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.
Whitler: What struggles are agencies grappling with as they adapt to the new model?
Orlov: One of the biggest struggles agencies face today is making sure to have the right conversations with the right people. To have the right conversations, it starts by ensuring that agencies can speak openly and candidly, even when the idea may not be what the CMO or CEO wants to hear. However, this can’t happen if agencies are afraid to speak the truth and in some cases, there is a currency of fear.
When agencies are afraid of losing a client, the quality of work is at risk because agency representatives will be afraid to challenge, push back, or even speak honestly. What ends up happening is that clients talk at agencies. What used to be a partnership and discussion has in some cases turned into a company-vendor relationship.
In addition, there are other factors impacting the advertising agency world. Conversations today are far more data driven, which is fantastic. CMOs are more focused on mattering rather than marketing. This presents an opportunity for advertising agencies to do more meaningful work, embedded in purpose rather than selling.
Additionally, there is a big shift on the horizon. If agencies aren’t careful, consulting firms will continue to encroach on our domain. Companies like Deloitte Digital and Accenture Digital are starting to expand beyond strategy to think about the delivery model. Increasingly, there are strategy players migrating into delivery. Additionally, big companies may begin to create their own internal agencies that create in-house IP.
Whitler: You talked about having the right conversations with the right people. What do clients need to do differently to make this happen?
Orlov: At the beginning of the relationship, you have to set the ground rules. If a client wants advice from an advertising agency versus simply the delivery of output, there must be an agreement up front about the give and take of discussion and that the agency will have the freedom, actually the responsibility, to speak up and share thoughts.
Today, many C-level leaders are younger than they have been in the past. This is terrific because they bring a data-driven mindset. However, while most people talk about intellectual capital, it’s actually an abundant resource. EQ, on the other hand, is a skill that tends to be earned over time, across a number of life experiences. Experience only comes with time, scars, and learning.
For great work to occur, sometimes you have to throw your knowledge away and shut up and listen to the other side. Sometimes, people believe that because they have data, they have the whole of the data. Insight often lives between and across data and great work requires more than data. Clients should treat their agency partners like employees (rather than vendors) and be more gracious.
The best work I’ve ever seen and done is when there is a pause—and opportunity to slow down, breathe, and think.
Whitler: What do agencies need to do differently?
Orlov: Agencies are actually pretty appalling at selling their work; the reason, I believe, is related to the point I mentioned earlier—the fear that they have. While clients need to help alleviate that fear, agencies need to do more careful research and should argue not from emotion, but from fact. When the two parties are having difference discussions, one from fact and one from emotion, it’s easy to miss each other’s points. Agencies need to learn to speak and understand the language of clients to be able to have the right sort of conversations.
Additionally, while clients need to listen, agencies also need to listen and to ask the right questions. I’ve found that typically, when you lose a pitch, it’s often because you don’t ask the right questions. Agency folks often don’t understand the importance of the client’s KPIs (of creating objectives and meeting them) and need to ask about, understand, and center work on delivering against the KPIs. Finally, agencies need to live up to what they sell. Tell the client what you will do for them and do it well. You don’t need to shower clients with a ton of ideas. Often, less is more. Share the best ideas and explain why.
Whitler: Any last tips you can provide clients to generate better engagement and work from agencies?
Orlov:
• Be clear about requirements,
• Be open to opinion, advice, and thoughts,
• Understand that there is a big difference between when you want something done (usually ASAP) and when you can get something that is high quality
• Collaborate on the planning process (don’t hide the timing – it doesn’t help anybody). Have conversation around activities.
Source: http://www.forbes.com/
ABOUT WNFP
Westchester Networking for Professionals (WNFP) is an organization consisting of professionals and entrepreneurs which focuses on the success of our Members. We help our Members establish lasting relationships and generate new business opportunities towards the growth of their business.
Stay Connected with WNFP!
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.
Whitler: What struggles are agencies grappling with as they adapt to the new model?
Orlov: One of the biggest struggles agencies face today is making sure to have the right conversations with the right people. To have the right conversations, it starts by ensuring that agencies can speak openly and candidly, even when the idea may not be what the CMO or CEO wants to hear. However, this can’t happen if agencies are afraid to speak the truth and in some cases, there is a currency of fear.
When agencies are afraid of losing a client, the quality of work is at risk because agency representatives will be afraid to challenge, push back, or even speak honestly. What ends up happening is that clients talk at agencies. What used to be a partnership and discussion has in some cases turned into a company-vendor relationship.
In addition, there are other factors impacting the advertising agency world. Conversations today are far more data driven, which is fantastic. CMOs are more focused on mattering rather than marketing. This presents an opportunity for advertising agencies to do more meaningful work, embedded in purpose rather than selling.
Additionally, there is a big shift on the horizon. If agencies aren’t careful, consulting firms will continue to encroach on our domain. Companies like Deloitte Digital and Accenture Digital are starting to expand beyond strategy to think about the delivery model. Increasingly, there are strategy players migrating into delivery. Additionally, big companies may begin to create their own internal agencies that create in-house IP.
Whitler: You talked about having the right conversations with the right people. What do clients need to do differently to make this happen?
Orlov: At the beginning of the relationship, you have to set the ground rules. If a client wants advice from an advertising agency versus simply the delivery of output, there must be an agreement up front about the give and take of discussion and that the agency will have the freedom, actually the responsibility, to speak up and share thoughts.
Today, many C-level leaders are younger than they have been in the past. This is terrific because they bring a data-driven mindset. However, while most people talk about intellectual capital, it’s actually an abundant resource. EQ, on the other hand, is a skill that tends to be earned over time, across a number of life experiences. Experience only comes with time, scars, and learning.
For great work to occur, sometimes you have to throw your knowledge away and shut up and listen to the other side. Sometimes, people believe that because they have data, they have the whole of the data. Insight often lives between and across data and great work requires more than data. Clients should treat their agency partners like employees (rather than vendors) and be more gracious.
The best work I’ve ever seen and done is when there is a pause—and opportunity to slow down, breathe, and think.
Whitler: What do agencies need to do differently?
Orlov: Agencies are actually pretty appalling at selling their work; the reason, I believe, is related to the point I mentioned earlier—the fear that they have. While clients need to help alleviate that fear, agencies need to do more careful research and should argue not from emotion, but from fact. When the two parties are having difference discussions, one from fact and one from emotion, it’s easy to miss each other’s points. Agencies need to learn to speak and understand the language of clients to be able to have the right sort of conversations.
Additionally, while clients need to listen, agencies also need to listen and to ask the right questions. I’ve found that typically, when you lose a pitch, it’s often because you don’t ask the right questions. Agency folks often don’t understand the importance of the client’s KPIs (of creating objectives and meeting them) and need to ask about, understand, and center work on delivering against the KPIs. Finally, agencies need to live up to what they sell. Tell the client what you will do for them and do it well. You don’t need to shower clients with a ton of ideas. Often, less is more. Share the best ideas and explain why.
Whitler: Any last tips you can provide clients to generate better engagement and work from agencies?
Orlov:
• Be clear about requirements,
• Be open to opinion, advice, and thoughts,
• Understand that there is a big difference between when you want something done (usually ASAP) and when you can get something that is high quality
• Collaborate on the planning process (don’t hide the timing – it doesn’t help anybody). Have conversation around activities.
Source: http://www.forbes.com/
ABOUT WNFP
Westchester Networking for Professionals (WNFP) is an organization consisting of professionals and entrepreneurs which focuses on the success of our Members. We help our Members establish lasting relationships and generate new business opportunities towards the growth of their business.
Stay Connected with WNFP!
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