My talk from ad:tech Tokyo:

I’ve met with a few CMO’s and agency heads in the last few weeks and was astonished how painful relationships between agencies and brands have become. This is not just a feeling, it’s a major data point in a survey released by RSW/US: A client’s look ahead at agencies.

I do recommend downloading the free report but in case you’re pressed for time, here are two facts that caught my eye:

– Only 55% of marketers state they would consider using their primary agency again if they were to put up their account for their review.

– A marketer’s tendency to look for a new firm is driven by general lack of satisfaction with an agency’s creative, their strategic thinking, or their general lack of proactivity. (…) “…”lack of proactivity” was one of the primary reasons given for finding a better agency partner. They were with a much larger firm and felt, because of their “small fish in a big pond” status, they weren’t getting the attention they needed – resulting in their desire to look for a mid-size agency to better serve them.

Screen shot 2011-09-15 at 8.56.56 AM

The challenge for agencies

When the first agents appeared, the mission was very clear: Purchase advertising space on billboards/print on behalf of businesses.

Over time, brands wanted more: produce remarkable advertising that increases sales. To answer that demand, agents started to hire illustrators and copywriters. They transformed into agencies. And customers became clients. This hasn’t changed much over the decades.

The objectives of clients changed dramatically. It used to be enough to produce advertising that produces sales. We give you a coupon, you buy the product. You get an invite to test-drive a car, you head to the showroom.

The market changed over time. Everything became more complex and complicated – more brands, more media, more channels. Suddenly, you had to spend more to get some kind of lift. The placement game turned into an arms race.

No matter what: Clients still want to see increased sales. As they should.

Unfortunately, it’s complicated. In the old days, the guy with $20 to spend on advertising sold more than the guy with $1 for advertising. The ability to track results against communications activities has become diffuse. A campaign lives in too many channels, the desire to differentiate now means that there might be no direct, trackable call to action and the complex economic structure (pricing, distribution, competition, economic climate, etc.) cause signal interference for brands that advertise widely, sell multiple product lines, distribute through multiple sales channels, and face many competitors.

The complexity can be overwhelming

Clients have to muddle through this complexity and they don’t feel very empathetic when advertising agencies are not ready to join them through this struggle. On the contrary, the report suggests that clients feel a great deal of disappointment and bitterness about the failure of agencies to help them guide through complexity, while still delivering obvious, measurable results.

What agencies have to fix:

– Strategic Expertise:

Clients complain that agencies don’t think strategically, don’t have solutions that help clients gain market share, increase volume or otherwise steal sales from their competitors. They feel agencies don’t know their customers, their market, their competitors, their sales and distribution channels – in short: the complexity of the business. .

Agencies feel that clients don’t ‘get’ marketing, just focus on ROI and sales. They don’t get brand building and set unrealistic goals. Agencies don’t believe they are considered partners, just a commodity, ready to be thrown on the big pile.

– Transparency & Accountability

Clients believe agencies are bad at strategy and analytics. They can’t effectively measure the results they produce, or even worse, hide the real results. Clients desire more accountability from agencies: either sales, volume or ROI. At the least, they want to know how an agency defines success.

Agencies believe that there’s more to advertising than analytics and sales. While clients want deep analytics and strategy, they are not willing to pay for it. Clients just look at production and media costs, expect the strategy/analytics part to be a value-add.

– Creativity

Most clients believe their agencies are not creative enough. They don’t get enough brilliant and innovative ideas.

Agencies believe clients don’t get sophisticated creative, don’t get new technologies and are scared of new ideas.

– Trust & Service

Clients believe agencies don’t really listen to them, they don’t receive the desired attention and have to deal with junior staff after the initial pitch. Not enough unsolicited ideas, not enough interesting ideas, not enough fully developed ideas. They feel that agencies express a superiority towards the internal marketing team.

Agencies feel there’s no loyalty on the client side, trust being the main factor. Too often, they are being tested and not being seen as a collaborative partner. Clients can be abusive: passive-aggressive (delaying approvals) or direct (screaming/nasty emails).

– Costs & Capabilities:

Clients feel agencies nickel & dime them constantly on items that should be part of the project. They don’t know how to price a project and manage the costs throughout the process. Clients don’t want to deal with multiple agencies but they feel handcuffed assigning everything to one agency. They desire a more flexible and fluid model.

Agencies believe more clients want work for free or that clients just don’t pay enough. They often have to deal with procurement directly, a business division solely focusing on cutting costs. Clients often start out with one budget but get cuts later and expect the same results.

So, is the agency model about to expire?

The summary of the report is pretty devastating: Clients have business needs and objectives. They hope an agency can help them to achieve those through marketing and advertising. However, they don’t believe agencies are well equipped to surmount any of these challenges. That’s how the distrust cycle begins. And ends with a review.

There are two major challenges:

  1. Nobody pays agencies a dime to become experts on the client’s business. That’s why agencies become experts on advertising. They don’t have the people, reward structure and procedures to explore the economic and market structures of the client and, if needed, challenge the client in his assumptions. Agencies are often limited interacting with the client’s marketing department, lacking insights from other divisions to develop the best recommendations. And the client doesn’t pay an agency to get that information on their own.

  2. The fear factor: Let’s face it: Good advertising is not direct marketing. It’s based on good insights, hidden desires, based on lifestyle, develops cultural icons and builds a movement. When you found that nugget, that little hidden thing, you will do anything to defend it. Agencies will limit their research to prove their case. They will bring limited ideas to the table to make sure that the one idea will be bough by client. That idea is really the only thing they have, the only thing that keeps them in business. When the campaign is over, they will gather research that defends their idea, they often don’t gather the best data and don’t learn from campaign to campaign.

That’s why relationships falter: hurt feelings, unmet needs, disappointment, and an erosion of trust. That’s what happens when you misalign expectations with capabilities.

Nobody is at fault here

Clients ask agencies to solve problems they can’t solve.

Agencies are too married to the services they provide, not the outcomes of those services they created at one point.

It comes back to the old paradox: Agencies thought they were in the business of selling access to the development and placement of advertising, while their clients were trying to buy increased sales.

Clients don’t need agencies anymore.

They still need creative production and media placements/negotiation, etc. But not a full-service agency.

What they need now are business-model-seeking agencies that create roadmaps to carry out consumer, product, channel and marketing strategies. These agencies will facilitate the creation of assets that are placed into those channels or campaigns on behalf of their clients. They will be trusted experts who guide clients through the ever-evolving landscape of their market.

Capitalism is the art of creative destruction. Some agencies will prosper, some flounder, others disappear. Nothing is forever.

Update: Found this fabulous infographic by The Big Orange Slide.

infographic3

Enhanced by Zemanta