agency 2.5

Agency 2.5How Agencies Are

Transforming for the Future

Presented by Tim Williams

© ignition consulting groupwww.ignitiongroup.com

A selection of key concepts from

Agencies?

Agencies are at an Inflection Point

1. Fragmentation and addressability of media and audiences2. Democratization of creativity3. Inexpensive and instantaneous production4. Online interconnectedness5. Digitization of everything6. Brand advocacy in place of brand management7. Pricing pressures due to oversupply of providers8. And …

“An inflection point is a time in the life of a business when its fundamentals are about to change. Inflection points can be caused by technological change, but are about more than technological change. They can be caused by competitors, but they are about more than just competition.They are full-scale changes in the way a company or industry does business.”

http://www.youtube.com/watch?v=ERGrSQoY5fs

“The Last Advertising Agency on Earth”

Media Production housesClient in-house resourcesCrowdsourcing

Agencies

Management consultanciesBrand consultanciesMarketing research firms

Competition both upstream and downstream

Media companies becoming agencies

Marketers that expect to do more business directly with media companies:

52%

Marketers that expect to do more business with agencies:27%

Becky SaegerChairman, Association of National Advertisers

(ANA)

“If I were an agency, I would be really worried about being disintermediated.

More and more, agencies are almost in the way sometimes.”

Ideation

Execution

Productionde-coupling

Another way agencies are losing leverage in the relationship

Crowdsourcing as competition

Future roles for agencies?

Media brand ownersContent collaboratorsContent curatorsProgram producersNetwork creatorsData providersData aggregatorsRights managersBrand guardians

Source: The Future Foundation

Interrupting

Engaging

Imperatives for transforming the agency

Exposure Engagement

Reach

Frequency

Cost per thousand

Attentiveness

Receptivity

Buzz potential

Efficiency Effectiveness

http://www.youtube.com/watch?v=SI-rsong4xs

“The Best Job in the World”

“Instead of reaching 80 million people, let’s reach a million in your target and spend 10 minutes with them.”

Michael Lazerow, CEO

Implications and opportunities for marketing organizations1. We need to change our language.

2. Engagement requires a new set of metrics.

3. Learn how to engage small audiences for a long time instead of engaging large audiences for a short time.

Mass media as channels

Everything as channels

Imperatives for transforming the agency

PAID

EARNED

OWNED

Three main classes of media

PAID

PAID

Media advertising

PAID

The store as media

PAID

The physical world as media

PAID

EARNED

EARNED

Traditional mass media

EARNED

Blogs as media

EARNED

Viral videos as media

http://www.youtube.com/watch?v=VQ3d3KigPQM

“T-Mobile Dance”

PAID

EARNED

OWNED

Microsoft.comOfficeLive.commsn.comXbox.com

OWNED

The brand’s online properties as media

The brand’s online properties as media

OWNED

The product itself as media

OWNED

PAID

EARNED

OWNED

Instead of this …

… this.

Implications and opportunities for marketing organizations1. Plan touch points and communications channels,

not media.

2. Start with owned, then earned, then paid channels.

3. Better yet, help your clients build the marketing into the product.

Brand perception

Brand experience

Imperatives for transforming the agency

Agencies are missing revenue opportunities by stopping at pre-purchase

Lee ClowTBWA/ChiatDay

“The best ad we ever did for Apple is the Apple Store.”

Parker Stoner, Swanson Russell Associates

Behavioral Economics: A new strategic imperative for agencies

Rory Sutherland, President

Institute of Advertising Practitioners (IPA),Vice Chairman, Ogilvy, London

“Hundreds of agencies have developed models for ‘how advertising works.’ What’s needed now is for agencies to base their business on ‘how people work.’

An advertising campaign to persuade mothers that chicken soup is a good for colds and flu …

Placing chicken soup next to the cold remedies.

-- or --

Behavioral Economics

Agencies should be in the business of

Choice Architecture

Behavioral Economics

Implications and opportunities for marketing organizations

1. Help optimize how customers experience the brand, not just how they perceive it.

2. Help your clients move further up the effectiveness hierarchy.

3. Become expert in brand interactions, not just brand messages.

Consumers as audience

Consumers as media

Imperatives for transforming the agency

Which is your mental map?

What advertisers spend on media

What consumers spend on media

“Today, the average 14-year-old can create a global television network with applications that are built into her laptop.”

Randall RothenbergCEO, Interactive Advertising Bureau

http://www.youtube.com/watch?v=5YGc4zOqozo

“United Breaks Guitars”

Consumers as media

Consumers as media

“Customer service is the new media

department.”

Pete Blackshaw

Implications and opportunities for marketing organizations1. Understand the not just the demographics but the

technographics of your audience.

2. Make it easy to share and distribute your content.

3. Proactively plan for consumers as “media.”

4. Realize that your brand will never have enough money to outspend consumers.

Persuasion

Utility

Imperatives for transforming the agency

Utility instead of persuasion

Utility instead of persuasion

Utility instead of persuasion

http://www.youtube.com/watch?v=qOr5_GaGnPc

Implications and opportunities for marketing organizations

1. Put more effort into helping consumers instead of selling them.

2. Look at “utility” as an opportunity to develop some of your own intellectual property.

One-to-many

One-to-one

Imperatives for transforming the agency

+The ideal agency of the

future?

Mass MessagingHigh volume mass communications with imprecise targeting with little or no segmentation or personalization

Mass CustomizationMessages deployed based on dynamic analysis of real-time behavior across channels

Broadcasting Narrowcasting

Spending a lot of money to produce a little content to reach a lot of people.

Spending a little money to product a lot of

content to reach a few people.

Narrowcasting

“Will It Blend?”

http://www.youtube.com/watch?v=oRr7N7A4Wc0

Implications and opportunities for marketing organizations

1. Soon all media will be both searchable and addressable.

2. The new agency skill set is mass customization in place of mass messaging.

3. Agencies can package and sell data analytics as a service.

4. Precise addressability will allow more niche brands to advertise, creating more opportunities for agencies.

Digital department

Digital competency

Imperatives for transforming the agency

“Digital spending will double in the next five years … … but advertising budgets won’t.”

Digital marketing is the new mainstream

marketing.

THEN NOW

From great in traditional to great in digital

Marketers who use the same agency for both mass and digital are more satisfied

Verbal Designer

Visual Designer

THE NEW CREATIVE HYDRA

Experience Designer

Experience Design (XD)User Experience (UX)Information Architecture (IA)

Implications and opportunities for marketing organizations1. Digital must be at the core of the agency business

model, not an add-on.

2. There will soon be no difference between “traditional” agencies and “digital” agencies.

3. Being digital means technologists must join creative and media teams.

4. An increase in digital work will produce more agency income, not less.

Controlled communications

Open conversations

Imperatives for transforming the agency

Offline Online

Non-Paid

PaidBroadcast advertising

Print advertisingOut of home advertising

PromotionsEvents

Direct mailTrade shows

Product placement

Media relationsCommunity relations

Employee relationsInvestor relations

Crisis communicationsMedia trainingSales training

Search engine marketingOnline display advertisingSponsored online content E-mail marketingInteractive kiosksMobile marketingVideo gamingWebsite development

Search engine optimizationOnline product reviewsOnline endorsementsBlogsMicrobloggingPodcastsOpt-in online contentWebinarsSocial media

ROLE OF THE CHIEF COMMUNITY OFFICER (CCO)

1. Instead of just creating brand advertising, a CCO builds a community around the brand using multiple channels.

2. Instead of just sending messages, the CCO monitors and responds to the community.

3. Instead of focusing on pre-sale activities and seeing areas like service and support as “someone else’s job,” a CCO follows what consumers are telling the brand and each other.Chuck Brymer, CEO DDB Worldwide

“The Nature of Marketing”

Social media as an agency service

Social media auditHelping to develop social media policies and proceduresAmbassador trainingSubmitting to online directoriesBlog creation, seeding and maintenanceBlog monitoring and participationTweeting and retweetingSocial network developmentOnline groups and forumsOnline publicityPosting and seeding videos and other branded contentTracking, analyzing and reporting results

“Advertising in the future will be much more like PR. We’ll be run more like a daily TV show or an interactive newspaper than an advertising factory.”

Richard PinderCOO, Publicis Worldwide

Implications and opportunities for marketing organizations1. Learn to market “consumer-to-consumer” instead of just

“brand-to-consumer.”

2. Shift the agency’s skill set beyond “presentation” to “participation” and package it as a service.

3. Erase the artificial line between “advertising” and “public relations.”

4. Make publicity a central goal of your marketing efforts, not just a hoped-for by-product.

5. Experiment with ways to move what used to be offline, online (like product sampling, etc.)

High Volume/Low Margin

Low Volume/High Margin

Imperatives for transforming the agency

Diagnose Prescribe Create Execute

HIGH

LOW

Relative value of agency servicesValue perceived by client

Cost incurred by agency

Architect

General Contractor

Sub-Contractor

Which are you?

Project Lifeline

Higher Value ServicesConsumer insightsStrategic planningConcept developmentReputation managementProduct developmentMarketing ideationConnection planning

Lower Value ServicesProgramming and codingPre-press workPrint productionBroadcast productionVideo productionRevisions and resizesMedia buying

Implications and opportunities for marketing organizations

1. Realize that the traditional agency cost structure cannot support both high-value/high-cost services and low-value/low-cost services.

2. Understand that either of these two business models (idea business vs. execution business) is viable, but they are different businesses requiring different cost and pricing structures.

Full scale

Agile

Imperatives for transforming the agency

Agencies are organized like a classical orchestra in a jazz age.

Rashid Tobacowala

The Agile Manifesto1. Build projects around motivated individuals. Give them the

environment and support they need, and trust them to get the job done.

2. Simplicity--the art of maximizing the amount of work not done--is essential.

3. At regular intervals, the team reflects on how to become more effective then adjusts its behavior accordingly.

4. The team welcomes changing requirements, even late in development.

5. The team delivers working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale.

Direction Teams

1. Business Director2. Planning Director3. Channel Director4.Content Director5.Project Director

Implications and opportunities for marketing organizations1. An always-on marketing program requires agile

teams and an agile approach.

2. The agile approach requires fewer people, fewer layers, and more autonomy.

3. The need for professional project management will only increase due to the complex demands of digital marketing.

Selling time

Selling value

Imperatives for transforming the agency

http://www.youtube.com/watch?v=R2a8TRSgzZY

“The Vendor-Client Relationship”

RFPs that focus extensively on price.Mandates to reduce fees without also reducing

SOW.Demands for extensive disclosure of agency

costs.Clients not forthcoming about marketing

budgetsAgency services “shopped” based on hourly

rates.

The branches of the compensation problem

What is the root? The billable hour

Salaries + Overhead + Desired Profit Expected Hours = Hourly Rate

Hours Worked

Fee Charged=Hours

WorkedValue

Delivered=What’s the right formula for agency

compensation?

Why time-based pricing is the wrong paradigm

1.Looks in the wrong place for value (inside vs. outside)

2.Based on cost to agency rather than value to client3.Assumes client is buying activities rather than

outcomes 4.Puts emphasis on efficiency instead of effectiveness 5.Misaligns the economic interests of agency and

client

“Do you want to haggle over hours, or do you want ideas that build the momentum of your brand?”

Jeff HicksPresident

Crispin Porter & Bogusky

Estimating hours isn’t pricing.Counting costs isn’t pricing.

Setting an “accurate” billable rate isn’t pricing.

Costing is a science.Pricing is an art.

Chief Compensation OfficerNeal Grossman

“This is not the death of marketing and media, but a dramatic rebirth in the way the end of the last Ice Age yielded more advanced species than had every prospered on earth before.”

Bob GarfieldAdvertising Age columnist and author of “The Chaos Scenario”

The complete Agency 2.5 seminar is available on a custom basis to agencies and organizations.

www.ignitiongroup.com

Direct inquiries to Tim Williams at twilliams@ignitiongroup.com

@IgnitionGroup@TimWilliamsICG

An invitation to visit Ignition’s new online resource center

www.ignitiongroup.com

Books by Ignition’s Tim Williams

Take a Stand for Your Brand:Building a Great Agency Brand

From the Inside Out

Positioning for Professionals:How Professional Knowledge Firms Can Differentiate Their Way to Success

www.ignitiongroup.com