‘Marketers must help agencies, not dilute them’ says industry author
The author of a controversial book, predicting the death of the agency of record business model, has warned it is up to marketers to help them solve their financial challenges.
“You can continue the assault on agency fees and they will probably take it,” Madison Avenue Manslaughter author Michael Farmer. “They are scared to lose you.”
“But the combination of growing workloads, declining fees and the downsizing of offices has had the effect of reducing capabilities at a time when (marketer) problems have never been greater or more complex.
“Marketers now face a choice, cause agencies can’t fix themselves. The job is too big. So what do you do about that?”
Farmer noted that resulting degradation of many advertising agency capabilities had led to some marketers deciding to take things in-house or looking to consultancies or smaller agencies. However, Farmer told an audience at the ANA Financial Management Conference in Florida earlier this month that this was far from ideal.
“You can take it in-house, and many of you have done that,” he said. “You can shift the work to consulting firms who might have higher quality work and better results. You can work with an even greater number of smaller, focused agencies who aren’t going into that trap, or you work to strengthen the agencies who are already relatively sick organisations cause you need them.”
One of the key issues Farmer said is the remuneration of staff – particularly at the junior level, leading to high turnover and poor service for marketers.
“Because agencies have been owned by holding companies they have downsized to generate profits.
“Agencies paid their people relative to Google, Fairfax, Bain, McKinsey, etc, poorly. And they all compete for talent today,” he added. “We are not looking at lavish salaries here.
“We need a return to relationship building. But let’s actually do it. We need the principles that turned around the aerospace and other industries.”
Michael Farmer also discussed the challenges facing agencies while at the ANA Financial Management Conference 2016.
Timeline on podcast:
- 0.30 The financial challenges facing agencies – why they aren’t making money anymore
- 2.30 The things agencies don’t understand about their business model
- 4.00 Solutions to the degradation of capability
- 5.30 The role of the holding groups and procurement in creating this crisis
- 6.45 The sustainability of current models – is a train-wreck looming?
- 7.30 Ways agencies can put a floor on pricing with procurement
The most important and powerful innovation in the advertising industry was the radical new ad agency planning role, Advertisers loved it, they had been waiting decades for it to finally arrive. What then happened? Too many ad agency chiefs failed to really understand the new role and how it worked. Too many agency chiefs pretended to have planning on board OR hired impostors for the vital [strategic] role. Over the decades until the present the planning role became the most complex role in the agency, mainly due to quality multi-skilling qualifications. It also became the most hideously misunderstood role in the agency. One of the reasons quality planning was so successful was that advertisers experienced less of agency people ‘taliking the talk’ but failing to ‘walk the walk’. Unfortunately, some so-called planners also learned to ‘talked the talk’ because they did not have the full range of necessary skills and experience. Quality planning is the most pivotal role in the agency. If the agency doesn’t have the genuine role it will create real problems and loss of confidence by advertisers.
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