Monday, February 13, 2006

Why Ad Agencies Can't Respond to John Stratton's Warning

Verizon Wireless CMO John Stratton went to Ad Age’s “Hollywood and Vine Conference and told the 400 ad agency poobahs what every client in American already knows -- the ad agency business is overwhelmingly focused on itself NOT on clients.
His eight point indictment explicitly articulated what many clients have been thinking for quite a while. His points were …

1. Your clients are absolutely in trouble and they are looking for you to save them.
2. What you've been selling for the last fifty years no longer works.
3. Major marketing money is going to be in motion in the next decade and no one really yet understands exactly where it will land, if it even will land, or if it will just disappear altogether.
4. Before they figure out where to put their money, your marketer clients will hire and fire agency after agency, seeking someone, anyone, who can tell them where they might go next.
CMO average tenure, already famously brief, will get even shorter as CEOs begin to recognize how much money they are blowing on antiquated media plans.
5. Your marketer clients are really seeking one thing and one thing only: An audience for the message they are trying to convey to the market place.
6. But your clients actually need more than just an audience. One of the consequences of the evolution of our media delivery systems over the last ten years is that the audience you do ultimately find is much less receptive to the message you're trying to send.
7. They are absolutely armed and ready to get to the content they want while avoiding the message you are trying to implant within it.
8. They need much more than an audience. They need an audience that cares about what they have to say. They need their message to be relevant to the audience they are saying it to.

Yet the real question is not whether agencies can hear the message. The real question is whether they can do anything about it. Consider these points that suggest that agencies are so far out of alignment that they will NEVER BE ABLE to answer Stratton’s clarion call.

1. Agencies have very thin subject matter expertise. They know damn little about the business and even less about the interior structures and processes of their client’s businesses. Long shut out from strategic councils and often only linked to the Marketing Communications department, they just don’t know how the client’s business works, what the levers are or how to influence the demand drivers or the dynamics of the supply chain.

2. Agencies are in their own way. Locked into bureaucratic and hidebound processes to conduct market research and produce TV commercials, they have little understanding of trade relations and even less understanding of relationship marketing techniques and the evolving new media used to communicate with a diverse, dispersed and distracted set of target audiences.

3. The holistic and integrated approach is a whole lot of bullshit. The TV and print guys rule. They give lip service to online and emerging media but they don’t get it. Adding an 800 number or a URL to an ad is still considered a slight to the creative team. The notion of sequencing, simulcasting or integrating messages or audience segments among media is a foreign idea which is perpetuated by siloed departments and competing units. Even at the holding company level, very few campaigns can bring a sophisticated, multi-channel campaign to life in a way that measurably impacts client’s business.

4. They think the whole game is the message. They don’t get the notion that advertising and marketing is about throughput – finding, engaging, qualifying and incenting likely customers to buy. If a commercial tests well or the placement gets decent ratings they are done. Bringing customers through the pipeline is outside their worldview.

5. They measure the wrong things. Clients want to know what they got for their marketing spending. If they spend $10 they want to know if they got $100 in business in return. Agencies don’t have access to the data or expertise to count and measure the impact of their work. Instead, agencies want to talk ratings and recall scores. But don’t ask about the efficiency of their processes or how much it costs to create an ad with 30 words of copy and a photo.

6. They can’t make money any other way. Agencies are locked into production processes, project management procedures and cost elements that prevent them from changing. Having been hammered into commodity pricing and benchmarked to death during 3 years of recession, agencies can’t afford to find or hire the new expertise they need to survive. The people who run agencies still think they are living in the Oglivy and Bernback era. In fact most of them came up during that period and have been befuddled ever since. And frankly the kind of people they need would never be caught dead working in a traditional ad agency where a few egos rule the roost, where there is zero training or career development, where technology is several generations back and where there are few players with advanced degrees or specialized skills.


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