Should Advertising Agencies Be Called Advertising Agencies?

Should Agencies Be Called Agencies? By Mike Carlton What’s In a Name? Juliet, in Shakespeare’s Romeo and Juliet proclaimed: “What’s in a name? That which we call a rose by any other name would smell as sweet.” At a recent management meeting the American Association of Advertising Agencies announced that henceforth it would be officially called by its long- standing acronym, the “4As.” In a stroke, the venerable industry association, which since 1917 has ably represented the interests of advertising agencies, was removing the words “advertising agencies” from its name. Is this rebranding just an effort to simplify its handle? Or is it a reflection of more profound underlying changes in the marketplace? Has the name “advertising agency” lost its relevance? And if so, by what name should they be called? Definitions My 30 year old desk dictionary has this definition: “An advertising agency is a business that creates and issues advertising for its clients.” That’s it. Pretty simple. And probably quite appropriate for its time. Today, Wikipedia has an expanded definition: “An advertising agency is a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients. An agency can also handle overall marketing and branding strategies and sales promotion.” And then, continuing under the heading of Advertising Agencies, Wikipedia goes on for six more pages defining; Full-Service Agencies, Limited-Service Agencies, Specialist Advertising Agencies, Interactive Agencies, Search Engine Agencies, Social Media Agencies and a bunch of more kinds of agencies. But, perhaps not surprisingly, they keep Public Relations Firms, Direct Marketing Firms, Branding Agencies, Design Firms each under their own separate headings. Not connected at all to the Advertising Agency heading. 1

And what’s more, Wikipedia does not have separate listings at all for Market Communications Firms, Integrated Agencies, Digital Advertising Agencies, Creative Collaboratives, Idea Factories or Marketing Architecture Firms. (note: if you use one of these descriptions you might want to consider staking out that real estate on Wikipedia). Obviously, agencies have a big category mess on their hands. No, maybe it is more like a category train wreck. What was quite clear and simple a few decades ago has fragmented in to a whole bunch of disparate and often overlapping pieces. No wonder there is confusion. The words “advertising agency” once represented a precise category. But it sure doesn’t look that way today. The Difference between DO and HOW That raises the age-old question; Are we best known by what we DO (what we accomplish) or by HOW we do it? (the tools used) The answer to this question is important because there is a strong common thread among all of the above businesses in what they DO (what they accomplish). But there is great difference in HOW they do it (the tools used). The Common Thread All of these firms (and their categories and sub-categories) exist for just one reason; To influence the behaviors of consumers (B to B as well) for the benefit of the client marketer, the consumer herself and society as a whole. That’s it. When you scratch through it all, every one of these businesses are fundamentally in the behavior modification business. That’s the only reason why marketers pay for their services. So ultimately, all are in the same big category. It just doesn’t have a generally accepted name. Advertising Agency Etymology That leads to the questions; How did the name advertising agency come to be? And how has its meaning evolved? Let’s start with the word “agent.” From a legal point of view an agent is: “One who is authorized to act on behalf of another (called the principal) to create a legal relationship with a third party.” An agency is, of course, a business organization which performs on a generally larger and more complex scale the practical and legal functions of an agent. 2

So, where did agencies come from? The first advertising agencies started about 150 years ago. They began as sellers of advertising space for newspapers (and a few early magazines) – really the only commercial media available at that time. And newspapers paid agencies a commission for selling that space and assuming advertiser credit risk. They were in fact and in deed sales agents of newspaper advertising, thus being known descriptively and accurately as “advertising agencies.” Creating the Ads But there was a problem. Newspapers didn’t want the responsibility of creating the advertisements that were to fill the space the agencies sold. So, agencies moved into that void and not only sold the space and guaranteed the credit, they also created the ads that would fill the space. A simple business proposition. But developing the advertising strategy, the layout design, the copy and then producing the ad itself moved the agencies a lot closer to the marketer. And soon, in an unusual twist on agency practice, they became positioned as the agent of the marketer rather than the agent of the newspaper. So, the marketer became the principal (the client) and the agency owed its primary allegiance to that marketer client, even though the agency continued to be paid a commission from the newspaper. Thus these young service businesses became advertising agencies for their clients. The words “advertising agency” continued to be perfectly descriptive. And perfectly comprehensive. But Things Change As time went by, in their special relationship with clients, advertising agencies began doing things for those clients in addition to just advertising. They created brochures and bought printing. They undertook sales promotion activities. Originated designs, illustrations and logos. Sometimes they performed public relations services, too. In some of these services they acted as legal agents, like when they were buying media, printing, etc. for their clients. But sometimes they acted as advisors or consultants, for which they were paid a fee for the services they performed. And sometimes they just acted as vendors when they sold the client something for a fixed, all inclusive, price. What had started out as a simple business model became increasingly fuzzy. 3

Fast-Forward to Today Ways to reach and influence the consumer have grown exponentially. The advent of the internet and the wide range of new media employed have further complicated things. While the literal, traditional, meaning of the words “advertising agency” apply for some of the services provided, in lots of instances the work is not advertising and the relationship with the client is not that of an agent. And to confuse matters even more, a host of other kinds of firms have sprung up (many of which are owned or financed by agencies or agency holding companies) which don’t call themselves advertising agencies but provide related services designed to influence the marketer’s consumers. And in some cases, these new players create and place advertising itself. And in doing so are actually acting as legal agents of the client principal. Wow! The waters have indeed become muddy. Umbrella Category Wouldn’t it be nice if there were an umbrella category with a simple, descriptive name that all of the various businesses serving marketers could be under? One that embraced advertising agencies, PR firms, emarketing companies, design studios, and digital firms, analytics specialists, etc, etc. Wouldn’t that make it easier for marketers and the service providing firms themselves? It sure would. But it is not likely to happen. And as Dusty Springfield’s song goes, “Wishin’ and Hopin’ and Thinkin’ and Prayin’ will not get you there.” There has to be another way. In The Eyes of the Beholder But wait. Language is a living thing. And meanings are constantly changing. Evolving meanings come from the marketplace, not from learned authorities. And the power of the folks in the marketplace to shape those meanings is gaining strength every day. After all, isn’t that what Web 2.0 and social media are all about, anyway? So in light of this, what meaning do most marketers today ascribe to the name advertising agencies? And what might their understanding of that meaning be in the future? Nothing is For Sure Of course the problem with market driven meanings is that there is no specific, 100% agreement. Each person holds a slightly different view. Kind of like a continuum in which opinions at the extremes may be dramatically different but 4

there usually are big, statistically significant, clusters scattered along that continuum. And while those clusters are usually slowly moving and constantly reforming they do provide some insight to current meanings. So let’s explore the meanings of the words advertising agencies, as well as PR firms, digital and social marketing firms, etc., within the context of a big continuum populated by the opinions of marketing executives. Now, it would be great if there was a reliable study to answer that question. One that is widely accepted showing where executives in this continuum stand on the meaning of the words advertising agency. But there isn’t. So we don’t have a respected authority to look to for a definitive, statistically accurate picture of how that continuum looks today. Nor the precise shape, location or movement of the various clusters. But there are some helpful tangential studies and, of course, lots of anecdotal evidence. Based on those sources here are some thoughts. Beliefs There is likely to be little argument to the belief that the majority of marketing executives view advertising agencies as providing many more services that just advertising. Most are not stuck in that narrow, literal view. They have a much broader perspective than that. And that very few actually think much about the legal implications of the word agency. They view advertising agencies as providers of an increasingly broad range of helpful services. And not infrequently they use that dreaded word “vendor” when categorizing advertising agencies. However, as a recent Forrester study points out, many senior executives consider advertising agencies excellent at creating and placing advertising but not as strong as they should be in digital and other forms of new media. These important influences apparently believe that advertising agencies as a group have not embraced non-traditional ways of influencing customer behavior as quickly or effectively as they would like. And this has opened their consideration to providers outside the traditional advertising agency category. Obviously, each agency is different. And the speed and effectiveness with which each has embraced new tools and techniques is different. But the overall view that Forrester reflects matches lots of anecdotal evidence. Thus, the advertising agency category is frequently painted with this broad brush. The Agency Conundrum In addition, some agencies are caught in a trap. A trap largely of their own making. Much of their income comes from hourly charges for creating and 5

producing advertising. And many have become addicted to the revenue that work generates. At the same time many are not adequately paid for their strategic contributions to client success. Nor have they figured out how to effectively monetize the use of new tools and techniques, particularly in the digital and social world. This is a tough spot to get out of. But not an impossible one. A vanguard of progressive advertising agencies are demonstrating powerful chops in digital, social media and promotional PR. And in doing so are effectively and efficiently changing the behavior of their clients’ consumers and being fairly rewarded in the process. And at the same time expanding the definition of the words advertising agency. At least as that category relates to their specific agency. The Flip Side Concurrent with the expansion of services from the advertising agency side, many PR firms, digital and interactive organizations (and other new media service providers) are expanding into the arena that was once the sole province of advertising agencies. In fact, only a few years ago it was common for new media firms to be primarily technologically driven. While today, it is increasingly likely for them to be much more concerned with the psychological implications of how the user interacts with their technology. A very significant and very unifying shift. We Are One Remember, regardless of what a firm in this broad continuum is called, we are on one unified mission. To change consumer behavior for the benefit of our client, the individual consumer and society as a whole. Often using different tools, but with the same outcome in mind. We have more in common than that which separates us. And in that truth lies the way forward. There is no prescribed solution to this category name issue. Nor will there be. Nor should there be. The language and the business models will be defined by the marketplace. Success in that marketplace will determine the definitions that grow. As well as those that decline. 6

So, the meaning of the words “advertising agency” may continue to expand. Or it may change. Or just drift away. Same is true for the words “PR firm,” ‘digital agency,” etc., etc. And, an umbrella category may never materialize. But that’s OK. Whatever Works Every firm in this broad category, whether it began as an advertising agency, or a PR firm, or a digital shop, or a sales promotion business, etc. will be judged not by its category but by how well it accomplishes the objective of influencing consumer behaviors for its clients. The value it brings those clients. What it chooses to call itself is less important than what it accomplishes. And the perceived value that marketing executives attribute to that firm. When you think of it in this light it is a much simpler, and less parochial, way of moving forward. And it is certainly in keeping with respecting definitions determined in the free marketplace. The Wisdom of Juliet She reminded us that the essence of the rose is that it pleases our sense of smell. That’s what is important. How it does that or what it is called is unimportant. It works the same for your business, too. Copyright 2009 Carlton Associates Incorporated Quotes: “That which we call a rose by any other name would smell as sweet” – Shakespeare’s Juliet Language is a living thing Illustration: A rose Subject: Agency Whitepaper – Should Agencies Be Called Agencies? 7

Lead in: Have the words “advertising agency” lost their meaning? And their relevance? Is it a category name in decline? And if so, what should service firms in this field be called? Both now and into the future. Here are some thoughts on these vexing questions. I hope you enjoy the full text or the condensed video capsule. 8

Should Advertising Agencies Be Called Advertising Agencies?

by Carlton Associates Inc on Nov 19, 2009

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Should Advertising Agencies Be Called Advertising Agencies? — Document Transcript