3 MIN. READ
The ad agency business model has been on life support since the mid-90's when Procurement torpedoed it by forcing the media departments out. Profitability has been gradually bleeding out ever since due to the on-boarding of 'new capabilities' (increasing overhead) and ever more billing model changes (slashing profit further) foisted upon the industry by the demand for 10% annual growth by client shareholders.
Long live the lean and agile MarCom Agency Model: an eclectic squad of proven strategic/creative thinkers who outsource the varied capabilities needed for any given client project, incentivized by a commission 'bump' on for sales that exceed an agreed target.
- Consumers have been demanding something that traditional marketers have been VERY reluctant to give them: a return to the kind of marketing that simply works best, a return to human nature. And our fellow humans have never stopped begging for this since day one.
- The strategic future of the Marketing Industry was laid out 20 years ago. It was exactly what consumers wanted, but most marketers have spent the intervening two decades distracted by 'shiny and new' instead of heeding the simple message...it's The Experience Economy, stupid! (Pine & Gilmore, 1997)
- The new Social Media (the first electronic 'social medium' was the home phone) have led to a breakthrough in what has always been marketing’s ‘holy grail’ — a shift in focus from ‘push’ efforts to ‘pull’ results. People love the latter....the former not so much.
- A ton of successful new business models emerged from 'push-pull disruption,' but not at the traditional ad agencies. Sadly they've just continued plodding and have grown into ever larger dinosaurs. (Like newspapers, they were built on a platform that has gone extinct and their business model of 'we do it all in-house' has led them to grow far too large to adapt to the new climate.)
- There has never been a more urgent need to bridge 'The Traditional Sales-Marketing Divide' in order to leverage the increase in efficiency and effectiveness that comes with better aligned Sales and Marketing efforts, but few CEOs have proven sufficiently visionary to mandate it.
- P&G, arguably the marketer with the single most influence on ad agencies globally, has just announced that they will further 'squeeze' agency contracts in 2017 to eliminate any 'wiggle room' with regard to extracting revenue by 'cost-plus-ing' items under the table. Along with impetuous decisions at the top in the US that will likely spark the next Great Depression that the US credit bubbles are setting the world up for, this will very likely be the year that the first major global agency goes bankrupt. More will surely follow, likely preceded by media firms.
"It is difficult to get a man to understand something when his salary depends on his not understanding it."
- Divest of ALL those in-house capabilities other than superb thinking (including data analysis), project management and human resource recruitment and outsource as required (including creative)
- Insist on a bonus for higher-than-expected sales (it was the agency's IP that drove the volume!)
- Remind the client that the smartest, most agile minds WILL NOT thrive inside a client office (a hypercritical environment by nature) AND that they need to be incentivized with high pay (higher hourly fees)
- Focus on superb brand experiences (one-on-one engagement) as the primary in-going strategy
- Bring media planning and placement BACK in-house (there's virtually no ATL anymore)
- Collaborate with clients -- but be a true 'one stop shop' to reduce their current time spent coordinating with a dozen different agencies for content, social, shopper, experiential, digital, media, promo, etc.
- Keep the teams lean and adaptable.
Slide #7 from "The Future of Marketing Experience":