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The Agency of the Future

Posted on | December 4, 2007 | 1 Comment

It’s December 2027 and the annual bonuses are being dished out.

This year, the best agency executives are getting more than the bankers at Goldman Sachs.

An unlikely scenario? Yes, probably…but if the advertising business is to thrive for the next 20 years, something the industry can do more than just dream about.

WHAT HAPPENED?

It wasn’t always this way. In the “good old days” before procurement, before agency consultants, before annual new business pitches, the agencies tended to command a lot of respect (particularly in the US), right up to the boardroom level. A combination of factors led to its demise

  • The decline of marketing influence – marketing as a function spend too much time on magic and not enough on logic. It lost its own place in the boardroom to sales directors, finance directors and procurement heads – all people who could empirically prove their contribution. The marketing function continues to get squeezed for funding, and its been difficult to drive innovation
  • Unbundling – with the constant demand for more revenue streams, agencies ‘released’ functions they would otherwise have delivered on – starting most importantly with research, but followed by media, promotions, CRM etc – so much so that creative agencies are now a ‘shell’ trying to prove they can orchestrate with others. Look to Japan – Dentsu and Hakudodo continue their dominance. And before you jump up and complain about the dominance of Japanese media over creative, last year according to Gunn, Dentsu won more awards than the next seven agencies in Asia combined.

WHERE ARE WE NOW?

The agency world is a strange place now

 – a semingly important testament to brand success is the ‘consumer created content ‘ – whether its Pepsi in China, Dorito’s in the US, every market has its examples. Consumers outside of the developing markets complain about being ‘over-advertised’ to. Milward Brown can verify that TVC LINK Test goals are getting tougher and tougher. Because of unbundling, clients have too much fleixbility to pitch different parts of their businesses on a regular basis (I guess it’s a good time to be a pitch consultant!)

WHERE SHOULD WE GO?

It should never be forogtten that the marketing business is a creative business, and that the power of ideas has never been more important. Take this example from Australia last December – a farmer, short on cash, decided his idea was to let people ‘Adopt a Sheep”. For $35 (enough for 100 days of feed), ‘city-folk’ could get a photo and a certificate of a sheep. He set up a blog with PayPal and send out press releases. For five days nothing happened. Then one paper picked it up. Later that week, two TV crews visited the farm. By week 2, there were 10,000 hits. 10 radio stations called. More coverage. Certificates were printed. The German and Japanese news picked it up – the blog was translated into multi-languages. The Farmer’s Association enquired to take the campaign national. The Adoption Certificate became a hot Christmas Gift. In the end, all of his 3,000 sheep were sold. Media cost – zero. PR cost – zero. Production costs – zero.

The message here is simple. Ideas matter. Agencies should be charging for their business outcomes not for their business inputs (headhours) or busines volume (commission). This outcome based structure is radical. Some agencies will lose a lot more than they win. It requires ROI tracking. It requires a completely new and more disciplined approach to measurement. The best agencies in the US are trying this already. Are you ready?

Greg Paull is co- founder of R3, a consultancy focused on marketing efficiency and effectiveness.

Comments

One Response to “The Agency of the Future”

  1. Mary Lou Roberts
    December 5th, 2007 @ 8:16 am

    A recent study, “The End of Advertising as We Know It” by IBM Global gives strong support to Greg’s thesis. http://www-03.ibm.com/industries/media/doc/content/resource/business/2898468111.html
    MLR

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