The agency model is breaking bad

The road to perdition for agencies

All good things come to an end

Advertising, direct marketing and digital agencies have played a pivotal role in turning marketing into a $600 billion a year industry. The memorable ads, mailshots and digital campaigns have done more than simply help advertisers to create brands, sell products and develop ongoing relationships with customers, they have also helped create a form of consumerism that verges on the edge of addiction and shaped shared cultural values around the world through products that facilitate common experiences from Presidents to paupers.

In return, initially through pitches and personal passion and then subsequently through mergers, acquisitions and stockpiles of debt, the small boutique agencies of yesteryear have become vast global enterprises who many consider too big and too important to fail, a story with painfully familiar precedents in the banking sector.

Today, four major agency holding companies alone channel over 65% of the world’s total advertising spend. One network controls an astonishing 48% of all advertising investment at the global level. At this level, these extraordinary institutions are as likely to be as focused on managing currency fluctuations and delivering to the interests of shareholders as they are on serving the needs of clients and the interests of the customers they in turn serve.

On the road to perdition

This fact has not gone unnoticed by Clients. P&G recently announced that it would be cutting $500 million off its agency fees by shrinking its roster. According to AdAge that is a potential 50% cut in expenditure, which as P&G’s CEO, Jon Moeller, indicated would, “Help reduce the number of agency relationships and the costs associated with the current complexity and inefficiency.”

Apart from the exponential budget reduction, “Complexity and inefficiency,” are the keywords that Moeller hopes will shape the agency response to his tough love challenge. It is not a challenge that agencies focused on sustaining exponential revenue growth through development in emerging markets will be pleased to hear. Some agency pundits have been heard to complain about the damaging effects of the cutbacks as though they were the thoughtless act of an inconsiderate benefactor.

That has got to hurt

Reductionism on this scale may not be a challenge that agencies who have geared up for global business are designed to accommodate. More significantly, agencies will not be the only types of businesses rising to the challenge in a post growth-by-consolidation age in which the previously differentiating lines between frenemies such as WPP, Google, Oracle, PWC, Amazon, Salesforce, Adobe et al will become increasingly blurred. I might also add clients themselves into the mix, as many have already developed their own award-winning in-house agency teams or are building increasingly automated marketing systems – the agency free-type.

In the midst of this fascinating evolutionary struggle, between service providers, technology developers, platform providers and clients themselves, the role of the agency, a term encompasses a variety of different permutations, will come to mean something as yet unmapped. It is entirely possible that agencies will not be driving the change or the rate of change.

Keep your friends close

Clients, armed with a desire to create closer connections to their customers through the use of technology that optimises spend, streamlines processes and creates real-time engagement with prospects, conquests, advocates and collaborators will begin to run the show.

At one extreme, clients might consider bringing the whole agency process in-house and eliminate the wastage. At the other, clients with poorly designed products containing features unlikely to differentiate them from the competition, may still choose to reach out to audiences by means of the hyperbolic talents of a brand activation agency. Even in that case, once customers become aware of the brand’s existence, the entire process of developing product preference, conversion opportunities and building relationships can be passed onto the automated digital systems.

My brains hurt

I often find that agencies believe that clients come to them because agencies attract the combination of left and right brain thinking that leads to enhanced insight, objectivity and creativity. I have heard it said by an individual I regard as one of marketing’s greatest intellectual talents and without doubt its most entertaining speaker, that clients need to devolve more responsibility to agencies. I find the opposite to be true. Clients need to find ways to solve more of their problems themselves. The claim that agencies are inherently more objective and have an equally vested interest in the outcome of campaigns is, in my opinion, not always true.

It’s my party

If you accept that clients, through recruitment, continuous training and investments in technology and system are more adept at developing business objectives, market insights, communication strategies, and data-driven relationships, then the role of the future agency will deliver fewer and fewer of the following processes:

  • Content Development
  • Activation Publishing
  • Digital Analytics deployment and reporting
  • Social interaction propagation
  • Mobile communications
  • Web experience management
  • Cross-channel testing and optimisation
  • Media optimisation
  • Campaign management.

The fact is, all but the first two, Content Development and Activation Publishing, could and should be done in-house by teams and automated systems. This is because the micro-marketing era will be built around the immediate testing of hypotheses in real-time.

Multiple system atrophy

According to Think with Google research, the average number of touchpoints on the pathway to purchase has increased from 7 to over 30 in recent years. That is largely due to the development of Smartphones and 4G. So it stands to reason that the touchpoints are increasingly granular and do not fit into any kind of pre-ordained content development calendar that is currently trending with agencies. Google also suggests that customers make 60% of the purchase decision before they go searching for your owned media content.

The fact that Google now regards itself as a mobile first company hints at the significant role small particles of information, potentially not even develop by the client or an agency but by 3rd parties and scraped from the internet, may play in acquiring, converting and retaining customers.

In this cybernetic world of process interoperability, the agency of today is simply squeezed out of the picture because of media bias, lack of speed, expense and process overlap.

Multiple donor systems

Many global brands are already posting outsourced projects on creative community sites such as Tongle. A client simply submits a task/brief on the website, anyone in the Tongal community can submit ideas, the client selects and rewards the winner, film makers pitch to produce the winning campaign and in many cases award-wining campaigns are launched and leveraged in a fraction of the time previously required.

It is not unusual for these campaigns to go viral because they often involve customers and a global community of creative thinkers with a collective consciousness far in excess of any agency network. Small wonder, the CEO of the world’s largest agency network, Sir Martin Sorrel in an adweek interview, considers the future of his business will be, “More focused on media investment, data investment management and digital. The company would be much more balanced. In other words, it wouldn’t be a classic brand advertising agency-led agenda. It would be much more neutral. You would be much more respectful of people in the media business. You’d be dabbling in content. Same approach in a way as now, but different focus.”

Looking for meaning

If you explore the different elements of that quoted interview from a CEO who is without doubt the single most influential individual in the advertising industry, can we glean anything about the shape and scope of the future agency?

“More focused on Media investment”

Clients and agencies regard major media spend as the most attractive aspect of building brands and developing preference for products and services. The problem is that customer response to brand advertising often results in search activity during which Google, Bing and Yahoo serve up many alternative options. So investment in media without a corresponding investment in SEO will become increasingly flawed.

“More focused on Data Investment”

Developing profound collective insights into consumer needs, wants, desires and actions has long been the bedrock of many memorable brand campaigns. In the current fragmented media-scape, however, consumers are increasingly influenced and motivated by trends, social influencers and 3rd party reviews that make it much harder to find significantly common attributes on which to base our plans. The question is will social channels provide more immediate and practical insights into customers than classic research?

“More balanced”

The problem with many client and agency side campaigns is the upfront influence of the brand teams. These guardians of the logo have often sat in judgment over the ‘lower orders’ within the business. Developing the high-profile, press, poster and TV campaigns ensures they attract the lion’s share of the budget while other departments are little more than a footnote in the last section of the brief. Balance can only be achieved by putting an end to working in silos and the current heuristics of agency structures and snobbery.

Interestingly, for a number of years, WPP and Omnicom have both offered to build bespoke agency teams amalgamated from the WPP Network of 179,000 employees and 3,000 offices for individual clients. The question is, how will talent ripped from their chosen positions and locations feel about being commoditised in such as fashion?

“More respectful of people in the media business.”

The business of communication through the growing range of media channels is becoming increasingly complex. The power and influence of many established media channels is in decline while others, that are growing in importance, are close to reaching the tipping point in the transition from mass marketing to one-to-one communication. Building a business case for media plans has never been more difficult. Those capable of making informed and sound judgment calls in this area deserve recognition. The question is will theses judgment calls be something clients can afford to delegate to anyone outside the business?

“Dabbling on Content”

The meaning of content, (dabbled with, created or curated for that matter), is open to interpretation. For me, content falls into four categories: Ucentric, Utopic, Utilitarian and Useless. Ucentric content involves a client talking about themselves and often to themselves, a common problem with clients primarily focused on transactions. Utopic content relates to products or brands fortunate enough to attract positive 3rd party opinion – the most potent form of content. Utilitarian content involves developing material that customers find useful at different points of the customer journey – the content that supports decision-making without constantly pushing for a sale is most appreciated by customers. Useless content is anything that doesn’t fit into any of the aforementioned categories, and, I am afraid that at a recent TFM&A talk I gave, the vast number of respondents to a live survey indicated that close to 90% of content fitted into the useless category. That category includes the kind of work that is specifically designed to work in a creative portfolio or provide the agency with an award-winning opportunity at the expense of the client. The question is, can clients tell the difference before it is too late and the budget has been appropriated?

“Same approach as now, but different focus.”

The primary focus of every business is, of course, to stay in business. The management team’s approach to that end is the only thing that should change as circumstances dictate. The question is will merely changing focus in the age of digital be sufficient? Clients are already beginning to automate many of the less challenging communications processes in SEO, PPC, Display, Email, Mobile and Social. As this process accelerates to include the full production of relevant content in response to customer-triggered events in real-time, the need for outside input on a grand scale will rapidly diminish. The question is how soon will that day come? If the biggest spending clients in the world are cutting back right now, it follows that the rest will soon follow or at least reconsider their current arrangements. What can’t be automated in some way or other, may thereafter be the only things left for agencies to work with.

 Where there is a will…

So how can the agency survive in the interstitial place between now and the advent of seamless integration between client and customer networks?

I believe agencies will have to find new ways to close the distance between a whole range of currently disparate groups and form what we might call Agile Content Developer Communities (ACDCs). These communities should include everybody with a vested interest in the outcome: agency, client, channel partner, and customer. It could lead to the kind of breakthrough work exemplified in the WestJet Christmas Miracle campaign of 2013.

In this campaign the agency, staff and customers collaborated to create a video that became the N01 global trending topic the day after launch, was shared over 40 million times on YouTube in over 235 countries, generated over 1 billion Twitter Impressions, increased subscribers by 320%, captured six times the engagement of any other airline on Facebook, developed over 600 media stories with over 328 million media impressions, lifted site traffic 100%, increased bookings by 77% and helped increase revenue by 86%.

The campaign is driven by data, a small content production team from Studio M in Toronto, a handful of simple questions, enthusiastic staff (known as WestJetter flashmobs these days) and a supporting cast of customers made happy and/or tearful by the brand experience.

Where there are many wills…

Actually, the campaign is as much an exercise in turning customer research into an event, as it is an act of brilliant brand-activating creativity. “What would you like for Christmas?” being the key question. It is also an exercise in creating amplifiable content designed to generate comment and provide opportunities social sharing and the potential for unlimited follow-up narratives on individual customer answers and experiences. The potentially bad news for the agency is that the follow-up part of the campaign can be completely automated. The good news is that the activation team can move straight on to the next campaign while all the time-consuming nurturing, conversion, onboarding, cross-selling, upselling, retention and win-back systems get to work on maximising lifetime value at the most personal level possible through all manner of digital channels.

There is hope

So if you are not studio M, WestJet and Canadian, how does your agency stay in the mix?

First, agencies need to assess if they and their clients are up for upheaval and uncertainty? Can both parties find new ways to eliminate the perversely reassuring barriers that exist between themselves and customers?

The truth is that some clients will be ready for this brave new world of increasing codependency while others will still want things to stay just as they are. Between these two extremes will be the clients experimenting with rationalising rosters, crowdsourcing content and internalising processes. Even if your agency is on a retainer, every promised project could soon be up for grabs by a competing global community of workers (in the style of Amazon’s Mechanical Turk) that can help with any task, from developing data-filtering algorithms to deploying international creative campaigns.

Evolve beyond the silo

As Darwin explained, evolution is won by those most capable of change. To the matter of surviving and thriving amidst the forthcoming chaos, I would give the following advice to any agency.

Replace the silo with Agile Content Developer Communities (ACDCs). These self-authoring and flexible agency, client and customer communities thrive on being plugged into the zeitgeist of any given moment. They operate autonomously with full authority, in a world of perpetual mission creep, coalescing around tasks as they manifest themselves on some form of MoSCoW (Must Have, Should Have, Could Have, Won’t Have this time) prioritisation radar and an agile framework we might call CREAM. Cream stands for the constant exploration of Context, Response, Engagement, Analysis and Monitoring of customer-centric-experience in any given moment.

Cream rises to the top

The function of each element of the CREAM team (sorry couldn’t resist) could be as follows:

The function of the Context element within the community is to explore and explain the evolving situation at both the macro and micro level across the customer journey.

The function of the Response element within the community is to define the optimal response, in terms of cost-benefit and experience, to any given context.

The function of the Engagement element within the community is to acquire, convert and retain the customer at all points of the customer journey

The function of the Analysis element within the community is the monitoring and optimisation of all activities.

The function of the Measurement element within the community is to deal with budgeting, metrics, KPIs and ROMI.

Large complex systems are difficult to design

At the moment most agency teams are split into management, client services, researchers, planners, creative, media, production, data, analytics, brand, direct, digital. Digital makes things even more complex, with specialist teams for SEO, PPC, Display, Email, Affiliates, UX, Social, Content, Analytics, and so on. It is a mess. The wastage is extraordinary. The results are less than inspirational.

Even integrated agencies don’t hold all the answers. Most suffer from inherent historical channel bias and jobs still pass through many silos and hands in a generally linear process that is simply to slow for anything but brand activation.

Failing to love what we do

To make matters worse, an Adobe article on the subject of ‘Building more effective employee communications with mobile,’ references a Gallup poll that indicates “Only 31% of employees are engaged at work,” and that “Research from McKinsey Global Institute suggests that productivity improves by 20-25% in organizations where employees feel connected.”

Pitch perfect

In my experience, the only time agency teams feel ‘connected’ is during the new business pitch process that is loved and loathed in equal measure. Here, due to the steep learning curve, time pressure and competitive motivation, the barriers are often pushed aside (even cross-agency borders go missing in action on occasion).

For a few days or weeks, cross-function teams feeding on rounds of live desk research with clients and customers and quick-fire concept development and presentation sessions, become the norm. So the Agile Content Developer Communities model I suggest is something many agencies already have some experience of running. The problem is that as soon as the pitch is over, everyone retires to a default setting of business as usual. I have seen a supercharged pitch team switch from trauma unit levels of ability to something akin to warden-controlled geriatric mode as soon as the prospective client has been loaded into a taxi.

Now you are getting it

Agencies need to stay in the pitch mentality for each and every client every day, every week, every month, ad infinitum. The team needs to progress towards being full-on Agile Content Developer Communities so intermingled that they are even closer to the frontline than the client’s in-house team. They need to be beyond in-house. They need to be in-house with the client the agency and the customer as well. Now that sounds like an agency any client would find hard if not impossible to replace.

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