With budgets shrinking, the dollar plummeting and clients running scared, the advertising industry is on the cusp of entering one of the toughest business environments Australia has faced. It makes you wonder how the agency world will adjust.
Adjust?! That is unlikely. Have agencies ever adjusted?
Agencies missed the opportunity in the Mad Men days to cement their know-how at the top through close relationships with CEOs to become strategic leaders. Instead ad bosses watched as accounting firms did – reinventing themselves into specialist consulting firms and then watching the dollars flow in.
When direct marketing took off, agencies had another opportunity to grow and improve the industry by integrating executional elements across broader channels and instilling DM discipline into marketing and advertising.
Did it happen? Again, no. Agencies purchased DM specialists, but didn’t integrate the offering or embrace definitive metrics. The old adage: “we know 50% works, we just don’t know which 50%” was preferred and just goes to show how the industry missed it with metrics, pushing their expertise further down the chain.
And now we get to digital today. Surely no one can argue it has been well integrated into traditional offerings? It hasn’t. The way the industry is handling digital goes to show it hasn’t learned from the past and is now just whoring about looking for whoever will pay the most for it.
So, knowing we’re facing five years of tough economic times, what can agencies do to get it right this time?
At the heart of the problem are the creative departments and the disproportionately high salaries paid to those working in them. This means little can be invested into other parts of the business and that every solution the agency provides to a client has to have enough production weight behind it in order to support those fat salaries.
The creative output from an agency is critical, but it’s not the only must-have. Isn’t it time agencies look at ways to expand their core business, learning from the failings and missed opportunities of DM and digital?
First up, pay high salaries elsewhere – particularly in account service – to attract smarter people back to the industry.
Whenever I say this to an agency or pitch consultant, they always respond in the same way: “Clients won’t pay for it. They just won’t pay for it!” I certainly agree that many clients don’t see great added value from account service (in general), but how do you account for the money they spend on consultants to help them in the marketing and comms space? Clients have always looked for and wanted thinking that helps grow and improve their business – this will become even more important in the next few years.
The problem is agencies don’t see this. At one of this country’s biggest agencies a senior account service person has just left – all very mutual and friendly, but he walked straight into a consulting role at one of the agencies’ clients. This happens all the time.
So why can’t these services be provided by an agency? Why won’t agencies pay more to get top thinkers and doers back to the industry? If it’s not about the client’s willingness to pay, then why?
As is the case in all hard times, there are opportunities for good businesses to grow by taking a leap forward, expanding their offering and long-term viability. This industry needs to jump in a new direction to survive. Who will be first?
Peter Davis
Director
Maximised