6 or even 7 Ps.)
What about “People” some say. Well, people are an integral component of the product. There are 7Ps, which have also stood the test of time:
Proper
Prior
Planning
Prevents
Piss
Poor
Performance.
Another consequence of splitting media and creative was to open the door to the Google/Facebook duopoly. They leveraged their relationships with the big media agencies to help them gain direct access to clients and they also work with the Advisory and Consulting firms. In the long game they have been playing, Agencies are a pesky “middle man”, though extremely useful in the short to mid-term in driving advertising dollars online. In July this year, Fortune estimated the Duopoly controlled over half of all online revenue worldwide and growing rapidly (In the US it is over 60%). Why do they need to pay commissions to a middle man when they virtually own the online advertising market? (A variety of different reports put the figure of the % of “new” online advertising controlled by Google/Facebook in excess of 90%).
So, as well as the Advisory and Consulting firms, competition in the media business will come more and more from Google/Facebook. Many clients are moving in-house programmatic planning and buying and dealing directly with Google/Facebook. (These guys were not paying large commission and rebates because they are “generous”. The more media dollars moved online, the greater their control.)
We are being squeezed from all sides.
Advertising agencies having been trying to take on the Advisory and Consulting firms at their own game. One thing that hasn’t changed since I first joined an agency in 1983, is that successful brands had Product, Price and Place sorted BEFORE briefing their agency.
And the brief comes from the “marketing department”, though what a marketing department is and does is becoming somewhat blurred - there is now debate as to whether “customer experience” is separate to marketing. We are seeing Chief Customer Officers as well as Chief Marketing Officers in the one organisation. No wonder quality briefs are becoming rare. It is literally becoming a case of too many chiefs and not enough Indians, or is it a case of too many cooks spoil the brothel? (My dam dyslexia again.) But you get the idea – a brief is now something served up by a committee and nothing good ever came out of a committee.
I have not heard much about “Innovation Labs” recently. Seriously, what is an agency doing advising a client on new product development (unless it occurs by “mistake”, a consequence of another task being undertaken)? Pricing elasticity studies are complex beasts best undertaken by specialists and Marketing 101 states that a product lives or dies on its distribution. (The internet has provided the greatest distribution source of all-time. As opposed to the greatest advertising medium. Digital disruption is mostly achieved by using the internet as the source of distribution). Even before the “digital revolution” there were a plethora of consultancies in these areas.
Carmen Bekker stressed that KPMG would not be offering “creative” services. This is a speciality area for which they were not equipped. Having a background in advertising (her last role with JWT London), she has a greater understanding of the divide between advertising and marketing.
I have lost count of the number of clients who decided to bring creative in- house, only to reverse the decision after realising an internal vertical integration of the marketing and communications areas didn’t pan out in practice the way the MBA textbooks said it would. Who recalls The Commonwealth Bank setting up their own creative agency 360 in 2000? This didn’t last. Anyone with a flair for creative and an ambition to make a career of it, concludes very quickly that being stuck inside one company, working on one client is not going to provide the breadth of experience required to go on to bigger and better things.
Content businesses is where our true competition lies, though as 90% plus of all commercial content produced is not viewed, this is a transient threat. (“Content” is nonsense term). Thanks to corporate blogs and social media, we have been inundated with a specific type of “content” – stories/case studies aimed to promote health insurance, exercise regimes, banks helping small businesses grow, telecoms providers solving business problems etc etc etc. People are inundated with “content” and these corporate stories don’t stack up against Game of Thrones, Family Guy, live sport and (excuse me whist I vomit), Reality TV etc – the huge choice of genuinely interesting competition for their time. Just ask Isentia about the bargain buy of King Content. The client and content producer may think it is fabulous, but to the average punter it is as boring as bat shit. (It’s not all bad, there has been some great creative content produced, just as there have been a small number of hard -line terrorists de-radicalised).
For many years in the 70s, 80s and 90s. Agencies divided themselves into Above and Below the Line practices. But now, integration of creative services should be a mandatory. Packaging and logo design, promotions, DM/eDM, training videos, jingles/music etc. were once separate to mainstream agencies. If we want to stay relevant and compete, all creative services should now be brought under the one roof.
In mid- nineties our agency’s positioning was Above, Below and Beyond. I was fortunate to have teamed up with Grahame Bond, an extraordinary creative talent – actor, writer, director, comedian, producer, musician, song writer and above all a great creative lateral thinker. With Grahame’s talents and contacts across the Australian music, entertainment and theatrical scenes, we were able to tap into a wide variety of “creative talent.” This allowed us to offer an array of integrated creative services.
Going through the library I found a training video from 1993. The not overly politically correct (the target was car dealers), I think anyone who has worked on an automotive account will find it amusing and also show the automotive industry has not progressed very far, despite all the lip service, in the past 20 odd years. (Anyone who enjoys off the wall, slightly black humour should also get a laugh or two.)
A quick bit of background:
Daihatsu was launching their new Micro Car – the Mira. The Charade, a 1 liter, 3- cylinder vehicle, had been an overwhelming success. Topping private car sales and wining a slew of awards including best overall vehicle by the NRMA. But car dealers are skeptical, with small cars being an anathema to most back then and all were multi-franchised. Unless they believed in the vehicle, carried some stock (1, even 2 demos), ensured merchandising was in place and briefed and provided incentives to their sales force, forget about advertising it to the public, it was not going to fly. So, the number 1 target market was the dealer group. We put together the launch at Darling Harbour Convention center, designing everything from the menu to the themed decorations, wrote several songs for The Beatnix (The Beatles Tribute band) to play. And we wrote, filmed edited and produced the following dealer launch video. (Graham plays one of his characters, Kev Kavanagh). A fully vertically-integrated creative package for a new vehicle launch:
Imagine this coming out of PwC or KPGM?
Forget the rubbish about digital versus mainstream advertising. (Virtually all advertising could be called digital today. TV began broadcasting a digital signal in 2000). The are all simply different platforms – consumers move seamlessly between the wide range of platforms/medium. When creating advertising, the golden rule has always been to ensure the creative execution is empathetic to the medium in which it appears. Nothing has changed, except the large increase in the number of mediums available.
The major difference between advertising now and 30 years ago, is media, IT and data have gained primacy over creative. Many large companies collect data the way hoarders fill their house with rubbish – “What do you want that for?”. “I don’t know but I am sure it will come in handy one day”. With a background in mathematics, I have a keen appreciation of the value of data. But often the data is not relevant, tells what people did but not why, or there is so much of it, the relevant information is lost in a sea of numbers. Quality, not quantity should be the golden rule of data collection.
IT plays a vital role, but it is analogous to print, radio and TV production. It is the “technical”, not the message/creative – the tail, not the dog.
Unfortunately, the problem of the separation of media and message remains. They are not discrete entities. Far more attention is paid to the media, as that is where 90% plus of the budget goes. But media without message is like a wonderful race car, without a driver. It takes both working as one, to be successful.
It may be too late to bring media and creative back together again. Industry rationalization has resulted in a small number of holding companies owning a large number of what could broadly be termed “marketing communications companies”. The big media agencies in each of these groups service a large and wide variety of “creative” agencies. I know from experience some of the large holding companies believe strongly that media should be a stand-alone business and for others, untangling the “mess” is just too hard.
It does seem though if ad agencies are to remain relevant and viable, they should focus on advertising i.e. media plus message. Though highly professional and staffed by exceptionally smart and qualified people, the Big 4 advisory and Management Consulting firms, are still a long way off being able to offer genuine creative services. (But it will happen if we leave the vacuum long enough.)
Ironically, the future for advertising agencies may very well lie in the area in which we made our reputation – creativity. .
