In a recent interview with Advertiser Perceptions, an organization that provides data-driven intelligence to marketers, I was asked, "Will the full-service agency model survive?" As part of their survey, I was shown the results of how advertisers had thus far answered the question. It was pretty close between those that said yes (42%) and those that said no (32%). Twenty-six percent were not sure. My response, in this article, follows.
The full-service agency will survive if it is willing to make significant changes to the current model. The full-service agency concept, as we know it, has been in jeopardy for many years and, more recently, it's being besieged by many other entities working directly with advertisers.
Most full-service agencies have already been dismantled in one way or another. (I'm not speaking about the holding companies here.) For example, media departments have pulled away by forming freestanding entities years ago and today have a significant presence in the marketplace. We have also seen the emergence of many creative boutiques coming on stream for more than a decade. That also started to change the full-service agency concept as it existed. Now, agencies have also shown a willingness to handle just certain elements of a client's marketing requirements. Naturally they would like to win back other duties as time goes on. But that's only a small part of the story now.
The advent of the technological revolution, digital marketing with automated data analysis and programmatic buying has transformed the business and required a different structure. But more significantly, we now see consultants such as Accenture, McKinsey, Deloitte and others entering the main stage, focused on project assignments and specific areas of agency responsibility. While they initially concentrate on marketing strategy and financial guidance they are beginning to add more services. We also see AdTech companies making overtures directly to advertisers to perform data analysis, programmatic targeting and cross platform uniformity, cutting out the agency. And a few advertisers have even brought several agency functions in house (media buying through their own trading desks, handling programmatic buying and also building their own resources). In some cases, even creative people have joined a few client companies.
It seems to be getting worse for full service agencies as fees are being cut and profit margins are squeezed to the limit. Another competitive force has been media companies, with editorial and interactive content, experiential marketing, sponsorships and unique advertising units, bringing many of these assets to advertisers directly, bypassing the agency.
Advertisers who are looking for "best of breed" will pick and choose the specialist services they're looking for -- and they don't want to pay for anything else. They certainly don't want to pay for overhead against staff they are not employing.
The latest development I've seen, affecting the full-service agency, is that clients are doling out more project assignments. One offs if you will. While some of these assignments go to agencies, others don't. That also changes the traditional relationship between the agency and the client, which has been built in the past on longevity with agencies serving all clients' marketing needs with trust and confidence.
So how can the full service agency survive? Here are a few of my suggestions:
1. They must be willing to make important changes in structure, compensation and how they view their organization.
2. They must recognize that brand strategy is the starting point for effective marketing activities and improve the data analytics process to delve more deeply into business intelligence.
3. They must advance media expertise to build strategy and implementation from consumer insights that go beyond media efficiency to actionable media connections.
4. They have to be more flexible and restructure their operations to be as fluid as the marketplace, with the ability to more accurately evaluate SOW and be quickly prepared to adjust manpower and cost as client's marketing results indicate.
5. They've got to efficiently integrate teams and their work to maximize outcomes.
6. They've got to measure and monitor results with complete transparency.
7. They've got to price their services in greater alignment with specific client goals and objectives. Yes, all of the deliverables must also be clearly stated in the contract.
Can a full-service agency more effectively and cohesively bring together the kind of disciplines that usually exist within a holding company, to integrate a client's marketing activities under a pinnacle leadership? That's a big question and only time will tell. But we do know it's not one size fits all.
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