December 12th, 2009 § 0 Comments
Agencies play the same role they have for the last century. they create and distribute specialized content in an attempt to increase revenue, create and maintain relationships and ultimately profits for client organizations. What has changed during the last decade is not so much the purpose for which agencies exist, but the relative importance they play in relationship to one another at any given account. The diversity of clients’ content needs in today’s marketplace has led to a greater diversity in agency players who work with one another on any given account. Clients are no longer necessarily looking to one agency of record to fulfill all their marketing needs. And agencies continue to specialize in the service of those diverse needs.
Historically, agencies were responsible for creating short format “ads” to reach the broadest possible audience and to be distributed across the narrowest channels—broadcast and print media. These short format “ads” still dominate, but with the advent of database marketing, email, the Web, and now social media, content has shifted to richer, more interactive “experiences.” This new content is increasingly influential in consumer decisions because short format advertising is proving less effective at creating loyalty to a company, product, or brand image.
Response to the demand for and impact of these new forms of content has resulted in the evolution of a new class of “digital” agencies. Starting with the presentation of static content on the Web, followed by the emergence of rich media, and amplified by the emergence of social media—now including multiple applications, devices, and tools—these agencies are connecting consumers with clients and often consumers with each other, all wrapped in the banner of particular brands.
Today, there are too many areas of expertise, and the organizational methods needed to produce and distribute the content are too diverse, for any single AOR to manage.
For example, the creative team responsible for innovation using any particular medium requires a high level of mastery to exploit that medium sufficiently to influence consumers who scarcely have the attention to devote to any particular bit of advertising.
Not only is there a limit to the degree of excellence that can be produced, but then reward must be distributed to these creative people according to the excellence produced. This means again, that excellence favors organizational diversity, which is not typically found in large traditional agencies.
And finally, the organizational structure that is needed to produce excellence in each medium is somewhat different. While creative people exist in each type of agency, and with differentially specialized talent, the majority of the employees are in delivery focused roles specific to the medium in which they work. As Olgivy states “…about 60% of ..(agency staff) … do clerical work.” a similar trait exists in technology focused agencies where the vast majority of employees fill technical rather than creative roles..
And the operating principles are very different across each of these cultures. In a traditional agency for example, traffic management is nowhere near as complicated as project management is in a technical or digital agency. While the difference may not be as significant in digital advertising, since it is effectively placing ads according to a process similar to offline ads, it is quite different in digital marketing firms, where the content is both interactive and participatory, and the problem is not the marginal quality of the work as determined by subjective and momentary emotional response, i.e. did I like it, but by sustained attention from the interaction, i.e. did it work.
Most companies continue to look to traditional agencies to do their advertising: one to many communications that drive brand awareness and when applied to direct response influence propensity to purchase. These agencies are best suited for this work. They are organized around efficient production, from their business models to their talent acquisition, retention, and compensation strategies. But while these large agencies and networks can provide the scale and account management needed by large enterprises, they tend to be more risk adverse in their creative and excel more in their abilities at production than in their disruptive ideas.
When corporate marketers really want to make an impact, they increasingly turn to small shops that are usually built around a single creative force—likely a refugee from the large agency world who was constrained by his employer’s risk aversion. These smaller agencies are willing and able to take much larger risks with their work, in part because they tend to be lifestyle businesses (specifically compensating the risk taker) rather than growth and profit-oriented firms. While they can deliver groundbreaking ideas, they tend to be limited in their ability to execute and are unable to scale. This is usually the result of limited access to capital and a dearth of business-driven management talent.
And then there are those agencies in the middle. In today’s agency world, the opportunities for newcomers and growth has been centered around new technologies—this is the area where most new successful agencies are coming from and are generally lumped together under the category of digital agencies. Up until the recent economic downturn, these agencies were attracting new customers, new talent, and most importantly, new investment dollars that allowed them to grow and expand their scope of services and clients much faster than their large and small counterparts.
Their financial success is owed more to not being saddled with the institutional constraints, high overhead, and aversion to risk associated with the large traditional agencies than to the innate superiority of their ideas. And on the other end of the spectrum, they are free from the limitations to growth and scale that hamper the small creative shops that have less access to investment capital and less operationally talented executive management.
From: www.puretheoryofmarketing.com (offline)