Remodelling the agency relationship for the 3.0 age

The ’always on’, 24/7 digital world demands a fresh approach from brands but the traditional client-agency relationship does not facilitate this, says a new report. MaryLou Costa looks at the new agency models that are emerging to better service the marketer’s needs

  • Read more debate on whether boutique or network agencies are best equipped to meet marketers’needs click here
  • Check out what marketers are saying about the agency of the future click here

Marketers used to appoint creative agencies to produce glossy 30-second television ads along with the complementary print campaign. But the digital age has brought with it an expanded number of marketing channels, making clients’ needs much more challenging.

The best results might now come from a crowd-sourcing initiative or a video that turns viral rather than a slick television campaign. Traditional agencies need to change as a result, according to a study by GyroHSR, which has carried out in-depth interviews with 50 top marketers. It also issued a survey to 250 marketers on agency effectiveness.

The results throw up a number of trends, such as the emergence of new remuneration models for agencies (see below), and the growing importance of planners in delivering content across the relevant points in a new media landscape (see below).

That changing media landscape means that agencies need to rethink their offering, argues GyroHSR chief operations officer Richard Perry. Marketers need agencies to be “always on” to reflect that consumers are constantly connected to the media world through multiple channels.

“Agencies have to understand that brands are ‘always on’,” Perry explains. “If something happens in the middle of the night and there’s no reaction to it until morning, that is a lifetime to a consumer now.”

The general feeling is that marketers not only need their agencies to work to a continuous engagement strategy, but that they are gravitating more towards full-service network agencies to deliver this, adds Perry. “In this sense, a network agency can offer a strong position, compared with a boutique agency which might not have the infrastructure to support this.”

The David and Goliath battle between boutique and network agencies has heightened over the past two years. A new breed of boutique agencies is emerging in an attempt to win clients, headed up by former agency executives who believe there needs to be a new agency approach that reflects the digital age.

However, marketers have split opinions when it comes to deciding what type of agency is best equipped to deal with new media. A growing expertise in digital has brought the networks back into favour to a degree, according to Google UK’s country sales director, Mark Howe. He argues that the big networks had originally been slow to adopt digital but are now starting to secure digital-only campaign briefs.

But former Burger King vice-president of marketing for EMEA David Kisilevsky counters that many network agencies still see digital as a “bolt-on” rather than an embedded part of their core offering.

The digital age has also encouraged marketers to gravitate towards full-service agencies. Those that provide a one-stop shop have the expertise to place the creative idea in the most relevant channels, argues Boots executive marketing director Elizabeth Fagan. “We are moving to a world of full-service again because increasingly the agencies that make the difference are the ones with quality planners that are truly media neutral.

“Clients, and therefore their agencies are thinking about the customers and the brand first and then thinking about who can execute the big idea through any channel.”

But boutique agencies still have a role to play,  suggests GyroHSR’s Perry. The marketer questionnaire on agency effectiveness reveals that despite networks offering efficiency and scale, 56% say boutique agencies are responding best to client and market changes. “There are opportunities for boutiques to be specialist in their thinking, customer focus, innovation, creativity and technological awareness,” he explains, but “boutiques have to own a space of pure creativity.” (See boutiques versus networks, below)

Virgin Atlantic: How do you monetise a campaign like its Eighties nostalgia ad? Virgin suggests different payment models for different campaigns

There are also calls for a shake-up of client-agency remuneration models, according to the research. Of the marketers GyroHSR surveyed, 90% say agencies should be more accountable for the commercial success of their work, through remuneration models such as “payment by results”.

More than half (55%) disagree that agency fees should be based purely on time and output, meaning that retainer models could be phased out in favour of performance models.

Results-based payments will become more popular as clients set agencies specific targets based around their business objectives, according to GyroHSR’s Perry. This could be measured by the number of visitors to a website, product sales, or an increase in brand awareness. “If I’m going to spend £100,000 of a client’s money, then I should share the pain if it doesn’t work and gain the rewards if it does work,” he reasons.

However, payment by results could prove difficult to measure, says Virgin Atlantic head of global advertising and communication Breda Bubear. “We want an agency to put its money where its mouth is but payment by results is not always fair. Our 25th birthday TV campaign was not about getting a certain number of bums on seats, for example. It was about nostalgia to reach the decision makers of today who grew up in the Eighties.”

New payment models are tricky to get right, she adds, but others argue that using different payment models for different briefs and even using different payment models with different agencies working on the same project, is a viable way of working, as long as a client discloses these openly to its agencies and explains why it is taking a particular approach.

Scott Knox, managing director of the Marketing Communication Consultants Association, says: “There is nothing wrong with building a hierarchy of different payment models for different agencies but don’t expect all of them to deliver for everything if you aren’t paying them for it. Retainer and payment-by-result models should be reserved for the top-level agencies that work really closely with the brand and get all of the insight and deliver to that.

“Revenue sharing is being talked about and being trialled by some, but it can be risky because a lot of brands belong to corporations that are bigger than the agencies working with them. Some of the smaller agencies that some clients favour to deliver the more cutting-edge ideas are not going to be able to take on that risk.”

Agencies have to understand that brands are ’always on’. If something happens in the night and there’s no reaction until morning, that is a lifetime to a consumer now

Richard Perry, GyroHSR

Marketers also want to see a greater willingness from their agencies to work together rather than focusing on protecting their own disciplines and revenue streams, according to the research. This means agencies must be prepared to hand ideas across to their partners if the client’s need dictates. “The parameters have to be laid out [clearly to agencies] and the client has to enable and support this,” notes Perry.

He points to his client Virgin Atlantic: “It’s understood that whichever agency comes up with the ad idea, it goes to RKCR/Y&R, and whichever agency comes up with a CRM or brand activation idea, it goes to us, and so on – regardless of which agency came up with the idea originally.”

But however the idea is born, the creative content must take into account new and varying patterns of media consumption across demographics, according to GyroHSR insights. Clients are increasingly deciding to forego spending small fortunes on a glossy 30-second TV spot, but are instead demanding multiple pieces of creative, engaging content that might cost less but could reach more consumers through a mix of channels and viral spreading.

New breeding ground
This new way of delivering content means planners have become more crucial to an agency than ever, delivering the channel and market insight that can provide a new breeding ground for the “big idea”.

Agencies must, however, resist offering every service to match a client’s brief when only specific solutions are relevant and will generate a better return, says Kevin Brennan, former marketer director for Kellogg UK who has since moved to Premier Foods.

He observes that the traditional agencies still have a tendency to offer old solutions to new problems: “There does seem to be a bias within ad agencies towards either a need to make great TV films or to offer you a creative digital response to a brief even if you have not asked for it.

“Agencies need to have a view on what is needed creatively to make a brand win,” he adds.

Clients also want to see more transparent behaviour from agencies, says Kisilevsky. He complains that agencies are sometimes guilty of using their top people to front a pitch, but then hand the work to junior members of staff when the pitch is awarded.

Kisilevsky states: “When we put out any pitch business for Europe we stipulate that the key people will be expected to work on our account. Agencies can decide to withdraw from the pitch.”

However, younger agency executives shouldn’t be discounted but valued for their technology know-how and should be called on to share this savviness with their seniors, argues Sarah Alspach, marketing director at Barclaycard Freedom. “Younger agency execs have ideas that transcend channels because they have grown up in an all-encompassing media world.”

Remuneration models, agency structure and how they integrate with other agencies is in a state of flux and agencies need to think how they can better serve clients in the digital age. Some might argue that a new system of working is already in place, but the consensus from clients is that there is a long way to go before a winning agency model for the future emerges.

In search of the new world order

The advertising agency of the future does not have a blueprint. The tectonic shifts in the media consumption habits of a fragmented audience has forced ad agencies and clients to examine different ways to reach consumers: from brands disguising themselves as “entertainers” on YouTube to generate interest and fame to adland experimenting with new agency models.

By 2000 there was barely an ad agency left that was full service or had its own media department. But that same year, Naked launched – with no media or creative department – promising to provide solutions to clients’ needs. In due course, the likes of Bartle Bogle Hegarty and TBWA/London and more recently CHI & Partners also started bundling creative and media functions closer together.

At the same time, the rise of digital agencies meant that the original amoebic single-celled agency did not exist any longer. DM agencies are now integrated shops; network ad agencies are almost full-service; and the buzzword among media planning and buying agencies these days is “creativity”. But who is best placed to rewrite the rules of advertising in this fast-changing world?

The client-survey conducted by GyroHSR shows that more than 50% believe smaller boutique agencies are adapting best to market changes. An outlook shared by the new YouGov Agency Reputation Survey 2010, due to be launched on Pitch in September (soon to be followed by a Digital Agency Reputation Survey).

Sonoo Singh, Editor, Pitch

The findings

Some 80% of those surveyed feel that digital agencies are too fragmented and specialised and want digital agencies to grow their service offering to provide a fully integrated offering (such as design and build, development, email, eCRM search, data, display and social media). Brand owners value their digital agency relationship the most (28%) followed by advertising (20%) and branding (20%).

Some 90% of those surveyed feel that agencies should be accountable for the commercial successs of their work, such as introducing payment by results. And 68% think agencies should be paid on the value of their ideas. Some 55% of those surveyed disagree with agency fees being based purely on time and output.

Some 30% of those surveyed feel the global agency networks are responding best to client/market change, while 56% reveal the boutique/specialist agencies are responding best to client/market change. Brands value the creative leadership of an agency the most, with 77% citing it as the single most important team, followed closely by planning and strategy, with 74%.

What marketers are saying

Kellogg former UK marketing director Kevin Brennan (now at Premier Foods):
“Brand strategy is where agencies can differentiate themselves and add value. Clients are crying out for more strategic thinking from their agencies. I want agencies to come through our door and not be afraid to challenge us.”

Boots UK executive marketing director Elizabeth Fagan: “You get a feeling early on whether the talent within an agency is right for your brand. For their part, clients must be clear about their own brand strategy and what is important to their customers. When they are clear about this they need agencies that ‘get’ their brand strategy.”

Bacardi global brand director Christian Woolfenden:
“In an ideal world we want a group of agencies, led by one, that can genuinely work together to get the best results. We need to see that a network can provide the right consumer insight so strong creative ideas can work internationally. Our agencies must have a ‘global local’ approach.”

More Than marketing director Pete Markey:
“Our agencies must keep up with us and find ways to engage with our audience daily. For this to work they must be our partners and feel part of our business. Regular engagement is critical to ensure success in such a fast moving sector as ours.”

Barclaycard Freedom marketing director Sarah Alspach:
“We need creative ideas from our agencies that can be executed cheaply and there will be more opportunities for bespoke work if an idea can connect with consumers quickly. Agencies are not delivering integrated thinking where it is the idea that drives the work, not the channel. Agency people talk that language but few deliver it. Big agencies make most of their money from TV and that drives them. Some of the most interesting thinking at the moment is coming from independent agencies.”

Best Buy Mobile US chief marketing and merchandising officer Jude Buckley:
“We look to work with marketing agencies and disciplines that can connect on the ground at a very local level, town by town, store by store.”


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