Tuesday, February 22, 2005

The Last Hope for Ad Agencies

Ad agencies have always been at the mercy of client anxieties. And agencies have always been the whipping boys for all manner of brand or product performance issues. Everyone understands that agencies exist so they can be fired. Everyone also realizes that the core agency value proposition is either “we know or can do something you cannot” or “ we have arms and legs to get things done faster, better and/or cheaper than you can do it yourself.”

But in the last few years agencies have had even more tenuous relationships with their clients. The list of clients that broom agencies quickly seems to be growing. Skip Pile’s latest research indicates that clients change agencies, on average, every 2.5 years, twice as frequently as before. There are all kinds of reasons but the bottom line is that few clients believe that agencies are long-term partners.

You can’t be a partner if they don’t know you well. Rarely are agency chieftains, part of a client’s inner circle. It is unusual for agency heads to be considered the CEO’s or even the VP Marketing’s consigliore or to even have a voice in crafting client strategy. Instead agencies and their leaders have become receivers of strategic output and implementers of tactical plans.

Very few clients believe that their agencies actually know the fundamentals of their business, their category or the critical processes within their enterprise. Agency expertise is understood as generic, plain vanilla project management.

And even that role, too, has a built-in trap. Aggressive cost controls and benchmarking have given savvy clients unusual leverage. Many specify upfront the time, cost and staff to produce a postcard, a website, an e-mail campaign or a #10 mail package. Few are willing to pay for anything but minimal staffing. Even fewer are willing to pay for senior people who allegedly bring added value, insight or experience to their accounts.

Yet agencies, from the 2-person shops to the global conglomerates, seem to be impotent to affect the size, timing or sequence of client spending. Agencies are output. It is a sobering thought, which fundamentally changes the game.

Yet changing these circumstances requires changing the way agencies do business. Consider a few key areas.

Leadership. Clients hire agencies that have a point of view. If you don’t have a POV you are just another vendor cranking out pretty pictures or punchy copy. Unfortunately too many agencies either haven’t developed or articulated a distinguishing POV or are unwilling to expose their POVs for fear of rejection. In a corporate environment that is naturally risk averse, having a POV is a point of distinction, which must be leveraged to an agency’s benefit.

DM agencies especially have practical knowledge not only about a client’s strategy but generally understand the distribution channels, the media, contact centers, customer service, fulfillment, retail traffic patterns and nuts and bolts operational reality. Agencies are often in a position to traffic information, data and ideas among and between different business units and to infuse grand schemes with a healthy dose of reality.

Leadership requires agencies to get out ahead of their clients by thinking through and anticipating events, sketching out likely competitive scenarios and contingency plans, understanding the personalities and power dynamics within client organizations and presenting “crazy” ideas or trial balloons for client consideration.

Doing this requires proactive thinking and investment spending. It also requires that we train junior people how to do these things and use senior, seasoned people to get top-level access and to put this stuff across persuasively. Account people who take reasonable risks, get beyond the day-to-day and become trusted, memorable or effective on the basis of their personalities play a critical role in offering clients the leadership they crave.

Efficiency. Developing tools to train, manage, deploy and effectively use agency resources is critical to maintain margins and grow profitable businesses. In the wake of the Seifert conviction, it will be critical to answer skeptical clients questions about rates, billing and productivity. Though most agencies have adopted the professional services fee model, they haven’t used professional services norms to maximize the value, productivity and utilization of their people.

This is not a software problem. It is a matter of understanding who is working and what they can do and mapping these resources transparently against client needs in real time. Improved real-time resource planning in-tandem with clients is a necessity.

Agencies have not parsed work among or between teams to capitalize on expertise or economies of scale. Nor have they used time zone differences, cost differentials or global resources to move projects ahead faster or to squeeze out better margins. Force utilization tactics and productivity measures, beyond counting billable time, are virtually unknown in the ad business, even though other industries have used these techniques to great effect in reducing costs and cycle times while motivating their best people.

Alliances. Every agency has loads of alliances. They are usually touted in press releases. Yet few can actually capitalize on these relationships to the benefit of clients. And while they sound good in credentials presentations, far too many agencies can’t, don’t or won’t leverage these alliances because they cannot control the ally’s end product or they fear disintermediation.

These twin demons --- paranoia and the need for control – have undercut most agencies claims and seriously burned credibility in offering clients the ever elusive “integrated solution”. The ability to leverage resources within networks is still the exception rather than the rule and has led all but a few clients to reject the idea that they can get full service from any one holding company.

Clients believe that each agency has one or two core strengths. Nobody really believes that any given agency is tops in everything. Having, using and delivering credible, expert allies is critical to consolidating, maintaining or expanding any standing with the leading marketers and brands, especially at a time when they are working with skeletal staffs.

Being able to field a coordinated team of agencies who will uniformly understand client objectives and culture, work in a coordinated manner, deliver against integrated timetables and husband precious marketing dollars is the Holy Grail. Orchestrating alliances is the best chance for finding and delivering the Grail to our clients.

Leadership, efficiency and alliances are three areas directly controlled by agencies. They have traditionally influenced relationships with clients. Attacking consulting firms and whining about the economy isn’t the answer. Leveraging agency assets is the only hope.


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