Opinion: The biggest threat to the agency model

Marc van den Berg
By Marc van den Berg | 7 July 2014

The marketing and advertising industry has for many years been going through incredulous change. New channels, technologies, techniques, business models and approaches continue to change and impact the industry. This is also compounded by the CMO revolving door and the ongoing drive for procurement to reduce bottom line costs.

Agencies on the other hand are pitching more than ever before, spending thousands of hours to convince clients that they have the best thinking and newest toys.

As if things were not challenging enough, you now have other industries, such as the consulting world, who are actively trying to muscle in on the agency pie because CMO’s are getting bigger and bigger budgets versus CIO/CTOs. Marketing technology platforms such as Adobe’s Experience manager covering products such as CQ5, Site Catalyst, Test and Target etc. are also blurring the lines between marketing and technology from an ownership and budget point of view. Luckily for agencies, consulting firms still struggle with the creative and marketing strategy side.

There are also many tensions that the agency world continues to struggle with, such as who owns creativity, is it purely the domain of an art director and copywriter, or is creativity inherent in everyone? My view is that everyone can think creatively, albeit some are more creative than others.

What about agency business models – retainer versus project versus profit based results (PBR). How do you structure teams to be flexible to changing client requirements and needs, while trying to run a successful business – the answer is that it is almost impossible. Where clients have retainers with agencies, they generally retain a fixed resource profile, but what that means is that it becomes hard to swap additional resources and skills in and out of the mix. As a brief comes into an agency, it is no longer the case that the output (or need) will be a TV and print ad fuelled by a creative idea, and in many cases the requirement might not even need a creative treatment.

Then there is process, something that most agencies generally struggle with whether that be agile, waterfall, iterative,  hybrid approaches. This also has a big impact on agency structures, approaches and skills. The truth is that processes tend to work well when you have consistent inputs, outputs and rules, not when you have changing requirements, channels, time-frames and/or deliverables.

As client needs diversify, covering anything from PR to CRM to social to mobile to web to TV, and the associated output even more diverse covering an infinite selection of platforms, technologies, approaches and formats, then it’s not hard to see why agencies are in a tough situation. Strategically some are convinced that specialising is the correct approach i.e. a digitally focused business specialising in specific capabilities, others take the view that having everything under one roof is the answer.  Others take a partnership approach, but the reality is that agencies then give away revenue, which impacts their bottom line. By having a mixed approach it also becomes a financial nightmare to manage and track.

The future agency model in my opinion will be less about subjectivity, but more about relevant, targeted and contextual advertising and marketing, fuelled by data and insight. This includes always on content, continually tuned to maximise brand relevance and bottom line sales.

At the heart of this will be the ability to test and learn quickly, so that you can change what doesn’t work - dial up what does, without going through a complex agency process. It’s for these reasons that clients are continuing to invest significant amounts of money on marketing technology platforms and rapid content capabilities, which in time will have the biggest impact on the agency model.  

Marc van den Berg
Operations Consultant 

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