The shift to analytics-driven
marketing and technology-enabled business growth has changed the nature of
advertising agencies. The era of “Mad Men,” where advertisers primarily focused
on TV, radio, and print advertising is gone. In its place are specialists who
focus on social media, digital media, and traditional media. And, there are
behemoths who attempt to pull all disciplines into a single house.
On top of it, the traditional
agency model was built on a revenue generation approach that included media
placement; while there were different models, the most common one was based on
a percentage of the media placed (e.g., 15% of the value of media placed). That
model is being disrupted as programmatic media buying takes hold and clients
push for changes in the agency compensation model.
With expectations of
agency performance increasing (i.e., linking agency performance to client
in-market performance), the agency compensation model being disrupted, and new,
leaner competitors cropping up, one could argue that the golden years of agencies
are over. To better understand this shift, I recently talked with Alexei
Orlov, Global CEO of Rapp. What makes Orlov’s perspective interesting is that,
having spent most of his career on the client side (was the CMO of Volkswagon,
China prior to Rapp), he provides unique insight on the future of agencies,
what agencies need to do to better meet client expectations, and how clients
can get more out of their agencies.
Kimberly Whitler: How are advertising agencies
changing?
Alexei Orlov: The actual model is changing.
As recently as roughly eight years ago, advertising ruled everything; it was
the golden era of cinema and TV. Clients would start with a budget and then ask
agencies to develop creative that would be spent against that budget. Now the
world has changed. The power has shifted from brands to people. Today, brands
need people more than people need brands. The challenge for brands is
delivering real benefits in real time such that you create a discreet
experience. And you have to do this every day, bit by bit, minute by minute,
that aggregates over time to a holistic view that the consumer has about the
brand. This has caused a fundamental shift as agencies now have to develop
deep, meaningful insight from data that can take a brand and catapult it to
another place. This takes precision. Companies that succeed will be able to
take a nuance of data that is real, meaningful, and unique and then shape the
insight in a way that makes people stop.
Additionally,
agencies need to understand that co-creation is happening. Gone are the days
when companies threw everything at an agency and the agency was expected to
come back with a final product. Clients want to be involved in creating the end
product. Often, they want the consumer, or other critical stakeholders to be
involved as well. Agencies have to open up the process and let clients in—the
black box era of creation is over.
Whitler: How does this impact the
structure and organization of agencies?
Orlov: There is a big change in
the architecture of great agencies. First, there are fewer creatives as the
head of advertising agencies and more creative communities. These communities
include graphic designers, copywriters, analysts, strategists, and big
thinkers. It is an integrative team brought together to combine left and right
brain thinking into superior strategy and creative. Second, there are less
account managers/executives and far more practitioners at agencies than in the
past. The reason for this is because clients understand how to monetize
technologies, leverage cross-channel personalization, and actually how to
connect with the clients better.
Source:
forbes.com
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