The evolution of client-agency relationships


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Overview of the evolution of the agency-client relationship in the context of the socialization of media

Helsinki National eMedia Conference Keynote

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  • This is an attempt to put together the changing nature of the client-agency relationship in the content of the new media developments of today.
  • The evolution of client-agency relationships

    1. 1. Can a weaving spider collaborate? Or, A circular story about the evolving client-agency relationship Mark Linder WPP Global Client Leader National eMedia Conference 2008 IIR Finland Helsinki 21 November 2007 Contact [email_address] +44 774 00 7927
    2. 2. Advisors
    3. 3. “ JR ”
    4. 4. Topics we will talk about <ul><li>Overall theory is that the seed of tomorrow’s client-agency relationship are way back in history. We need to look back to look forward </li></ul><ul><li>Marketing and mass communication starting from the advent of television – the nature of the business partnership and media commission… USP and the “compliance school”, and how we “slowed” ourselves </li></ul><ul><li>What changed the dynamic of the relationship – separation of media, selling out, re-ingineering, etc </li></ul><ul><li>The Internet / web 2.0 – why participation and new media is SO HARD to understand, just as hard as TV was. What the “utility” concept of marketing is about </li></ul><ul><li>The new media landscape, and how to why we all need to become involved, not just the media agencies </li></ul><ul><li>The client of the future, agency of the future </li></ul><ul><li>Implications for Finland </li></ul>
    5. 5. “ Marketing” was invented in an unusual time Mass production Mass communication Mass consumption In the 1960’s and 70’s, we were GLUED to our TVs
    6. 7. A “destination” model of communication Besides, it’s easy to blow your own horn Brand marketer Interpreter Decoder The Mass Audience Many receivers Each de-coding Interpreting Encoding Each connected with a group where message re-interpreted Cheap TV “Reach and Frequency” Repetition Increasing sales Indirect feedback (research, sales, etc) Inputs from social sources Based on Shannon & Weaver’s 1947 process model
    7. 8. Commission business model rewarded mass Agency takes risk Buys blocks of media space Offers to client at a profit Performs value-adding services
    8. 9. Remember the long-running campaign? One benefit of a trust-based relationship
    9. 10. Clients and agencies co-owned the business problem The word “brief” did not exist Client-agency partnership was in shared risk/ reward Agency investment Client spend (Agency revenue) Client profit
    10. 11. 30 years ago, agencies managed programs <ul><li>Research and insights </li></ul><ul><li>New product development </li></ul><ul><li>Branding and packaging </li></ul><ul><li>Channel management/ retail </li></ul><ul><li>Communications </li></ul><ul><li>Media investment </li></ul><ul><li>Tracking and ROI </li></ul>Investment in solutions Insight into the socialization of the new technology A “blockbuster” business
    11. 12. However when “marketing” = Advertising Advertising = commissions Commissions = exploitation
    12. 13. It is hard to overstate the culture of impressions-based “marketing” Global size of the industry, in $billions 34 Sponsorship 241 Direct marketing 700 7 24 394 Worldwide Total PR Research Advertising
    13. 14. A sidebar why the “USP” hinders true marketing
    14. 15. The USP <ul><li>Each advertisement must make a proposition to the customer: &quot;buy this product, and you will get this specific benefit .&quot; </li></ul><ul><li>The proposition itself must be unique - something that competitors do not, or will not, offer. </li></ul><ul><li>The proposition must be strong enough to pull new customers to the product. </li></ul>
    15. 16. <ul><li>“ The tension lies in the fact that traditionally, marketing is done TO people, not FOR or WITH them. Messages are developed and broadcast to ostensibly passive and receptive audiences. If they don’t respond, then there are “compliance issues” or “problems of communications uptake.” </li></ul><ul><ul><li>--Jill Caldwell, a social researcher </li></ul></ul>The USP helped create the Compliance School of communications
    16. 17. Agencies became USP “concept factories” and forgot about socialization of media itself Percept an external event that causes the activation of a certain category in the mind Concept an abstract idea or a mental symbol Concepts are the basic elements of propositions, much the same way a word is the basic element of a sentence &quot;Nobody reads ads. People read what interests them, and sometimes it's an ad.“ --Howard Gossage
    17. 18. Osgood-Schramm (1954) Communication is a two-way process Did we hear? Message Encoder Interpreter Decoder Message Decoder Interpreter Decoder
    18. 19. And there were a few other developments…
    19. 20. Events of the 80’s and 90’s <ul><li>Re-engineering and Activity-based Costing Procurement moving into services </li></ul><ul><li>Private agencies selling to public companies, monetizing the relationship </li></ul><ul><li>High p/e source markets aggravating this </li></ul><ul><li>Separation of media function </li></ul><ul><li>Result: damage to the trust between advertiser and agency </li></ul>
    20. 21. And at the same time, the emergence of new technologies
    21. 22. Acceleration… Gary William Flake Microsoft / MSN
    22. 23. Democratization <ul><ul><li>Computing </li></ul></ul><ul><ul><li>Content </li></ul></ul><ul><ul><li>Commerce </li></ul></ul><ul><ul><li>Community </li></ul></ul>
    23. 24. Over 30% of South Koreans are on high-speed braodband – 32MBit download
    24. 25. 1966
    25. 26. The new media landscape Not how do we reach us, but how is it affecting us? Dual Sync 40 Million Homes DVR 3.5 Million Homes Gaming 80 Million Homes Video On Demand 16 Million Homes Interactive Program Guide 20 Million Homes Virtual Channels 2 Million Homes Ad Targeting 108 Million Homes 65.2% cell phone U.S. penetration Satellite Radio & Internet Radio 1.5 Million Subscribers / 70% Penetration Interactive/Placed Based Out of Home – 400M BB’s Internet / Broadband 150 Million Users / 57 Million BB Users DVD Player 50 Million Homes Portable Audio 15 Million Units Custom Publishing
    26. 28. The socialization of this technology is the real change
    27. 29. “We are connected, but not connecting” Rob Alexander, JWT Fragmentation creates the need for re-integration
    28. 30. We are worked over by the media
    29. 31. What about “non-media” Advent of actual UTILITY in marketing!! Why promise to be something, when you can actually DELIVER that thing!
    30. 32. Welcome to the brave new world of Branded Utility, where brands look to provide a useful service or a helpful application; to give people something they actually need – without demanding an immediate return. “ Simon Andrews – Chief Strategy Officer, Mindshare Interaction &quot;I believe the next stage of brand advertising is going to be in the realm of 'branded utility,&quot;' says Palmer (with Johnny Vulcan)
    31. 34. What role does an agency have?
    32. 35. Android Software Operators Semiconductors Handset Commercialization Plus $10M in prize money for developers!
    33. 36. OHA launch video
    34. 37. Google Open Social <ul><li>MySpace </li></ul><ul><li>Bebo </li></ul><ul><li>iLike </li></ul><ul><li> </li></ul><ul><li>LinkedIn </li></ul><ul><li>Hi5 </li></ul><ul><li>Friendster </li></ul><ul><li>Oracle </li></ul><ul><li>Flixster </li></ul><ul><li>RockYou </li></ul><ul><li>Slide </li></ul><ul><li>and more </li></ul>
    35. 38. Is it any wonder who is on top? Source: Interbrand Corp, Business Week Aug 2007, Brand Channel Reader’s Choice 2006 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Value Change 2007 vs. ’06 -3% +3% +2% +5% -4% +12% +15% +5% +7% +8% Most Valuable Most Impactful in my life 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
    36. 39. Examples <ul><li>Nike Run London </li></ul><ul><li>Innocent’s Fruitstock </li></ul><ul><li>Nokia’s Royal Artist’s Club </li></ul><ul><li>Charmin’s bathrooms </li></ul><ul><li>Flickr’s “Interestingness” </li></ul>
    37. 40. Crowd-sourcing Gardening Me Squared Interestingness -- Flamingo, for Nokia
    38. 41. Jennierose, crowd-sourcing
    39. 45. As technologies socialize, virtual becomes real
    40. 46. Business models are evolving Relationship Knowledge Relevance Interaction Effectiveness Opt in Dialogue Profile Blyk Advertiser-supported MVNO
    41. 47. To recap… <ul><li>Marketing was “accidentally” defined through TV advertising – the new technology that caused social change </li></ul><ul><li>Agencies explained the socialization of the new media and showed clients how to take advantage of this. They used to be trusted business partners, when they ran programs and shared a risk/reward business model with clients. The erosion of trust has been over 25 years </li></ul><ul><li>“Web 2.0” is having a similar impact on social change as television. How are agencies interpreting this? </li></ul>
    42. 48. What is the role of agencies in this context? What is the role of media owners?
    43. 49. Landscape is changing, and everyone seems interesting!   Tactical Strength of Advertiser Relationships Strategic Traffic and Inventory Control Direct Indirect Advertising / Optimization Networks Affiliate Marketing Direct Navigation Price Comparison E-Mail Marketing Niche Search Yellowpages Interactive Agencies Vertical Portals Behavioral Targeting Lead Generation SafetyNet Strategic Advertiser Relationships / Vertical Expertise Key for Lead Gen Tier 2 Sites with Traffic / Content Being Consolidated (e.g. Price Comp, Verticals) Ad Networks Evolving Upstream into Direct Response / P4P Strategic Advertiser Relationships Are Important Competitive Advantage... eBay, MSN and AOL will Need to Expand Advertising Services and Monetization Direct Response ...But Content and Traffic Drives the Economics Niche Players Expanding into Lead Generation Ad Management Online/ Mobile Advertising Landscape
    44. 50. New media owners provide marketing services WPP Yahoo Google Microsoft AOL Ad Serving Ad Networks Ad Exchange Mobile Marketing In-Game Advertising
    45. 51. Aimed at long tail marketers only? Who has become Google’s largest customer? Number of producers that realize those numbers Sales or popularity 20% that = 80% of volume The long tail Flow of effect
    46. 52. Google led the way
    47. 53. Microsoft has a rich offer
    48. 54. Microsoft takes an educator role
    49. 55. Who are all these guys? WPP entries Interactive Digital Media & Search Mobile Data & Analytics ID Consultores Century Harmony Viral Boole
    50. 56. New models
    51. 57. Open agency model
    52. 58. “ Six smart people around a table can solve any problem” <ul><li>We have separated into sectarian disciplines </li></ul><ul><li>Research into its own industry </li></ul><ul><li>Strategy and planning into consulting </li></ul><ul><li>Media into its own agencies, separated from creative agencies </li></ul><ul><li>Media agencies from quantitative analytics (some exceptions) </li></ul><ul><li>PR was separate, is still separate </li></ul><ul><li>Marketers change jobs more frequently </li></ul><ul><li>The traditional agency is no longer the hub </li></ul><ul><li>The media owner provides marketing solutions </li></ul><ul><li>Integration is a bigger challenge </li></ul>-- Shelly Lazarus, CEO Ogilvy
    53. 59. “ Group” consolidation vs single-point accountability <ul><li>By STUART ELLIOTT </li></ul><ul><li>Bank of America plans to end five years of having a single advertising holding company in charge of its marketing communications. </li></ul><ul><li>For the last two years, Bank of America, which spends an estimated $2.5 billion each year on worldwide advertising and marketing, worked almost exclusively with agencies owned by the Omnicom Group. For three years before that, the company worked predominantly with agencies owned by the Interpublic Group of Companies. </li></ul><ul><li>But Anne Finucane, chief marketing officer since March 2006, said today that she had decided that the holding-company model “hasn’t quite worked out the way it might have.” “What works better is for us to choose the agencies,” Ms. Finucane said in a telephone interview. Otherwise, she said, it “limits our ability to align the best agencies and the resources for particular businesses.” </li></ul><ul><li>Marketers that consolidate their accounts at a single holding company are typically seeking more effective campaigns as well as the cost savings that can come from placing eggs in a single basket. For instance, Ford Motor works almost exclusively with agencies owned by the WPP Group. </li></ul><ul><li>Other marketers, however, prefer to seek ideas from multiple agencies with different parents, on the theory that limiting interaction to a sole corporate source may prevent the best ideas from emerging. For example, General Motors, which had long worked mostly with Interpublic agencies, has also hired agencies owned by the Publicis Groupe along with independent agencies. </li></ul><ul><li>… .Ms. Finucane said she will ask BBDO Worldwide in New York, the Omnicom agency that is creating the current “Bank of Opportunity” consumer campaign, to take a role as the company’s lead creative agency and then coordinate the assignments for other kinds of work rather than have the integration done by Omnicom. </li></ul><ul><li>Under that plan, Ms. Finucane said, BBDO could continue to work with sibling Omnicom agencies — like Rapp Collins, for direct marketing; Organic, for online marketing; and TPN, for promotions — or with agencies that are not part of Omnicom. </li></ul>
    54. 60. Single-point accountability is an answer, if the skills and incentives are right “P&G says it's testing ways to change its agency model to improve collaboration and marketing plans while reducing the number of transactions for its brands and marketers. “
    55. 61. Agency of the future needs different skills <ul><li>THE AGENCY of the future will be confident in its ability to answer two absolutely basic questions for its clients. First, how much &quot;money should they spend on marketing? “Second, through which mix of channels can it most rewardingly be spent? </li></ul><ul><li>-- Martin Sorrell </li></ul>
    56. 62. Today’s agencies and networks Advertising-centric skills replicated in every office Original business was a talent business Challenge: specialist skills “Networks” consist of large numbers of offices with the same skills Best people start “owned and operated” hot shops The middle Production goes to specialists
    57. 63. De-coupling of the value-adding parts Lose the middle Strategic ideas, programme management from smaller units, some parent-controlled, some operator-controlled Technology-enabled implementation shared by many originating units Many specialist skills serving clients anywhere Better career paths for all Glue provided by strong work-flow and content management systems
    58. 64. Collaborative networkers Insights Research Media/ Analytics Planning Holistic Client Team One-to-many Comms design production One-to-one Relationship Lifetime Value Ident Design Concept/ Program Leader Social Networking Branded utilities Shopper/ Channels Shopper/ eCommerce Media/ Buying Experience Design Search Mobile OOH SNS Content Events Ethno Quant Performance Measurement Workflow/ CMS Econometric modeling
    59. 65. A larger spider Insights Research Media/ Analytics Planning One-to-one Relationship Lifetime Value Ident Design Branded utilities Shopper/ Channels Shopper/ eCommerce Experience Design Search Mobile OOH SNS Content Events Ethno Quant Performance Measurement Econometric modeling Workflow/ CMS
    60. 66. To recap… <ul><li>“ New media” companies see themselves as solving business problems, not just selling space </li></ul><ul><li>It takes time and effort invested to understand the dynamics of this fragmented marketplace </li></ul><ul><li>Meanwhile, marketers face the challenge of “pulling it together” </li></ul><ul><li>Single-point accountability migh be a more valuable concept than consolidation. Agencies who want that must develop programme management capabilities </li></ul><ul><li>Clients, agencies and media must become collaborative networkers </li></ul>
    61. 67. In summary…
    62. 68. Client of the future <ul><li>Strives for collaborative marketing management </li></ul><ul><li>Does not tolerate sectarian planning </li></ul><ul><li>Picks a primary partner as integrator and programme manager </li></ul><ul><li>Moves to shared risk/ reward agency (and media) compensation </li></ul><ul><li>Encourages trust. Does not allow procurement to take over business management </li></ul><ul><li>Is not just about the blockbuster…takes risk, looks for everyday innovations </li></ul>
    63. 69. Agency of the future is a programme manager <ul><li>Invests in understanding the sociological effects of the new media </li></ul><ul><li>Re-builds strategic and conceptual skills, and invests in ideas and solutions </li></ul><ul><li>Invests in leadership skills (this is different from “management”) to better collaborate with partners </li></ul><ul><li>Embraces accountablity and is willing to be compensated accordingly </li></ul><ul><li>Builds business and contracting skills </li></ul><ul><li>Insight into the socialization of all technologies </li></ul><ul><li>Bringing its own investments </li></ul><ul><li>(sound familiar?) </li></ul>
    64. 70. What does this mean in Finland?
    65. 71. Finland is an originating country <ul><li>The Nordics launch many born-global brands – not all B2B </li></ul><ul><li>Education orients youngsters to the world </li></ul><ul><li>Stable social democracy </li></ul><ul><li>Know how to trade </li></ul><ul><li>Confident yet liked in a leadership setting </li></ul>
    66. 72. Polar access to the world
    67. 73. My offer <ul><li>Help you – anyone – who wants to learn more about the other cultures </li></ul><ul><li>Help work out a framework for market entry – how to identify and solve all the problems </li></ul><ul><ul><li>Partners and distribution </li></ul></ul><ul><ul><li>Local marketing services </li></ul></ul><ul><li>Help you understand the new technologies and their impact on marketing </li></ul><ul><li>Help you build back trust in the agency relationship </li></ul>
    68. 74. To recap <ul><li>Originally, clients and agencies were business partners, agency a programme manager </li></ul><ul><li>Cheap media and USP-thinking turned us into concept factories distributing impressions rather than advisers on new media </li></ul><ul><li>Trust declined during the 80’s </li></ul><ul><li>Technology democratised, consumer participates. New media much more complex and interactive. Agencies have to help understand </li></ul><ul><li>Client of the future must concentrate accountability to allow holistic skills – and trust -- to develop. Agency of the future must become a programme manager. Harder work for both – but better options </li></ul><ul><li>Finnish clients and agencies have “originator” mindset </li></ul><ul><li>WPP is here to serve your future requirements </li></ul>
    69. 75. Thank you Mark Linder [email_address] +44 774 00 7927