Over the past few months I’ve checked in with a number of current and past colleagues and acquaintances who work at a variety of marketing services agencies — PR, ad agencies, social-media firms, brand consultancies, etc. In addition to the usual pleasantries, our discussions could not help but touch on the state of the industry. I’ve also seen and commented on a growing critical mass of news articles and blog posts on the future of advertising and PR firms.
What has been interesting about all of this dialogue, both online and off, is one consistent theme: The business environment for ‘traditional’ agencies is changing … radically … and overnight.
“I hear death is imminent for your business model, in fact I’ve heard the industry itself might be beyond repair,” commented Kyle Flaherty, a former PR agency professional and current tech-industry marketing director (now on the ‘client side’), in a December post on his Engage in PR blog.
What is causing this ‘plague’ of Biblical proportions throughout the agency world, and how can agencies overcome this situation by preparing for the next-generation of client expectations?
The current environment is being shaped by a myriad of factors: the advent of social media; the emergence of Web 2.0/3.0 infrastructure and applications; the power shift from brand-company to customer; the slow death of traditional print/broadcast media; the increasing enterprise focus on ROI/quantitative metrics; a growing client-side demand for integrated marketing communications campaigns; Recession-era chaos inside corporate America; a disruptive technology environment; more disruptive technology … I could go on.
But this myriad of factors all boil down to a single factor: Many agencies are out of touch with their corporate clients’ current needs. Marketing is becoming more sophisticated, and its agencies need to, as well.
This reality has hit the agency world hard. In mid-December, Adweek reported that bellwether BBDO laid off approximately 5% of its 3,700+ North American staff members. It also noted that BBDO’s parent, Omnicom Group, which is a holding company for dozens of advertising and PR agency brands, “… is trimming [close to] 5 percent of its worldwide staff of 70,000.” Many of its cuts are in ‘traditional’ PR and advertising brands, while ‘digital’ and ‘interactive’ agencies are garnering increasing investment. And this follows a previous hiring freeze across the Omnicom portfolio.
“This may be the perfect storm for big agencies to find ways to transform themselves,” commented Idea Couture CEO Idris Mootee, shortly after the BBDO news, in a piece on his Innovation Playground blog titled, “Big Advertising Agencies Are Needing Bailouts Too. Bailout Is Never Any Real Solution. This Is Part Of An Industry Evolution.”
There is indeed an opportunity for the agency world to right itself and to deliver on the needs of the next generation of clients, but that requires developing the next generation of marketing services agencies.
What are the key pillars of a next-generation marketing-services agency?
I believe there are five key characteristics that will mark successful marketing agencies in the near future:
> Holistic focus on both brands and brand community: Any good athlete knows you need to keep your eye on the ball. The core objective of any agency’s set of services is to support the marketing of brands. This means that agencies need to be hyper-focused, as never before, on the impact of their programs on both brand equity and on brand revenue; moreover, agencies need to act as an extension of their clients’ organizations, giving marketers and brand managers leverage in their own effort to maintain a holistic view of their brands.
“I need an agency to create, manage and monitor our online brand, alerting me to the communications landscape every morning,” wrote Kyle Flaherty in the same blog piece cited above. “Currently I spend 2-3 hours each morning performing this function … time I would gladly transfer to your agency.”
Brands also exist at the center of brand communities — a phenomenon identified by Professor Tom O’Guinn, a marketing researcher who heads the Center for Brand and Product Management at Wisconsin. I highlighted O’Guinn’s insights and the importance of understanding brand communities as a strategic component of improving brand marketing programs in a past blog post on this site, so I won’t go into more depth here. What is important, though, is that agencies are in a unique position to help bridge what is often a highly inwardly-looking perspective of marketers and brand managers with the outside world — helping to better connect brands with their brand communities.
Thus it is important for next-generation of marketing services agencies to focus on, and ideally be the expert on, how best to connect with and engage in two-way dialogue with these brand communities. This means not only proactive engagement via promotional activities but also reactive listening and understanding that leads to key customer insights and that supports continuous evolution and growth of the brand.
> Integrated, multi-channel suite of marketing communication capabilities: The legacy of the agency world is of firms that built a practice around being an expert in the medium — advertising firms, direct marketing firms, media relations firms, etc. … you get the picture. Over time agencies have become diversified, but their diversification was always about adding additional mediums. The problem? Effective marketing communication must be medium agnostic.
Marketers must understand the combination of mediums that are most effective for reaching their target customers and brand communities; marketers must also realize this will change over time. This means that marketers need agencies that can execute campaigns across an ever-changing combination of mediums and do so in a coordinated fashion; moreover, it means that recommendations for the ‘marketing mix’ need to be driven by real client/brand needs, not agency agenda.
Tim Hurley, former managing director for PR agency Porter Novelli’s Boston office, a few years ago came to this realization, which he shared in a recent blog post:
PR should be thought of as a key part of an effective, integrated marketing strategy. However, other critical marketing functions including corporate and product positioning and messaging, awareness and lead generation, sales support, events, marketing strategy and increasingly, social media and Web marketing must be part of the mix. And it really makes no difference, whether these functions are executed in house, through an agency, or as is most often the case, through a collaborative effort between client and external resources.
This realization led Hurley to partner with Alison Moore to build what is rapidly becoming a very robust and forward-thinking integrated marketing services agency, BluePoint Venture Marketing.
Business and innovation strategist Idris Mootee, cited above, believes the large agency holding companies, such as Omnicom, Publicis and WPP, are already feeling pressure from their clients to integrate in this fashion. He discussed this in another blog piece he published a year ago in January 2008:
The Web has fueled marketers’ frustration with the lack of collaboration inside the ad holding companies that dominate the industry. Many advertisers complain that ad executives too often push agendas that will most help their own bottom lines and tend to favor certain types of media, such as TV. Advertisers want a “media-agnostic” approach, one that picks whatever medium is best for the ad campaign.
Some bigger marketers have taken matters into their own hands during the past year. Procter & Gamble, Dell and Johnson & Johnson each have tried — working with ad holding companies — to create new types of ad groups that blend different functions.
> Balance of strategic capabilities with strong tactical execution: I do not enter this third point as a ‘new’ idea as much as a reminder that this is a critical component. Agencies are often asked to manage scale campaigns while ensuring that they are executed at every point and via every channel with perfect, ‘ground-level’ tactical execution. This means that successful next-generation agencies must have a blend of talent — both communication medium experts and business/marketing/brand strategy experts — that can make sure the complete spectrum of a client’s business needs, from the highest level down to the lowest, are fully covered.
> End-to-end results measurement and closed-loop client analytics integration: “… [C]losed-loop analysis is the process of tying all aspects of your company to financial data and creating metrics,” explains JT Buser, a senior product manager with lead-generation firm Bulldog Solutions, in a post on his company’s website. “[Closed loop analysis] allows you to follow each department’s impact on each other and ultimately, gain insight into your company’s financial well-being.”
Getting to this level of closed-loop analysis is a priority for marketing organizations because it helps to tune their marketing mix and better understand how marketing investments impact both brand equity over the longer-term and brand revenues over the shorter term. Agencies, thus, must become better partners in supporting their clients’ closed-loop analysis efforts — eventually playing a key role in enabling real-time measurement and dashboards.
Moreover, the same factors that are driving marketing organizations to achieve new levels of cross-channel integration are requiring a new level of sophistication when it comes to measurement: “There is a significant movement toward integrated campaigns and the focus on development of metrics to support that integration will help you measure the overall impact of integrated campaigns and the individual components,” comments IBM executive Sandy Carter in her new book, The New Language of Marketing 2.0. (Note: We will be featuring a Q&A with Sandy about her book in an upcoming post on this blog.)
Next generation agencies must be fully integrated with their clients’ information systems and be able to supply real-time marketing performance measurement data, across mediums, directly into their clients’ closed-loop analytics platforms.
Measurement and analytics also need to be focused. I discussed in a past blog post on this site how important it is to develop a simplified and proportional ‘top-five’ group of metrics. Most marketers and brand managers are drowning in data, and as agencies become more sophisticated in their technology infrastructure (discussed below), they likely will be, as well. The key is to cut through it all and to focus — in concert with clients — on the metrics that are most important and that will allow you to assess real impact and success of marketing efforts.
> Sophisticated, underlying technology platform: Whether it is for driving execution management for integrated campaigns or it is for improving measurement and integration with closed-loop analytics platforms, a sophisticated, underlying technology platform is a critical component of next-generation marketing services agencies. In fact, technology infrastructure must be as much a priority as hiring smart people at agencies.
Some of the critical capabilities that agencies must embrace include:
- Business intelligence/analytics infrastructure – to better structure, organize and analyze the myriad of data points developed each day
- Cross-channel marketing execution management platforms – to effectively manage execution across channels and to ensure consistency of personalization to brand communities and in the representation of the brand, as well as to support measurement and data collection (Note: As I discussed in a previous blog post on this site, I am in the process of building a list of ‘top’ vendors in this emerging space.)
- Dynamic, Web-based content management/delivery expertise – especially via open source, blogging and social-media platforms such as WordPress/CSS, MySQL/PHP and now Twitter
- Enterprise-grade data centers – to operate on a truly peer level with clients and their service-level expectations
- Multi-channel ad and content serving– especially via emerging mediums such as the mobile channel, as well as better tying together online and offline advertising
- Semantic analysis of both structured and unstructured data – to better develop customer insights and to monitor brand dialogue, especially via traditional media and now new social media channels on the Web
- Web services/cloud computing orientation – to enable efficient ‘tie-ins’ to clients systems and to efficiently feed data, in real time, into closed-loop analytics platforms
What are the major barriers to the success of next-generation marketing services agencies?
What I’ve described above is certainly an ‘ideal’ world, but we hardly live in an ideal world, nor ideal times. Being realistic, I must admit there are certainly barriers to firms succeeding in the new context I’ve described above. Yet, I see these barriers more as opportunities and would suggest that firms focus on how to not only overcome them but also to make doing so help better position them for future success.
These key barriers include:
- Legacy, marketing channel-specific silos inside corporations: Agencies find their greatest success when there is a clear, demonstrated client-side champion within a company. For example, advertising agencies in the past have been able to prosper when their client is a sophisticated (and dedicated) advertising ‘department.’ As agencies move to an integrated marketing communications context — even if this is what their clients say they really want and need — they will find it difficult to sell into client organizations that have not yet organized into cross-functional, integrated teams focused on a specific brand or business unit. It’s simple: It’s a lot harder to sell to a group than to an individual. If client-side departments such as advertising, branding, direct marketing and public relations operate in silos, they will not be able to effectively engage with next-generation agencies that are organized around delivering integrated, multi-channel marketing communications, nor fully realize the critical value from them.
- Technology phobia of many agency folks: Much of the traditional leadership of agencies comes from a background rooted in either client-account management or ‘creative’ development. In fact, I would be surprised to see any critical mass of agency leadership that is actually proficient in HTML, CSS or PHP or that can talk knowledgeably about business intelligence technology. I’m not advocating that agency people be at a CIO level of technology knowledge, but they do need to be comfortable and proficient with technologies related to content management, brand tracking, marketing program execution and marketing program analysis — especially those capabilities listed above. Integrated agencies need staff members who can build next-generation technology platforms for managing and measuring integrated campaigns, both online and offline, and for better interfacing with and supporting the emerging needs of their clients.
- Ongoing issues of normalization and evolution of performance metrics: Marketing data faces two problems. First, the format of data on marketing-program performance differs wildly, depending on the medium — making it difficult to make side-by-side comparisons for an integrated campaign across multiple online and offline mediums. Second, the quality of these metrics — e.g., concepts such as ‘impressions’ — are a continuing issue. Improving end-to-end, holistic brand insight and analytics, especially from the agency’s side, requires greater normalization and evolution of performance metrics — something the marketing world continues to wrestle with.
- Figuring out how to pay for it: A key piece of the economic logic for many agencies is figuring out how to pass as much cost directly onto their clients as possible. Less agency-side cost means more profit; I get it. Yet investment in some of the pieces cited above, especially technology infrastructure, is tough to assign to the needs of any single client; thus, one might argue that could potentially cut into agency profit. This mindset may be the single greatest barrier in agencies’ evolution. What is the payoff? Survival. This is the price of admission to next-generation client opportunities; moreover, for smart agencies, it can eventually lead to labor efficiencies and rationale for changing how you bill clients … changing the economic logic. Ultimately that means agencies that can be more profitable, not less, and that are more in demand.
This the first in a two-part series of posts on next-generation marketing services agencies. On Monday, the next post will present snapshots of several, specific firms I’m watching and that I believe are representative, forward-thinking leaders in the next-generation marketing services agency world. Stay tuned for more …
What’s next? What do you think?
As always, this dialogue is just beginning.
- What are your comments on my five key pillars, above?
- Do you think this is the right direction for the agency world?
- What are specific technology capabilities you believe next-generation agencies must possess?
[…] business network marketing program. By being online, you will generate better leads and follow Next Generation of Marketing Services Agencies 1 of 2: Pillars and Barriers – propellingbrands.wordpress.com 01/02/2009 Over the past few months I’ve checked in with a […]
Great thinking on the subject Adam, I enjoyed the read. It will be interesting to see how the industry does evolve, but I think that this shakeup will lead to two different outcomes; a very tough time for agencies that attempt to stick to what they have always done – outbound mass media marketing – and a new era of strategic relevance (although very different than before) for agencies that follow your rules above.
Your points on execution, analytics, and operations as key new elements are key – a change in mentality and skill sets will be necessary to thrive.
Great post, thanks for writing.
The economy is very poor, and will likely stay so through 2009 and 2010 – but just as the 9-11 thinking persists 7 years later, those who buy our services will remember and react as if the economic crisis persists for a decade or more after recovery.
Today, and for the foreseeable future – if the communications service you sell doesn’t DIRECTLY contribute to client sales, you’re likely to not make it through 2009. Because in this environment, GETTING NEW INCOME and PROTECTING CURRENT CASH is 100% of most client focus.
Nowhere is that more important than in the high tech and biotech industries ordinarily dependent on VC and private placements, and in the past, IPOs and secondary offerings. Most of these companies have no products on the market; some don’t even have granted patents. Many will require a great deal of money they don’t now have to take their products and/or technology forward.
Their options for the short term are grim. Chapter 7 would not yield anything close to what their investors have plowed in to date. To say that most of these companies are – in the terminology of the mortgage business, “under water” – is a laugh. Most are so far below the sea bed that it would take them a decade or more under great conditions to reach the surface.
On the other hand, many of these small biotech’s best prospects for money are large firms with significant cash reserves. These firms my have interest in a struggling biotech’s pipeline – but know that the longer they wait, the greater the likelihood the price they’d pay will decrease.
Those who provide communications services are accustomed to the softest of metrics. In the words of a NYC white goods merchandiser now out of business: “Faggedabowdit!” For 2009, communications is all about how you can help your clients and prospects improve their chances for bringing in cash – hopefully while avoiding dilution of current shareholders and management – but hey, half a loaf is better than crumbs.
In this environment, the most important skill a communicator can bring to a client’s table is a profound understanding of how the spectrum of industry participants beyond the client make money.
The second most important: An ability to persuade clients that you uniquely know how to use communications to
• Improve the ability of clients to position their products and associated resources to be most attractive to “investors” of all sorts
• Increase the efficiency and effectiveness of those client execs who will directly deal with sources of new revenue needed to keep the company on track
• Explore short-term alternatives to the conventional way clients thought they would generate cash – but in this environment, may be inappropriate
For example, many developers of products never thought of themselves from a service perspective – how could our people and lab facilities be used to provide services for which other companies in our field might pay money? Instead of just looking at major firms as money sources, how about thinking of them as potential sources of contract work?
Ironically, many biotech managers traditionally look at prospective licensees or tech/product purchasing big firms very narrowly, in terms of their own selfish interest. They don’t look to the NEEDS of these big firms (which is why so many fail to properly position their product offerings in terms meaningful to customers!)
This is just one general area of communications positioning that I see as critical to survival in 2009. Those communicators who successfully analyze their prospects’ needs and potential sources of income – and can persuade clients that their communications can enhance their client’s efforts to generate cash short term – are likely to survive the current environment, and thrive in the post-recession years that surely will follow.
Mel Snyder
Managing Director
ProClinica Inc.
mel@proclinica.com
@ Steven – Thanks for your comments. Like your comments about agencies sticking ‘what they have always done – outbound mass media marketing.’ It’s absolutely a time for a change in mindset.
I think that needs to begin with hiring, though. Agencies need to chase new leaders who are operating at the crossroads of marketing practice and marketing technology, and they need to view their technology infrastructure as a strategic differentiator, not an unfortunate cost center.
That also means building core systems and platforms that are leveraged across projects and avoiding building platforms/databases just for specific clients or projects.
Over the longer term, it also means agencies need to really be delivering (and billing for) a continuous ‘service,’ rather than the legacy of so-called services that were really just ad-hoc work for hire.
Adam, Great post and I agree that spending money in new technologies is important for any Marketing and PR agencies.
Here are some simple Tech ideas that can help the next generation agencies.
1.-Spend money to train employees with new technologies. Project tracking tools like Microsoft Project or similar open source alternatives. Tools for online collaboration file sharing also remote access to company resources so that employees can do work from anywhere.
2.-Learn how to market your clients through online video, podcasting, blogs, twitter. Learn the power of Adwords and learn about SEO.
3.-Learn how to really do great email marketing. Specially track the success of your email campaigns.
4.-Track your client’s name and brand through Google alerts, also if your client is being mentioned on TV or even online video sharing sites like YouTube you need to know about it. http://www.criticalmention.com is a great company and can help you do that.
5.-Last I would say that technology is only a tool to reach an ultimate goal. You still need great people so hire the best people. Hire people who have great ideas and are dedicated and that love their work.
Excellent enquiry Adam. I’m glad I had a chance to learn about you through Twitter.
I agree with your diagnosis, and your prescription sounds prudent. However, it may make more sense for clients to take your medicine, not agencies.
Small and mid-sized agencies don’t have the resources, breadth, or depth to install your pillars. And big agencies are so heavily soloed and incented to increase departmental billings that the teams are typically highly competitive.
Even when the people in big agencies do cooperate, few of these goliaths offer world class competence in account service, technology, analysis, strategy, creative, and all communication mediums (i.e., web sites, social media, SEO, SEM, direct response, print, TV, radio, PR, promotion, graphic design, events, etc.)
Some new agencies have managed to create media agnostic, cross functional models. Crispin Porter is the standout in this regard. Their work for Burger King, in particular, is remarkable. But it has yet to be proven that this model is scalable or durable. And I know of no agencies that have been able to reverse engineer this model.
Maybe clients need to take charge of their own brands, businesses and metrics — even if it means increasing head count. Then they can hire strategic and creative services as needed.
Then again, it could be that the current agencies need to go away and make room for innovative newcomers. It’s a brave new world in marketing communications!
Thanks for the post. Let me know next time you are in Minneapolis. It would be fun to chat over coffee.
Hi Adam,
I agree with your requirements for next generation marketing services–but am not sure they apply to the next gen agency.
The first thing that occurred to me as I was reading your post is that it may not make sense to have the fox guarding the chicken coop. It’s difficult for a marketing services agency to recommend the best media for conveying a particular message at a particular time to a particular party if that media is less expensive than some other choices.
Wouldn’t it make sense for corporations to split the functions? That is, they would pay one company to provide their “dashboards” of how their brand is doing, another to decide which marketing investments will be the most effective for a given objective, and a third to actually produce the creative and/or tactical programs?
Another argument for splitting the functions is that each requires very different areas of expertise. As any one who has worked for a large company can tell you, one type of expertise always ends up dominating the others. To get best of breed, clients may be best purchasing from a portfolio of plug n play solutions–perhaps hiring a guide to assist them in this process…
As you note, it’s difficult to compare “apples to apples”. It may be time for a standards organization similar to those you see in technology organizations that provide uniform measurements. Of course, it would be up to the client community to create and enforce the standards but it’s worked in other areas as the disciplines have grown large enough to exact big money from prospective clients.
@ Marco – I love your comments here. You’ve summed up much of the point of my post, albeit must more succinctly!
I think you get at a key point here, too. Agencies must be about BOTH great people and smart (technology) infrastructure/processes. And it’s the integration and ‘synergy’ between the two that will make or break a marketing services agency in the next generation. Don’t only have the best tech, but also make sure that your people are really leveraging it to get to the next level and that your culture is an asset.
@ Dan – I don’t disagree with your comment, “… it may make more sense for clients to take your medicine … .” But I do think it’s a two-part equation. I think internal marketing organizations must really begin to think in a new construct about how they manage and measure their activities, but I think they are crippled if they don’t have integrated agencies that can not only keep up with but buttress also this effort to move to the next level.
I increasingly think that the right model is really agencies as sophisticated ‘marketing communication outsourcers’ — differentiating on being better at executing, managing costs and thinking outside the box than their clients on the issues for which they are engaged — but case studies of successful outsourcers show that they must have very good sense of how to manage and measure what they do … and to tightly integrate that with their clients’ own methdologies. I think a key point from my post, above, is the point of being able to externalize and sync data between client and agency (esp. via a Web services/cloud model).
I also acknowledge some of what I’m putting out there is still abstract, but as you suggest, I really do believe many of “… the current agencies need to go away and make room for innovative newcomers.” It is, indeed, a ‘brave new world.’
Will be in touch next time I’m in MSP!
@ Barbara – I think you raise some good points about aligning incentives. But I disagree with your assertion that “[i]t’s difficult for a marketing services agency to recommend the best media for conveying a particular message at a particular time to a particular party if that media is less expensive than some other choices.” If that is truly the big challenge here, then that means the agency billing model is more broken than at first blush.
Paying based on outcomes, or creating ‘efficiency’ incentive structures, such as a set fee, can help align objectives. If an agency knows it is only going to make X amount off of a client, or that it’s payment depends on key benchmarks, it is going to find the most efficienct and effective way to get there. I hope that means that the most efficient and most-cost-effective route wins out. I also think that agencies need to be measured BOTH on contributions to brand equity and to brand revenue. (Unfortunately, they seem to be measured — typically only qualitatively — too often only on the former.)
I do agree with your argument about standards, though. I think this is an area we need to further pioneer as marketers … although I admit I’m not sure about the best route to achieving this.
Good dialogue, everyone. Thanks!
[…] January 5, 2009 by Adam Needles This the second in a two-part series of posts. This past Friday I discussed the five key characteristics I believe will mark successful marketing agencies in the future, I also cited some current barriers to firms succeeding in this ’next-generation’ context. Click here to view the first post, “Pillars and Barriers.” […]
Here’s a great proof point on the new direction for agencies.
Ogilvy just launched a new ‘Social Media RSS Dashboard’ for PR and marketing pros.
http://sev.prnewswire.com/advertising/20090108/DC5630708012009-1.html
This is an agency selling software. Interesting development …
Here’s another proof point from Ogilvy, which announced this past September a relationship with search-analytics technology provider Covario:
http://www.covario.com/news/newsArticle_9-16-08.shtml
The plot thickens!
I really enjoyed reading this posting.Many thanks.