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"Mad Men" or "Mad Scientists"? Re-Thinking Ad Agencies - Part I

March 20, 2012

Recently an agency client said to me "David, I'm convinced the agency model is dead. We need a new model." While this has been said many times by many others over the years, my journey last week visiting with many different agencies and one marketing technolog provider really stoked some thinking about what that would mean for the future of this business.

Profitable Legacies Never Seem Like One...

I just returned last week from a week of meetings with seven different agencies from Tokyo, Seattle and Boston. It's been a while since I've been able to see such a variety of agencies close-uIdeas Matter resized 600p like that, and it was incredibly stimulating. They ranged in size from a small boutique of a dozen people to a multi-billion dollar multinational...and the things that are happening out there were AMAZING.

But first a bit of full disclosure. I once built and ran a direct marketing agency in Tokyo for one of the global holding companies. While it was by far one of the most stimulating and educational career stops I've ever had, I generally saw myself as an industry outsider who despite being successful, never quite felt like I understood how the business really worked. I had my own ideas that worked for me and our team, but the centricity of the traditional agency model built around mass media advertising never made a lot of sense to me as it was always less motivated about what was best for the client (or their customers) and more by what was the easiest way to make the most money.

As we all know, that model, while still fighting to keep itself in place (and more in some markets than others), is long gone from the hearts and minds of the modern client who has (finally!) come around to appreciating things like Customer Relationships, Multi-Channel Integration and ROI. Despite the existence of world-class database management and audience segmentation techniques since the 1970's, it wasn't until the Internet showed up and drew away the billions of eyeballs that most clients bothered to appreciate some of these possibilities.

Too Many Changes - Part of the Problem?

While there are still "holdouts" on the client side of the world who don't fully grasp the possibilities (and who are often served by agencies unwilling to help them get there), the tables have turned in a manner that raises real questions about the purpose of an agency. A few of the relevant factors are:

  • The technical nature of digital and database marketing and it's ROI potential has brought new players from the client side into the mix from IT and Finance.
  • The level of automation and the low cost of mass customization across HUNDREDS of possible segments has made much of the heavy lifting in the old direct model a commodity that doesn't justify a premium for an agency.
  • The speed of business in the digital era has impacted marketing almost more than any other area. Flatter teams and nimble, multi-talented people who effortlessly cross back and forth between their inner-artist and inner-geek are in demand.
  • The growth of direct sales channels in clients who avoided them for decades...which brings into play an in-house customer database that for the first time gives the client huge advantages in understanding customer behavior in real time.
  • And related to that – the concept of “Customer Service as Marketing” which may not be very new to traditional direct marketers, but at some point clients who start to fully understand this concept in this direct model will start to understand why traditional catalogers and E-commerce players do so little advertising and question their own mix and model as well.

Without question, it is more difficult to than ever to build and grow an agency using any of the standard service models that existed prior to this century. This is not to say that this is not working for anyone. The problem is that is still works for many agencies – they are unfortunately just not going to be prepared when their clients finally take a cue to think differently and find someone else far more ready to help them do that.

Technology Without Ideas is a...Commodity

But there is one thing that will ALWAYS remain consistent - ideas have value.  In other words, "the message" still counts, and more so than the "media", which will evolve over time and is only a vehicle for the message. The real change is that our media and our methods for exploiting it require a bit more "science" than they did before, and that is the point of differentiation for today's successful agencies - they have learned to wed the discipline of process and technology to the creative DNA that drives appeal with the individual customer and end-user.

So what kind of things out there are we now seeing? We’ll cover some of the real innovation stories in Part II, tomorrow.

David includes a number of agencies, big and small, as his clients and works with them to think differently, pitch better, develop (sometimes global) partnerships and in general be of higher value to their clients. If you count yourself as one of them and would like to share a bit about what your agency does well (or not so well), you can reach David at david@fennec.co