ADOI Blog

THE PAINFUL TRUTH FOR AD AGENCIES

Ham on 07 26, 2008

As competition builds up in a tough economy, agencies find themselves becoming increasingly irrelevant!

When I returned to writing my regular column in this paper two weeks ago, the piece was too painful for some to bear.

The truth hurts when I write about how we have painted ourselves into a corner and shortchanged the industry by undervaluing our expertise and contributions to the advertising process. In fact, a close friend even phoned me to ask why I’m ruffling feathers and to leave well enough alone. And why must I write stuff that everybody already knows is the hidden truth. Fortunately,

I also received nine letters expressing their support to my argument and I thank them for it. So this week, I’ll talk about the other side of the coin: about ad agencies who are now better known as brand or creative agencies.

How brand agencies make money has also evolved into a science.

If in the early days it was based on commission, now the system is about fees, time costs, supervision fees and profit-sharing, based on results. But their problems are more than how to make money; it’s about how they can remain relevant.

In a recent report called The Connected Agency by Mary Beth Kemp and Peter Kim for Forrester Research, Inc, they summed it up most eloquently ?

Today’s agencies fail to help marketers engage with consumers, who, as a result, are becoming less brand-loyal and more trusting of each other. To turn the tide, marketers will move to the Connected Agency — one that shifts: from making messages to nurturing consumer connections; from delivering push to creating pull interactions; and from orchestrating campaigns to facilitating conversations.

Over the next five years, traditional agencies will make this shift; they will start by connecting with consumer communities and will eventually become an integral part of them.

There are many reasons why this argument holds true.

Consumers dislike advertising because of its irrelevance, interruption, and clutter. And still, marketers are deploying the same formula they’ve been using for years: Buy exposure to reach as many eyeballs as possible; place the message in a spot where it can’t be missed; and repeat the same message as often as possible. Citing four highlights from the report, here are some holes in this age-old approach:

1. Consumers prefer pull to push. Almost all consumers own a PC and mobile phone, and they spend almost half of their media time with interactive channels.

In Malaysia

alone, more than half the population spends a few hours a day online.

2. Fragmentation drives complexity. The number of media channels available to marketers, agencies and consumers has exploded. Proliferation of choice offers marketers new opportunities, such as social networks, mobile, and branded entertainment.

Each of these has its own success metrics and dynamics, making comparison and the calculation of ROI impossible.

3. Engagement remains theoretical, while reach and frequency reign. The marketing funnel is an outdated metaphor that helps preserve a siloed approach to media planning. Media firms try to combat the issue by recommending integrated marketing strategies, which rarely go beyond creative repurposed for multiple channels.

4. A new definition of “mass media” is emerging. The new mass media is made up of a collection of communities. While many consumers are involved, each individual community is small, fragmenting the market further. As more consumers become involved in Social Computing, these platforms will grow and eclipse today’s mainstream media.

In a Q4 2006 Forrester survey in the US, marketers said agencies are currently creating many more detractors than promoters. Senior marketers turning to agencies for help

have found that most of them don’t have the proper skills or structures to assist. One advertising director at a high-tech firm even said, “They’re a necessary evil.” The problem? Agencies are organised around skills.

The problems do not end there. Creative and media agencies are stuck in the mass media world. Digital agencies understand interaction but know too little about branding. And brand consultancies give a false sense of assurance to confused marketers because they cannot deliver that extra “oomph” which is still the domain of creative agencies.

How Malaysian creative agencies are going to grapple with this truth about the future of advertising is where the challenge lies. And if they “get it” before the so-called impending recession, then they should weather all storms. Come rain or shine.

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