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The Reset of the Agency Model

Ad agencies are always telling clients they need to be customer centric. The paradox is that agencies, for the most part, are still structured and positioned by line of channels/capabilities. We have digital, traditional “creative”, experiential “event”, social media, PR, mobile agencies and more. Though I understand the need for channel expertise, I wonder if this model makes sense anymore. In today’s connected society, customers experience the brand across multiple screens and platforms, sometimes at the same time. To be customer-centric, agencies should position their services in the same way. In other words, agencies should focus on brand experience rather than channel or capability expertise. This means the end of the channel line: digital agencies are becoming “creative” agencies while “creative” agencies are becoming digital.

They say that if the only tool you have is a hammer, all problems are going to look like nails. Positioning the agency by channel “tool” not only creates a perceived bias, but also commoditizes the offering. For instance, a “creative” agency is more likely to recommend traditional channels (e.g., TV, Print…) because this is how it makes money. However, if the agency focused on the brand experience, it would be in a better position to recommend the best solutions for the business and customer. The solution might not even be advertising at all. It might be a new product or service. Some agencies are already moving in this direction. The market is also shifting: Advertising impressions, or “paid media,” are decreasing in relation to customer influencer impressions, or “earned media”. Plus, influencer impressions carry more credibility (see previous blog post, “Digital Dilemma” for more detail).

This shift is likely to continue disrupt the advertising industry as its increases competition. Agencies are becoming integrated shops. The agency’s comparative advantage is going to be more on segment or industry expertise and less on channel expertise. For instance, an agency might focus on the Millennium generation. The compensation model may also need to be revaluated. The model will need to shift from fee-based to a combination of fee and performance. This will probably make sense as agencies continue to have more to say about the brand experience in a holistic sense.

In the end, the blurring of channels and the reorientation of agencies toward segments and industries will be good for businesses and for consumers. And therefore, the shift will be good for forward-thinking agencies.

Comments

  1. Interesting, thanks! Any thoughts on the role of the agencies in the (hypothetically) new ecosystem: http://mediarender.tumblr.com/post/6800844635/redefining-the-roles-publishers-marketers-and ?

    Greg

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  2. Great point of agency specialty bias.

    The necessity of a qualified in-house marketing/branding manager maybe growing for each (client) company.

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  3. alberto, nice piece, and as an agency guy, a very rational argument. where i see trouble is that even the most progressive brands who have "made the shift to customer centricity" still evaluate agencies through the channel / capabilities lens -- particularly in the rfp process (where procurement managers play a prominent decision making role). for agencies to have to tell the re-set story to procurement is an additional and rather steep hill to climb. in non-rfp situations, our experience even with these progressive brands is that the traditional perspective still reigns, and these brands still require that agencies prove capabilities. that being said, if the agency believes the customer centric story can be told, they should show it in terms of how work product has evolved in the new model. an agency that can rally around the brand's customer holds the prospect of delivering more value than a competitor that isn't structured to do so, which is indeed a worthwhile story to tell.

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  4. As a production-centric company, BARS+TONE has evolved over time. We now use the moniker Creative Video Agency. The reason we have done this is that our clients needs and expectations have evolved. We have become more than just a gun for hire. In addition to providing video and digital media production, we provide creative development to ensure that the message resonates with the target audience; we provide social media consultation to ensure the the piece integrates into the existing social media architecture; and we provide media buys and other distribution strategies to ensure that the piece reaches the target audience in the first place.

    Does this work? Our clients think so. As their needs and the technology change, they turn to us as a solution provider. No one will confuse us with a full-service, national agency that provided all of the silos. But we provide a range of services and have strategic partners that can fill-in the gaps so that we are a cost-effective and nimble solution to their needs.

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  5. We've realigned all our client service team into "customer" specialists, working across clients. Eg, students, investors, employers -- which fits how our biggest clients organise their own internal teams. Smaller clients are still handled in more traditional ways. In terms of channel bias, we make that clear in the work we do, how we position ourselves as an advertising and marketing agency -- that part is clear to all in rft's. In terms of "tools" or skills -- that too is clear with the results of our campaigns. And it means the skills are bedded across teams (no one person is a social media expert -- we all are)and tailored back to customer segments. That means the brand experience is kept relevant to media, channel etc. Interesting comments all, Alberto.

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  6. Thanks for your comments. All making good points. There are many challenges ahead to reset the model. Procurement remains a tough one. Clients come to the agency for different reasons; some clients are only looking to buy a website, mobile application... so channel expertise is critical. I think the opportunity for us is to always try to elevate the conversation and look at the brand experience holistically.

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  7. Interesting points Alberto.

    It's true that agencies are siloed and need to change desperately. In my own personal view,the challenge I see is that agencies have no way or method to build "integrated talent" within their shops. How can they attempt to do it, is something agency heads need to put their minds to work. Here's what they can consider:

    Take for example, traditional mainline client servicing guys or creative guys - at all levels must be moved across digital stream and then to events to mobile streams etc. and vice versa. By the time they become client servicing directors or creative directors, they will have a world view of how each of the specialization works. This is when really agencies can be integrated and provide solutions too.

    While agencies bear the brunt of this whipping, clients and their departments are also siloed. This needs to be broken too. The successful future CMO is one who can work closely with customer service, sales, technology and must have the ability to orchestrate this together and this will be a competency increasingly sought by CEOs.

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  8. Thanks for starting this important conversation. Your points, and the ensuing comments, address an issue that is crucial to the future of agencies. Single channel agencies will find growth challenging as marketers focus on creating a holistic brand experience for consumers. In fact, a recent RSW/US survey of marketers warned that digital agncies must differentiate themselves as being more than "digital".

    At Personifeye, we've been working with agencies to reset their business model since 2007, helping them create an integrated, unified practice. We recognize that agencies positioned by channel -- or by discipline, for that matter -- need to transform to be able to provide relevant client leadership in an evolving media/marketing environment. Positioning an agency by audience segment or industry niche, as you suggest, might be a more relevant calling card, but we feel the key to long-term success is the ability to credibly manage the holistic brand experience.

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  9. you have done a great work .......... its really working and important for us. so please keep sharing ....
    Branding and Advertising

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