Traditional Agencies and the Importance of Being Relevant

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Change is inevitable and the one constant among a universe of constants that is destined to be changing perpetually. Business models once thought to be permanent, only needing occasional refinements, are learning that nothing is forever, and in today’s fast paced technological era, nothing is forever for very long.

Legacy advertising agencies, historically a model where marketers hired well established teams of “Mad Men” types to create thirty-second television commercials and high-gloss magazine pictorials, are finding that even their vision has to change. To resurrect a familiar automotive advertising tag-line from the past, “It’s not your father’s Buick anymore.”  A long time industry veteran and CEO of Speakeasy Guild, John Winsor, recently said, “Advertising agencies are no longer the valued partners they once were.  In fact brands don’t really even need agencies anymore.  It’s not just their work that’s losing relevance; the ad agency business model itself may now be defunct.”

Like many other industries, advertising agencies of the future will find it necessary to become far more focused on their client’s need to satisfy their customers and less around the brand or the channels utilized to connect with consumers. Digital has disrupted the status quo of every market player’s business model, creating new pathways to consumers, opening up the market to new competitors and instilling significant and challenging innovations in organization and methods at an ever increasing speed.  Mark Read, CEO of WPP’s Wunderman and of WPP Digital says, “We’re going to need to be much more accountable to our clients for results, by which I mean sales. Part of this means we need to use technology and data to track our work to sales. It also gives us the opportunity to build new capabilities and expand our offer into e-commerce.”

At the mega brand PepsiCo, Brad Jakeman says, “The most effective creative will come from the integration of content creation and distribution, and greater in-house content publishing resources. For a brand like Pepsi, it was once sufficient for us to produce four pieces of content a year — mainly TV — and we could spend about six to eight months developing that one piece of content and spend $1 million on each piece of film. Now, those four pieces has turned into 4,000; eight months has changed to eight days and eight hours; and budgets have not gone up. Maybe [we have to publish] so quickly and efficiently that it needs to be more of a content-publishing group that sits inside the company and augments the work done through [agencies].”

What is required of agencies to remain relevant to its clients? Arthur Sadoun, the new CEO of Publicis, says “……”clients have three challenges: low growth, pressure on costs and a need to restore trust in their brands. All three are forcing them to transform their businesses and change the way they deal with customers. This is a race. It’s a race to be relevant. The big difference between today and yesterday is speed. You need to be much faster on the execution.” Mr. Sadoun is now faced with the cultural challenge of integrating and scaling up this business model.

Marketers and agencies are racing to get ahead but given the quick pace of technology – it’s a head to head challenge many are finding difficult to encompass. Julie Gareleck, founder and CEO Junction Creative Solutions says, “It is clear that we are in a new world and a new era. We have to adapt to entirely new marketing channels, make important decisions every day on how to invest our efforts and capital in utilizing new technologies in order to compete on an expanded global economy. Our firm was founded on a hybrid approach – valuing strategy and execution.  You need to be able to show value in terms of dollars, as opposed to just the number of overall impressions.” To Gareleck’s point, the impact that traditional management consulting firms have on the life of agencies is evident.

What is happening in so many industries today is a real game changer. It won’t be enough to tweak the old model around the edges. Agencies who fail to identify the new dynamics in the environment and react in a timely manner risk being left behind.