New Agenda for Agencies

It’s my belief that in 2007, agencies will be turned on their heads. How so? Agency efforts must be interwoven with client brand performance. And agencies must do whatever is necessary to satisfy their “customers” --- The Client.

Not reach. Not frequency. Not “generating awareness.” Not “stimulating interest.” The soft, fuzzy “accomplishments” that agencies have long lived by – and clients have long accepted – are out, caput, sayonara.

The challenges in 2007 and beyond is that agencies must push their clients – in high impact, measurable ways – to build brand excitement, brand momentum, brand loyalty, brand equity and, most importantly, brand business. Accomplishing this will require agencies to devise brilliant brand management strategies; conceive big, game-changing ideas; and execute with superior creativity and innovative media plans.

Moreover, as I stressed in last week’s blog, they will need to engage the consumer and put her at the epicenter of their efforts. Advertising Age confirmed this idea by naming “The Consumer” their advertising agency of the year.

For many agencies, this approach will necessitate a reinvention of their business model. It will require their people to find new, more effective ways to connect with consumers. They’ll need to go way beyond the traditional modes of “understanding the client’s consumers” and actually become the client’s consumers – consuming their media, participating in their social networks and living their lifestyles. True, deep, passionate consumer engagement.

At a recent ANA Senior Marketers Think Tank meeting, Bob Greenberg, Chairman and CEO of R/GA, described the new agency well. It may, he said, have some traditional titles, such as planners and buyers. But there will increasingly be new ones like “interaction designers” who deeply understand the user experience – how people interact with the brand in both the online and offline realms.

In addition, the new model needs to be grounded by “data driven insights.” Agencies must “retool” their organizations to generate the analytical insights to foster new fact driven campaigns.

Two agencies that have put a new relations model into practice with their clients are McKinney with Sony Bravia and Arnold with Ocean Spray.

Sony missed the early entrance to flat panel screens in the USA and had to play catch up with market leader Sharp by developing a “big idea” for the launch of the Sony Bravia. The initial focus was on “The Conversation” - all the ways to craft a meaningful relationship with the consumer. With research indicating that many consumers are confused by electronics and return their products due to this fact and the divide between the sexes over electronics, Sony focused on sending consumers to the store already knowing what to buy. By positioning the Sony Bravia as “The World’s First TV for Men & Women,” Sony was able to start a real conversation with their consumers and engage them personally.

Sony also decided to try something new with McKinney relative to their TV ads - creating commercials with separate endings. Some based on what men like. Some based on what women like. Sony partnered with Tivo and actually let consumers choose which ending they wanted to watch. Rather than worry about ad skipping on Tivo, Sony used the technology to help people go deeper into a rich, informative personalized experience.

Ocean Spray and Arnold Worldwide experienced genuine brand transformation collaboration in the creation of “The Breakaway Brand.” With a mixture of traditional media, and some much needed innovation, Ocean Spray and their agency brought new life to a mature brand – Ocean Spray cranberry juice. By truly understanding the brand and its consumers, the agency and client integrated the new message, going back to cranberries’ roots, throughout all media platforms and internally throughout the company. The ROI shows $1.57 return for ever dollar spent on advertising despite a category average of $.61. I

n a nutshell, the new agency must deeply understand the brands for which it creates campaigns … must be deeply invested in the success of those brands … and must be deeply engaged with the consumers it targets.

So how will compensation be handled in this new environment? That’s the $64,000 question – and one that the ANA’s Advertising Financial Management and Agency Relations Committees have been seriously addressing, with the goal of achieving a mutually beneficial agreement where both client and agency genuinely root for the other’s success.

Traditional compensation models are increasingly passé. At this point, commissions are nearly extinct, and there is growing frustration with the labor-based fees that replaced them, as they are based on input (hours worked) rather than output (value delivered). Furthermore, the once heralded performance incentives don’t appear to work, according to many agencies. All of which points to the new frontier of value-based compensation, the core principles of which are these:

• Never sell time, ever.

• There can be no financial incentive to recommend one channel solution over another.

• Agency must embrace any financial mechanism that rewards the quality of the idea.

• Tailor compensation to the needs, circumstances and culture of each individual client.

In line with these principles is the immensely important need for agencies to break down their internal silos – silos that obstruct the seamless integration of advertising, direct, public relations online and other marketing disciplines. We’ve had 20+ years of high-minded blather about the importance of integrated marketing, yet today most agencies still treat each core marketing discipline as a separate profit center, an inherently un-client-friendly model that creates inappropriate incentives to horde client billings, rather than serve client needs.

We all recognize that the marketing landscape is rapidly evolving --- and the agencies are an important component of that evolution. I want to remind you that last week I blogged about how marketers had to undertake a similarly gut-wrenching 180-dgree transformation. Agencies should be no different in how they view their business models. 2007 is the year these transformations will really take hold. I’m convinced of it!

Comments

[LRomero]

Re: the $64,000 question - How about an industry-wide business-model competition, open to both client and agency minds, academic types, consultants - soliciting best ideas for solving this conundrum?

Maybe some smart little independent agency could develop and host (and a few client companies could sponsor) a website featuring the contest and the various models, to be voted on by a balanced panel of reps from national advertisers and agencies?

Just one kooky idea.

Clients and agencies, and goodness-knows emerging media, want it solved, recognizing that the currently entrenched fee structure is archaic and works against all the highest-minded "strategic planning", ROI-focused media-neutrality, and "consulting" agencies are increasingly giving lip service to and attempting to provide.

So much more to discuss!

[Joseph Jaffe]

Amen Bob. Music to my ears. I continue to espouse very similar views on fixing the agency mess (www.lifeafter30.com/live) and put these views into practise with my own company, crayon (www.crayonville.com)

Let me ask you one question though...let's take the "never sell time, ever" principle which is right on the, er...money. What happens when the client/marketer insists on buying in an outmoded way?

Should the agency - ever - walk away from the business?

To what extent is marketer nation ready to put these principles into play?

The challenge at hand is the slippery and circular slope in which agencies undercut one other, compromise themselves all in the name of getting their feet in the door and getting a head start (read: survival). But once this merry-go-round commences, there's no coming back, or is there?

Look forward to your thoughts...