November
03
Tags
Winter is coming Don Draper
Are clients cooling their interest in agencies?
In July 2006, Unilever started giving the cold shoulder (sorry) to the agency world when it cut its UK marketing and digital agency roster from 20 to 7 shops. At the same time, Unilver quietly announced a review of its global digital roster. Among those agencies who survived the cull were: Agency Republic, AKQA, Billington Cartmell, Chemistry Communications, Craik Jones Watson Mitchell Voelkel, Tequila\London and Tullo Marshall Warren. What a Summer holiday those agency bods must have had?
In the build up to Christmas December 2013, Unilever looked at internal processes and started cutting back on marketing teams and trimming brands from its roster as part of streamlining its core marketing structures around; marketing insight, category and brand strategy, brand marketing plans, innovation/renovation, communications, in-market brand management, execution, tracking and optimisation. What a crap Christmas that must have been for agency staff gathered around the turkey.
“What did Father Christmas bring you Dad?”
“Why a shiny new P45, Son.”
At the time, AdAge reported that CMO, Jean-Marc Huet, was seeking to make $470m in marketing savings while eliminating over 800 marketing jobs. In in 2013, Unilever spent $1.29 billion on total U.S. advertising and was ranked 28 on the Ad Age DataCenter’s list of top U.S. ad spenders. That kind of financial investment requires and equally substantial investment in people and resources. Not any more. Automation will see to that.
No sign of a thaw in relationships
In July 2014, Unilever began a formal global digital agency review that involved agencies such as: WPP’s Ogilvy; Publicis’ Razorfish; IPG’s Huge, R/GA and Lowe Profero; Engine Group’s Noise; and independent VaynerMedia… not forgetting PR shops, such as Edelman, GolinHarris and Weber Shandwick. “Summer Time and the living isn’t easy,” would be the background tune I would have added to a documentary about the review.
Following a brief period of reflection (we’re deep into 2015 by now), Unilever set out on a mission with no less a target in mind than a 40% growth in online sales. The vision was to focus efforts on building direct relationships with shoppers that have traditionally been facilitated by retailers. I can see the brand agency staff and sundry retail intermediaries heading on holiday that Summer with a copy of Hemingway’s “For whom the Bell Tolls” stashed in their Gucci cabin-friendly luggage bags. Direct Relationships? With Customers? Without Retailers? Without agencies? What is the world coming too?
Things couldn’t get much worse for retailers who, these days, are under such pressure that the SALE Season is no longer a seasonal event but a year round necessity. Many retail chains have joined the ranks of national chains reporting downturns in business, unsustainable losses and closures and job losses on a blockbuster scale.
That having been said, it’s not all over for retailers on the Unilever front: Unilever is trying to figure out how punters flit between physical and digital channels, and, they have thought hard about how to do it with an interesting and informative approach by running a hackathon-hunt for start-ups that could provide new insights into the subject. Successful applicants snuffled up $50,000 in funding for their efforts. The interesting footnote here is that they didn’t, as would previously have been the case, commission an agency to sort the problem out. If you currently work in an agency, you can expect more of this bypass the buggers approach to problem solving.
A new ice age dawns
A quick search on Marketing Magazine (provided you can get past the paywall) reveals a continuous stream of well-known clients pulling their entire marketing operation in-house. Since 2005, the Guardian has had an internal agency for all direct marketing, sales promotion and ambient briefs called, Guardian Creative. Three years of graft was not enough to save Goodbye Claydon Heeley Jones Mason from the chop.
As a result agencies are struggling to keep a foot in the door. As Paul Phillips, head of media at the AAR says: “If you cast your eye down a list of the top 100 advertisers there are probably more in-house media departments than you’d think.” Even if a client still employs a brand activation agency, the rest is tackled in-house. The media division at Procter & Gamble now negotiates directly with media owners. No doubt the discounts that agencies once enjoyed not passing on to clients are being put to good use developing ROMI.
Only one of the attractions is money. The other is speed.
The speed at which a news company can go from picking up a local tweet to publishing a definitive evaluation of a complex international problem across a range of channels is as extraordinary as it is an example of how far agencies have fallen off the pace in the digital age.
Sourcing comment, building a corroborating source base, interviewing witnesses, cross-checking the facts, developing the copy, adding in the graphics, uploading the secondary-roll video, seeking authoritative response, promoting the story, broadcasting the piece and following up in the developing narrative for as long as it is of interest to the audience. All of this in a matter of hours or days and at pace and work rate that puts most ad agencies to shame.
The agency is not designed to survive climate change
My article, The Agency Model is Breaking Bad may offer a way out for agencies but I wouldn’t count on it becoming the norm soon. In fact, agencies, in denial of the bigger picture, may be transiently reassured by the fact that UK advertising spend reached £4.7bn in the first three months of 2015. But that growth was largely driven by a surge in TV advertising in the form of sponsorship, video-on-demand services, advertiser-funded programming and product placement. And, you don’t need an agency for any of that.
They may even point to their participatory role in the 12.8% increase in internet advertising spend which hit £1.9bn in Q1 2015. But that won’t last. Ominously, the growth in digital is increasingly driven by advertising on mobile devices, (up more than 50% to pass £500m) which will rapidly, as the age of context/intention marketing develops, reduce the role of the agency to bystander. As referenced in my article the The Rise of the Micro Marketing Machine: agencies are too slow, too expensive, too self-interested to survive in age of instant analysis, anticipation, activation, access, acquisition, analysis, attribution, adjustment, automation, advocacy, assetisation and adhesion. (More of which I discuss in next month’s special blog entry, “The 12 As of Christmas.” )
As the taciturn Jon Snow says…
“Winter… is… coming.” And it’s coming to an agency near you.
Great sife you have got here.. It’s hard to find high quality writing like yours these
days. I really appreciate people like you! Take care!!