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The Folly of Full-Service Advertising Agencies
 

The Folly of Full-Service Advertising Agencies

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Lots of agencies assert that they provide full-service. But just what does that mean? And is full-service what most marketers are looking for? And do they even believe that any one agency can do it ...

Lots of agencies assert that they provide full-service. But just what does that mean? And is full-service what most marketers are looking for? And do they even believe that any one agency can do it all?

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    The Folly of Full-Service Advertising Agencies The Folly of Full-Service Advertising Agencies Document Transcript

    • The Folly of Full-Service by Mike Carlton Choices Life presents each of us with an unending series of choices. When to get up each day. What tooth paste to use. The clothes we put on. What we eat for breakfast. The route we take to work. And on. And on. Some choices are made quickly and easily. Almost without us consciously considering the decisions we are making. While other choices are thoroughly vetted, with careful calculation of many alternatives and possible outcomes. Differentiation The key factor in all of our decision making is differentiation. The differences, real or perceived, between the choices before us. While it may happen almost instantaneously, we evaluate those various options and then select one. It is differentiation that drives that choice. For if there were no differences, how would we make a selection? Marketers Are No Different Just like us, marketers are faced with endless choices. How they budget their marketing money. The agencies they choose. The assignments they give them. And they make those choices based on their ability to differentiate one agency from others. Thus, how each agency differentiates itself is crucial. So, the way an agency describes itself – such as being full-service – has an impact on marketers’ perception of how to differentiate that agency. Is Full-Service a Differentiator? That leads us to the differentiation value offered by a full-service agency. While the term full-service is bandied about freely in our industry, we should stop to consider what it means. Probably the best definition comes from The New York Times online service, about.com. Here’s what about.com has to say: “A full-service agency is one that handles all aspects of the advertising process, including planning, design, production and placement. Today, full-service generally suggests that the agency 1
    • also handles other aspects of marketing communications such as public relations, sales promotion, Internet and direct marketing.” We suspect that most folks would generally concur with that description. A Few Facts Advertising Redbooks, a LexisNexis enterprise, is probably the most comprehensive source of information on agencies. They currently have detailed listings on about 15,000 agencies worldwide. And their definition of agencies includes PR firms, sales promotion houses, interactive shops, social media firms, design studios, etc. The entire range of marketing communications services. Of those 15,000 firms worldwide, just over half – 8,000 of them are in the US. And of those 8,000 US organizations 4,800 describe themselves as full-service agencies. So, if you put the facts from Redbook and the definition from about.com together that means that 60% of US agencies – from giant holding companies to one or two person shops – claim to competently offer a full and complete range of services. An American Peculiarity As an interesting aside, Redbooks also reveals the striking fact that geography plays a big role in the use of the full-service agency description. For of the 7,000 agencies they list as located outside the US only slightly more than 200 describe themselves as full-service agencies. The contrast is stunning. From 60% in the US to less than 3% in the rest of the world. Clearly, the full-service description is an American thing that has not gained much popularity elsewhere. Not sure why this disparity exists. Nor precisely what it means. But we do know that there are a lot of agencies outside the US that are growing quite nicely in their markets without describing themselves as full-service. Could it be that they are onto something that has eluded Americans? The Sales Proposition Essentially, when an agency says it is full-service it is an assertion that “we can do it all.” That regardless of what the marketer’s needs might be, the agency can successfully handle those needs. That the marketer does not have to retain any other resource to accomplish its market communications objectives. 2
    • It is basically an appeal to the benefits of one-stop-shopping. And the simplicity of convenience. Two Important Questions This leads to two key questions: 1. Are today’s marketers primarily looking for the convenience of one-stop- shopping? 2. Just how believable is the assertion that a single agency can do it all? The Way it Used to Be There is little doubt that proximity, personal relationships, and convenience played a bigger role in past agency selection than they do today. Clients typically would choose a nearby agency. And it was not uncommon for the selected agency to be led by someone the marketer already knew through community activities. Thus, while not directly articulated, convenience was at or near the top of the criteria list when choosing an agency. This convenience factor was supported by the notion that the chosen agency could do it all. One that would become the “agency of record.” Which made the full-service claim – while probably not a primary selection factor – a reassuring validation of the marketer’s choice. So, having the full-service benefit claim was an important supporting element. That Was Then, This Is Now There is also little doubt that agency selection criteria for most marketers has changed. Expertise that is directly relevant to the marketer’s specific needs has become much more important. And one could easily argue that expertise has displaced convenience on the marketer’s criteria list. Marketers want to feel that the agency they select is the best qualified to solve their unique marketing challenges. In this environment, geography, personal relationships, and the convenience of one-stop-shopping tumble down the list. If you don’t believe that, just take a look in the trade press for the experience and locations of the agencies included in a marketer’s agency search short list. It is almost always about special expertise. And location seems almost immaterial. Now you could argue that there are still lots of marketers that choose convenience over expertise. And that is true. But they are in the ebb tide. The incoming tide belongs to expertise. 3
    • The Believability of Full-Service Marketing communications is a whole lot more complex today than it used to be. The number of tools for connecting with and engaging consumers has literally exploded. And the consumer, including B to B, is no longer just a passive recipient of marketer messages. The potential customers are now actively engaged in the public dialog that influences market perceptions and behaviors. In this environment, no agency, not even the biggest holding companies, can have all of the expert talent in-house that a variety of clients are likely to need. It just isn’t economically feasible to hire on a full-time basis – and keep productively occupied - all the needed skills. At the same time, there is increasing evidence that knowledgeable marketers don’t believe anybody can do it all, anyway. Or at least, do everything they need as effectively as they desire it to be. As a result, there is a growing pattern of clients hiring multiple agencies. With each service provider assigned a specific responsibility aligned with their special skills. This brings the believability of a full-service claim into issue. If an agency says it, but the marketer doesn’t believe it, what does it do to the agency’s credibility? Or to the trust the agency wants the marketer to invest in them? Does the full-service claim inadvertently subject the agency to kind of “Jack of all trades, master of none” position? And if so, is that desirable? What We Can Learn From Healthcare It wasn’t so long ago that most of us had a trusted family physician. This person was usually a nearby generalist who we looked upon to treat most, if not all, of our healthcare needs. It was a convenient, one-stop-shopping personal relationship. But healthcare delivery has changed. Today folks will search the world for the physician or facility with the most expertise in treating their specific malady. Location and personal relationships are immaterial. Expertise is what counts. Just look at the healthcare ads in the airline magazine the next time you fly. Marketers are no different. They have a business problem that needs to be solved. And they want the expertise of the agency best suited to solve that problem. 4
    • Like the healthcare patient, if they have multiple problems they are very comfortable working with multiple agencies simultaneously. With each agency focusing on its area of strength. Relevance and Differentiation Thus the question, Is the concept of full-service still relevant? Or is it a relic of the past that is just kind of hanging around? And in America where the majority of agencies continue to describe themselves as full-service, what differentiation power does it have? Another Dimension - Being the Best If specific expertise is of increasing value to marketers, wouldn’t being the best at that expertise be the most powerful differentiator? After all, it sure looks like that goes directly to the core of what marketers are questing for. Now, no one is the best at everything. But the truth is that each of us is probably the best at something. Not everything, but just something. Some one thing that we truly excel at. A capability in which we are dramatically superior to others. Some ability or experience that can set us apart. Differentiate us. Same is true for agencies. In fact, I have never known an agency that I didn’t feel that in some way had some capability or experience that was truly extraordinary. Something in which they excelled. In which they were, in fact, the best. A unique strength that would perfectly fit some marketers’ needs. Yet, ironically few of those agencies aggressively promote their uncommon strength. Rather, most of them tend to aspire to the notion of being good at everything – just like all the other full-service agencies. While almost taking their strong suit for granted. Which is Better? This then leads to the question, Is it better to be wide and shallow, or narrow and deep? Each agency, and each professional for that matter, needs to answer that question. There is no right answer. Each answer must fit the unique situation for each agency and each person. 5
    • But we do know this. In most fields, specialists command greater respect and greater rewards than generalists. And as specialists, they are the antithesis of full-service. Their service offerings are very limited and tightly focused. Think of healthcare again. Or law or accounting or management consulting. Being perceived as “the best” or among the best, at just one thing can make marketing and sales a whole lot easier and a whole lot more effective. As well as usually being a more profitable business model. One Big Challenge Unfortunately, there are dramatically fewer potential clients in any geographic area for any particular specialist. This means that the narrower the niche being addressed the larger the geographic market must be. This calls for a fundamental rethinking of where clients and prospects might be located. And how to connect with them. This, of course, is the reason for all those airline magazine specialized healthcare ads. The marketing strategies and their implementation have to be quite different for specialized professional service providers. What it Takes “OK,” you say, “Mine is a full-service agency. I’d be interested in exploring what might be involved in shifting my agency’s focus from being a full-service generalist to a more tightly focused specialized service provider.” To begin, here are some things you might want to think about: 1. What one thing is your agency the very best at? This is the most difficult question. And there almost certainly is one thing. But it may take some work to identify and articulate it. There is a tendency to say, “We’re very good at a lot of things.” And that is surely true. But that leads you away from the one, singular characteristic that can make you truly world class. Not just a very good generalist agency. And the thing that you are the best at can reside in a variety of agency capabilities. It might be specific industry expertise. Or media expertise. Or client type. Or management of the process. Or strategic visioning, Or accountability, etc., etc. The potential list is endless. And real objectivity and creativity is called for in the identification process. 6
    • As well as some independent outside opinions on your singular strength. Folks who can see your agency more dispassionately than you do. 2. Are there enough marketers out there that need that capability? Here you will want to really expand your horizons. The reality is that in today’s world ease of travel and communications have erased geographic restraints. This is really a market potential evaluation. Who are the marketers that might have needs that are in complete alignment with your special capability? Where are they located? How serious is their need? How are they addressing that need now? What is it currently costing them to meet that need? And more importantly, what is it costing them to not address it as effectively as you can? What is the economic value you can bring to them? 3. Are there enough marketers with this specific need to support you? This, of course, is a key question. But remember, you are looking at an unlimited geographic area. Obviously, if this specialized market segment is not big enough to support your aspirations, you need to go back and deal with questions one and two again. 4. What will be required to market effectively to this specific segment? Many of these folks may have been outside your traditional marketing arena. So building a brand reputation with them may take considerable time and effort. However, because you are extraordinarily good at that service, direct competition should be reduced. Since you are playing from your demonstrated strength, likely against generalist agencies, you probably will compete less often but your win rate should go up dramatically. Clients are more likely to seek out an agency with demonstrated expertise. 5. Do you have the right people? Being best at a specific specialization will probably require different people than generalists in a full-service agency. You will want to develop a comprehensive strategy for how to move from the current talent base to a more specialized one. And don’t forget, outsourcing and/or extensive use of free-lance or contingent talent may be just what is called for. 7
    • 6. Can you manage the transition? Your business model will not evolve from full-service to a specialized provider overnight. It will take time and patience to navigate the transition. And there will probably be a fair amount of internal pushback. Beguiling full-service opportunities will undoubtedly pop up. How you deal with these siren songs will have a major influence on the speed, clarity and effectiveness of the transition. As you think through the issues outlined above it becomes abundantly clear how challenging making this kind of transition can be. It will not be quick or easy. The Future Reality But the reality is also abundantly clear. The future belongs to highly effective, highly specialized providers who are the best at what they do. They will be in demand. They will rightfully speak with authority. They will be highly respected. And highly paid. They will reap the rewards for what they are able to accomplish. And they will rise above the typical RFP cattle calls reserved for generalist full-service agencies. Agencies trapped in the full-service folly of yesterday. Copyright 2010 Carlton Associates Incorporated About Mike Carlton Mike has spent most of his life in and around advertising agencies. For over a quarter of a century he served in various agency functions, including general management and ownership in a 150-person shop. Along the way he held offices in the American Association of Advertising Agencies, agency networks, and became a frequent writer and speaker on agency issues. In the 1980s he founded Carlton Associates Incorporated, a consulting firm that focuses on agency business and leadership challenges. He was also a founder of World Systems, a first generation accounting system supplier for agencies, and 600 Monkeys (now a part of Computer Associates), a provider of new technologies for agencies and other professional service firms. In addition, he founded Centre for International Business, which has assisted advertisers and agencies globally. 8
    • His consulting, systems and international work has taken him to agencies all over the world. The client roster numbers more than 100, including strong, mid-size independent agencies, offices of global agency organizations, as well as successful smaller shops. He currently serves on the advisory or corporate boards of a number of agencies and related firms. Mike is a former Army officer and holds a business degree from The University of Delaware. He regularly lectures to marketing, communications and MBA students around the world. He and his wife Ruth have a large family and live in Chagrin Falls, Ohio, USA. Carlton 100 N. Main St. #115 Tel: 440-247-6672 Associates Chagrin Falls, OH www.carltonassociatesinc.com Incorporated 44022 USA mwcarlton@carltonassociatesinc.com . 9