Remodelling the agency relationship for the 3.0 age
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The ’always on’, 24/7 digital world demands a fresh approach from brands but the traditional client-agency relationship does not facilitate this, says a new report. MaryLou Costa looks at the new agency models that are emerging to better service the marketer’s needs
- Read more debate on whether boutique or network agencies are best equipped to meet marketers’needs click here
- Check out what marketers are saying about the agency of the future click here
Marketers used to appoint creative agencies to produce glossy 30-second television ads along with the complementary print campaign. But the digital age has brought with it an expanded number of marketing channels, making clients’ needs much more challenging.
The best results might now come from a crowd-sourcing initiative or a video that turns viral rather than a slick television campaign. Traditional agencies need to change as a result, according to a study by GyroHSR, which has carried out in-depth interviews with 50 top marketers. It also issued a survey to 250 marketers on agency effectiveness.
The results throw up a number of trends, such as the emergence of new remuneration models for agencies (see below), and the growing importance of planners in delivering content across the relevant points in a new media landscape (see below).
That changing media landscape means that agencies need to rethink their offering, argues GyroHSR chief operations officer Richard Perry. Marketers need agencies to be “always on” to reflect that consumers are constantly connected to the media world through multiple channels.
“Agencies have to understand that brands are ‘always on’,” Perry explains. “If something happens in the middle of the night and there’s no reaction to it until morning, that is a lifetime to a consumer now.”
The general feeling is that marketers not only need their agencies to work to a continuous engagement strategy, but that they are gravitating more towards full-service network agencies to deliver this, adds Perry. “In this sense, a network agency can offer a strong position, compared with a boutique agency which might not have the infrastructure to support this.”
The David and Goliath battle between boutique and network agencies has heightened over the past two years. A new breed of boutique agencies is emerging in an attempt to win clients, headed up by former agency executives who believe there needs to be a new agency approach that reflects the digital age.
However, marketers have split opinions when it comes to deciding what type of agency is best equipped to deal with new media. A growing expertise in digital has brought the networks back into favour to a degree, according to Google UK’s country sales director, Mark Howe. He argues that the big networks had originally been slow to adopt digital but are now starting to secure digital-only campaign briefs.
But former Burger King vice-president of marketing for EMEA David Kisilevsky counters that many network agencies still see digital as a “bolt-on” rather than an embedded part of their core offering.
The digital age has also encouraged marketers to gravitate towards full-service agencies. Those that provide a one-stop shop have the expertise to place the creative idea in the most relevant channels, argues Boots executive marketing director Elizabeth Fagan. “We are moving to a world of full-service again because increasingly the agencies that make the difference are the ones with quality planners that are truly media neutral.
“Clients, and therefore their agencies are thinking about the customers and the brand first and then thinking about who can execute the big idea through any channel.”
But boutique agencies still have a role to play, suggests GyroHSR’s Perry. The marketer questionnaire on agency effectiveness reveals that despite networks offering efficiency and scale, 56% say boutique agencies are responding best to client and market changes. “There are opportunities for boutiques to be specialist in their thinking, customer focus, innovation, creativity and technological awareness,” he explains, but “boutiques have to own a space of pure creativity.” (See boutiques versus networks, below)
Virgin Atlantic: How do you monetise a campaign like its Eighties nostalgia ad? Virgin suggests different payment models for different campaigns
Remuneration
There are also calls for a shake-up of client-agency remuneration models, according to the research. Of the marketers GyroHSR surveyed, 90% say agencies should be more accountable for the commercial success of their work, through remuneration models such as “payment by results”.
More than half (55%) disagree that agency fees should be based purely on time and output, meaning that retainer models could be phased out in favour of performance models.
Results-based payments will become more popular as clients set agencies specific targets based around their business objectives, according to GyroHSR’s Perry. This could be measured by the number of visitors to a website, product sales, or an increase in brand awareness. “If I’m going to spend £100,000 of a client’s money, then I should share the pain if it doesn’t work and gain the rewards if it does work,” he reasons.
However, payment by results could prove difficult to measure, says Virgin Atlantic head of global advertising and communication Breda Bubear. “We want an agency to put its money where its mouth is but payment by results is not always fair. Our 25th birthday TV campaign was not about getting a certain number of bums on seats, for example. It was about nostalgia to reach the decision makers of today who grew up in the Eighties.”
New payment models are tricky to get right, she adds, but others argue that using different payment models for different briefs and even using different payment models with different agencies working on the same project, is a viable way of working, as long as a client discloses these openly to its agencies and explains why it is taking a particular approach.
Scott Knox, managing director of the Marketing Communication Consultants Association, says: “There is nothing wrong with building a hierarchy of different payment models for different agencies but don’t expect all of them to deliver for everything if you aren’t paying them for it. Retainer and payment-by-result models should be reserved for the top-level agencies that work really closely with the brand and get all of the insight and deliver to that.
“Revenue sharing is being talked about and being trialled by some, but it can be risky because a lot of brands belong to corporations that are bigger than the agencies working with them. Some of the smaller agencies that some clients favour to deliver the more cutting-edge ideas are not going to be able to take on that risk.”
Agencies have to understand that brands are ’always on’. If something happens in the night and there’s no reaction until morning, that is a lifetime to a consumer now
Richard Perry, GyroHSR
Marketers also want to see a greater willingness from their agencies to work together rather than focusing on protecting their own disciplines and revenue streams, according to the research. This means agencies must be prepared to hand ideas across to their partners if the client’s need dictates. “The parameters have to be laid out [clearly to agencies] and the client has to enable and support this,” notes Perry.
He points to his client Virgin Atlantic: “It’s understood that whichever agency comes up with the ad idea, it goes to RKCR/Y&R, and whichever agency comes up with a CRM or brand activation idea, it goes to us, and so on – regardless of which agency came up with the idea originally.”
But however the idea is born, the creative content must take into account new and varying patterns of media consumption across demographics, according to GyroHSR insights. Clients are increasingly deciding to forego spending small fortunes on a glossy 30-second TV spot, but are instead demanding multiple pieces of creative, engaging content that might cost less but could reach more consumers through a mix of channels and viral spreading.
New breeding ground
This new way of delivering content means planners have become more crucial to an agency than ever, delivering the channel and market insight that can provide a new breeding ground for the “big idea”.
Agencies must, however, resist offering every service to match a client’s brief when only specific solutions are relevant and will generate a better return, says Kevin Brennan, former marketer director for Kellogg UK who has since moved to Premier Foods.
He observes that the traditional agencies still have a tendency to offer old solutions to new problems: “There does seem to be a bias within ad agencies towards either a need to make great TV films or to offer you a creative digital response to a brief even if you have not asked for it.
“Agencies need to have a view on what is needed creatively to make a brand win,” he adds.
Clients also want to see more transparent behaviour from agencies, says Kisilevsky. He complains that agencies are sometimes guilty of using their top people to front a pitch, but then hand the work to junior members of staff when the pitch is awarded.
Kisilevsky states: “When we put out any pitch business for Europe we stipulate that the key people will be expected to work on our account. Agencies can decide to withdraw from the pitch.”
However, younger agency executives shouldn’t be discounted but valued for their technology know-how and should be called on to share this savviness with their seniors, argues Sarah Alspach, marketing director at Barclaycard Freedom. “Younger agency execs have ideas that transcend channels because they have grown up in an all-encompassing media world.”
Remuneration models, agency structure and how they integrate with other agencies is in a state of flux and agencies need to think how they can better serve clients in the digital age. Some might argue that a new system of working is already in place, but the consensus from clients is that there is a long way to go before a winning agency model for the future emerges.
The Help Agency: Co-founder Hugh Dennis aims to offers a remuneration model that will motivate all parties to work with each other
Boutiques v Network
Marketers appear to be as torn as a teenager in love when it comes to choosing between using a boutique agency or a global network – their hearts tell them to go with the creative ideas that spring from the fresh minds of an independent agency, but their heads tell them that large networks can give them the scale and cost efficiency that the boutiques simply can’t.
While cost and scale might rule a marketer’s head, there is still the romantic notion that boutiques offer one-off quirky creative ideas and dedicated service, much like an independent store being favoured over a generic multinational chain. But both boutique and network agencies are fighting to find ways to gain a competitive edge.
Some smaller agencies have crowned themselves king of a specific market. Agencies like Dubit and Kids Industries are focused entirely on the youth sector, while research agency 2CV has recently opened its “Bloke” division to deliver insights around the 30- to 50-year-old male demographic.
Meanwhile, other agencies are offering alternative remuneration models. The Help Agency, a not-for-profit agency set up this year to work with the third sector, donates half of its net yearly profit to its clients, relative to the amount of work it produces for them.
Co-founders Dean Hodgetts, Andy Wakefield and Hugh Dennis, once a Unilever marketer but now best known as the disgruntled dad in TV show Outnumbered, believe the agency is offering a remuneration model that will motivate both parties to work effectively with each other.
This is not a publicity gimmick, Hodgetts insists: “It gives us a day-to day incentive to find efficiencies, and is a very effective way of measuring our success.”
Hodgetts claims that the larger traditional agencies tend to concentrate on “high profile, shock-tactic campaigns for big charities just to get noticed,” while Help is set up to help the lesser known charities that these agencies aren’t interested in dedicating resources to.
The agency is hoping to raise the profile of its first charity client appointment, Women and Children First, which works in Asia and Africa to help prevent pregnancy-related deaths.
Dennis says: “Some smaller charities have never looked at themselves as a brand. They need help to engage and build relationships beyond donations, and they need help to develop new marketing strategies and revenue channels, beyond ‘chuggers’ (street fundraisers), because they ruin the brand.”
While Help is set up to work with clients that it believes are overlooked by the bigger agencies, others are setting up agencies with alternative models because they believe the traditional model is broken.
New models
Guided Collective founder Sam Reid, formerly a consultant to a number of large agencies including Mother and BBH, believes new models are emerging because the traditional agency model is outdated and irrelevant. He argues: “The traditional agency model has so many superfluous layers which were relevant to the time when there were three types of media. Now you have about 20 types of media and that structure has to change. Removing those silos is critical to ensure things are properly integrated.”
Reid has developed an alternative “collaborative model” that he claims is more effective and can reduce client costs. Guided Collective runs an in-house core strategy team with a strong digital focus, alongside a “cloud” of about 200 independent consultants who are called in, and paid, on a project basis. Cloud members come from a range of disciplines such as creative, music, design, fashion, copywriting and PR, and work on other projects outside Guided Collective but sign a non-disclosure agreement once they agree to take on a client brief.
Guided Collective’s model means clients won’t have the experience of agencies selling them extra services they don’t require, claims Reid, something that some marketers in GyroHSR’s research have experienced.
Relationships
Reid disputes the notion that Guided Collective’s model doesn’t bode well for developing deep client-agency relationships. “Inevitably we are going to polarise people,” he says, but he believes the model enables a more straightforward and honest relationship with clients. And as client management is run in-house, the experience would not differ from working with a traditional agency, he adds.
The collaborative model is also favoured by The Next Door agency, which operates within a “neighbourhood” of five other agencies that all offer varying, complementary services, and can come together to serve clients. The neighbourhood’s areas of expertise span social media, technology, advertising production, PR, film content and music partnerships.
Not only does this allow The Next Door to deliver global campaigns, the agency claims its payment structure of one profit and loss account, regardless of how many neighbourhood agencies have completed the work, is the way forward for clients and is indeed how agencies should be working.
The directors of The Next Door have all come from big network agencies, which chief executive Kieron Monahan believes put “barriers in the way of doing the best work”.
He adds: “We were getting frustrated with coming up with ideas then dealing with other agencies that were on separate profit-and-loss accounts. Their businesses would thrive the more they were able to execute within their own discipline. Rather than everyone just getting behind the idea, agencies were trying to get a larger share of a client’s budget by directing the idea into their own discipline.”
The neighbourhood works, Monahan says, because of the selective and complementary nature of the agencies involved. For example, the neighbourhood doesn’t include another creative and planning arm, because that is The Next Door’s specialty. And like Guided Collective, each partner is called in if their skillset best matches the client’s needs, meaning client fees don’t factor in staff salaries across multiple departments.
“The structure of an agency is important in pushing a client’s brand forward. If everyone is under a single P&L then everyone has the same objective and is working towards the same agenda. And the client gets to see the best creative ideas,” Monahan adds. The model of a single-agency P&L is the future, Monahan believes.
But global network agencies aren’t just sitting back and waiting for boutiques to develop new strategies to take business away from them. Larger agencies are setting up divisions aimed at targeted demographics, such as WPP’s Ogilvy Mather’s Ogilvy Noor division, which specialises in Islamic branding and marketing.
Network Interpublic Group claims that new technology is helping it to become more “boutique”. McCann Worldgroup, which is part of this network, has developed an online “neutral network” that offers in-depth profiling of the talents and skills of each of its 20,000 global staff members – its individual agencies such as Futurebrand and the communities within this network. This technology helps McCann match client briefs to the relevant talent within its global network, Brett Gosper, EMEA president for McCann Worldgroup claims.
New technology has enabled network agencies to source their own “boutiqueness” but to a large scale, he argues. “We have never been able to do such detailed profiling before, and now that we can, it gives us a huge advantage over boutique agencies. The diversity we can get across the globe means we have far greater opportunities to find interesting and diverse ideas.”
Whichever model emerges as superior, it offers marketers a win-win solution if both boutique and network agencies are striving to deliver better work more efficiently. The choice may well come down to the merits of each agency, and not dictated by size and price.
In search of the new world order
The advertising agency of the future does not have a blueprint. The tectonic shifts in the media consumption habits of a fragmented audience has forced ad agencies and clients to examine different ways to reach consumers: from brands disguising themselves as “entertainers” on YouTube to generate interest and fame to adland experimenting with new agency models.
By 2000 there was barely an ad agency left that was full service or had its own media department. But that same year, Naked launched – with no media or creative department – promising to provide solutions to clients’ needs. In due course, the likes of Bartle Bogle Hegarty and TBWA/London and more recently CHI & Partners also started bundling creative and media functions closer together.
At the same time, the rise of digital agencies meant that the original amoebic single-celled agency did not exist any longer. DM agencies are now integrated shops; network ad agencies are almost full-service; and the buzzword among media planning and buying agencies these days is “creativity”. But who is best placed to rewrite the rules of advertising in this fast-changing world?
The client-survey conducted by GyroHSR shows that more than 50% believe smaller boutique agencies are adapting best to market changes. An outlook shared by the new YouGov Agency Reputation Survey 2010, due to be launched on Pitch in September (soon to be followed by a Digital Agency Reputation Survey).
Sonoo Singh, Editor, Pitch http://pitch.marketingweek.co.uk
The findings
Digital
Some 80% of those surveyed feel that digital agencies are too fragmented and specialised and want digital agencies to grow their service offering to provide a fully integrated offering (such as design and build, development, email, eCRM search, data, display and social media). Brand owners value their digital agency relationship the most (28%) followed by advertising (20%) and branding (20%).
Remuneration
Some 90% of those surveyed feel that agencies should be accountable for the commercial successs of their work, such as introducing payment by results. And 68% think agencies should be paid on the value of their ideas. Some 55% of those surveyed disagree with agency fees being based purely on time and output.
Structure
Some 30% of those surveyed feel the global agency networks are responding best to client/market change, while 56% reveal the boutique/specialist agencies are responding best to client/market change. Brands value the creative leadership of an agency the most, with 77% citing it as the single most important team, followed closely by planning and strategy, with 74%.
What marketers are saying
Kellogg former UK marketing director Kevin Brennan (now at Premier Foods):
“Brand strategy is where agencies can differentiate themselves and add value. Clients are crying out for more strategic thinking from their agencies. I want agencies to come through our door and not be afraid to challenge us.”
Boots UK executive marketing director Elizabeth Fagan: “You get a feeling early on whether the talent within an agency is right for your brand. For their part, clients must be clear about their own brand strategy and what is important to their customers. When they are clear about this they need agencies that ‘get’ their brand strategy.”
Bacardi global brand director Christian Woolfenden:
“In an ideal world we want a group of agencies, led by one, that can genuinely work together to get the best results. We need to see that a network can provide the right consumer insight so strong creative ideas can work internationally. Our agencies must have a ‘global local’ approach.”
More Than marketing director Pete Markey:
“Our agencies must keep up with us and find ways to engage with our audience daily. For this to work they must be our partners and feel part of our business. Regular engagement is critical to ensure success in such a fast moving sector as ours.”
Barclaycard Freedom marketing director Sarah Alspach:
“We need creative ideas from our agencies that can be executed cheaply and there will be more opportunities for bespoke work if an idea can connect with consumers quickly. Agencies are not delivering integrated thinking where it is the idea that drives the work, not the channel. Agency people talk that language but few deliver it. Big agencies make most of their money from TV and that drives them. Some of the most interesting thinking at the moment is coming from independent agencies.”
Best Buy Mobile US chief marketing and merchandising officer Jude Buckley:
“We look to work with marketing agencies and disciplines that can connect on the ground at a very local level, town by town, store by store.”
Readers' comments (9)
Patrick Danaher from GyroHSR | Wed, 4 Aug 2010 12:55 pm
Please share your views with us: http://www.surveymonkey.com/s/agency30
Or contact Richard or myself on +44 (0) 20 7351 1550
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Ayman Sarhan | Wed, 4 Aug 2010 5:16 pm
agencies should change nothing!!! it's marketers job to know a litte bit more about their role and responsibilities.
we can't hold agencies responsible for brand sales performance when:
1- An avalanche of revisions that NEVER. EVER. STOPS.
2- Pushy/impossible deadlines.
3-Clients who don’t consider what you do a real job.
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Neil christie | Thu, 5 Aug 2010 9:49 pm
Some thoughts prompted by this article: http://wklondon.typepad.com/welcome_to_optimism/2010/08/old-school-meets-new-era.html
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Christophe | Mon, 9 Aug 2010 11:16 am
"Agencies have to understand that brands are ’always on’. If something happens in the night and there’s no reaction until morning, that is a lifetime to a consumer now"
If something happens it should have been planned, if it hasn't then that's life...we are marketing people, we are selling products, we are not saving life, responding to earthquake or trying to found the cure for cancer.
The speed of the digital age gave people that do not understand communication the opportunity to over-dramatise problems that they do not understand or pull campaigns off just to be on the safe side, see what happen with Dr Pepper. Keep calm and carry on, if you are a good brand and do the right thing your consumer will still support you 24h after any events.
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MaryLou Costa | Mon, 9 Aug 2010 2:55 pm
Thanks for your comment Christophe. But I just wanted to add if something hasn't been planned marketers shouldn't just say "well, that's life, too bad", they need to know how to respond to something immediately, and need to know that their agencies will help them do this.
And in regards to your last comment about consumers supporting you 24 hours after any event, you have hit the nail on the head without even realising it - you have said this will happen if you "do the right thing". And, unfortunately, in this day and age, the right thing is being on top of your digital channels and responding proactively to any crisis as soon as it breaks. Consumers aren't waiting for your statement on BBC Breakfast, they will want to know immediately what you are doing to fix something. Does the brand BP ring any bells??
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Rick Clark | Tue, 10 Aug 2010 12:21 pm
This survey adds yet more weight to the notion that modern marketing is about experiences rather than messages. Marketers 'get it' - but they don't believe enough agencies do. Too many still regard social media as a 'channel' or a bolt-on. They're not seeing the wood for the trees. Consistent activity which creates positive experiences *is* the brand - not just a campaign or an execution. The dilemma is in choosing between a network with the resource and expertise to deliver ongoing brand experiences (but believes TVCs will gain it more kudos) and a boutique that 'gets it' but can't deliver every part of it. Nonetheless, there are encouraging signs in these findings that, as an industry, advertising is getting there.
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Dave Brown - UK Chairman, The Brand Union | Thu, 12 Aug 2010 4:35 pm
An interesting debate within our industry at the moment, most especially the antagonism between boutique and networked agencies.
“Those [agencies] that provide a one-stop shop have the expertise to place the creative idea in the most relevant channels. Increasingly the agencies that make the difference are the ones... that are truly media neutral”, says Elizabeth Fagan, Boots executive marketing director.
Fagan’s view rings true and the agency model certainly needs review. But I think we’re missing the bigger picture.
Regardless of niche or network, it should be the Big Idea that remains firmly in sight.
To ensure the best outcome for Brand, a brand-centric media neutral perspective needs to be your first point of departure. Today’s consumer brand experience is composed of a myriad touch points and interaction opportunities, be they at a live sports event, on a bus, online shopping – wherever hearts and mind are engaged. But it needs to work in harmony with your brand’s truth. With too much fragmentation of skills sets, there is a conflict of interests and opportunity lost as each communication agency fights their corner.
The solution is integration, but under the directorship of a lead agency able to connect and engage the most relevant channels that communicate and nurture brand reputation.
And so, the Agency Model for 3.0 needs to be a client partnership of a brand-centric media-neutral agency at the helm, staying focused on the Big Idea and the best and most appropriate way of engaging your consumers.
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Trevor Hardy, Founding Member, The Assemby | Fri, 13 Aug 2010 12:19 pm
The agency world is a complex beast. It has spent the past decade struggling to escape the silos of digital, PR, direct, creative and has left many clients confused as to the real benefits of specialist or integrated offerings; boutique agencies or global networks.
The new era does indeed demand a completely fresh approach and a move away from using 20th century agency models and structures to solve 21st century business challenges. The advent of a generation of creative collective, collaborative agency models, such as ourselves at The Assembly (www.theassemblyagency.com) have found that clients are ready for a different approach.
For decades, the discussion about the future of agencies has been about what they create – the output: broadcast, print, web, mobile, social media and so on. The next stage in the evolution of the agency will be a focus on who – the input, the people. A focus facilitated by an increasingly borderless and open-source world.
As the role of the creative agency is becoming more fluid, the pool of top creative and strategic talent can be found working in agencies of all shapes and sizes, or independently, across disciplines and geographies. To leverage this distribution of creative talent, the future might very well be a networked agency not an agency network.
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Alice Whitney | Tue, 24 Aug 2010 5:45 pm
This is a great piece Mary Lou, thank you. More to the point, the big idea is about being . . . ahem, ballsy, inspired, creative, intuitive.
Of course there is space for research led and solidly planned initiatives, there has to be. BUT - without the ability to respond intuitively and creatively across the 20 plus touchpoints that consumers interact with brands . . . well, you just might as well shut up shop.
Our diverse client base really appreciates our ability to deliver creative ideas and approaches across the marketing mix. We never believed in silos - least of all the distinction between 'client' and 'agency' - the most fundamentally flawed dichotomy ever. A client has a vested interest in making their messages work - as do we.
Our agency, Creative Nation Consultancy Ltd (www.creative-nation.co.uk) has been a collaboration of talents since 2008. At the time people scoffed. It'll never work was the refrain. Why? Apparently our diversity and the fact that our talents are drawn from agency AND client side, from film production as much as digital and social/community media stood against us. And now? I believe it's called the 3.0 Agency.
Welcome to our world!
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