By Paul Frampton, President, International, Control v Exposed
We talk a lot about changing consumer behaviour and how it has accelerated – often out of necessity – during the Coronavirus pandemic. But less talked about is how business and operating models are changing, particularly in our industry, with clients and agencies alike requiring a re-set.
It’s perhaps one of the (few) silver linings of Covid-19: the chance to have a cold, hard look at what we do as marketers and advertising practitioners, and what we could do better. This is not navel-gazing but business critical thinking.
The speed of change and demand for radical transparency and customer centricity will herald in a new era for the fleet-of-foot independents – those who can work directly with brands, segue seamlessly into partnerships with other agencies and complement rather than fight against in-housing efforts.
Marketing can (& must) make a difference
Businesses have recently been forced to look at their resilience, constantly re-forecast and acknowledge that risk mitigation plans and cash reserves are essential to sustainability. Marketing can make a big difference at this time if considered holistically – from brand and customer experience to customer retention and acquisition (in that order I would suggest).
Take the work we’re doing with one multi-national. It has chosen to use this upside-down time to review its entire marketing operating model and transform its capabilities and martech for this data-driven, direct-to-consumer age. They are seeking greater value, more agility and better quality, not the crass “better, cheaper, faster” of the last few years. They are also looking for support in pivoting to a DTC/e-commerce model and are discovering that legacy agencies have neither the tools or agility in their armouries.
What the industry can learn from GM and Ford
There are similarities that can be drawn between the agency holding group model and the automotive landscape. In the US, General Motors and Ford dominated, commanding over three quarters of the total market in the early 1960s. Then came the introduction of newer, more fleet-of-foot brands and rivals from Europe and Asia. Today, GM and Ford control only 30% of the automotive market and the growth and innovation is coming from elsewhere. Tesla is now the world’s largest car marque by valuation, even though it’s yet to turn a profit.
My prediction is the holding agency groups will consolidate into fewer players, but continue to hold significant share with the likes of WPP and Omnicom following the path that Ford and GM did. In just 12 months, the marcap of the big five has fallen by 25%. Why? Because there are viable, more agile and more transparent alternatives; the holding groups have struggled to keep up when it comes to disciplines like e-commerce, martech and consulting. Many brands are also reviewing their operating model for media and are looking at pulling functions in-house so they have both the ownership and agility to act on data.
Marketing must stake its claim in the value chain
Marketing has fallen down the value chain but, particularly in times of crisis, it is a brand’s biggest differentiator and closest connection to the consumer.
Ketchum recently reported that 45% of consumers have changed brand preference during lockdown and over 60% expect to change brand preference for good before this pandemic subsides. Now more than ever businesses need clear and authentic storytelling combined with best in class digital and e-commerce capabilities.
Strategy and planning have been compromised over the past decade as agencies have run towards digital to extract margin from channels like programmatic. The industry has been too focused on delivering the message at ever lower costs at the expense of customer experience, and not enough on the bigger picture.
Too many have acted more as an ‘agency’ for the tech giants than for their paying clients: it should come as no surprise that the independent agency community is seeing a healthy renaissance. Not compromised by shareholder or private equity expectations, they are focused on delivering value in flexible ways.
As the term “agency” conveys, it is our duty to be curious about the business as a whole, not just the advertising and communications. Those who reach upstream and provide agnostic consulting support and solutions, as well as the activation, will win in this new world.
How can agencies adapt and be more agile?
Now is the time to review your proposition and services. As the world has accelerated towards all things digital (and not just the ‘advertising’), an agency’s capabilities must be fit for purpose. If they aren’t, they must build them, partner or lose out – digital is the only discipline seeing positive growth year-on-year. Areas like Connected TV, Video and e-commerce will only attract more spend from traditional media.
It’s been four years since my holding group days, and I’ve been lucky enough to experience businesses that truly understand the roles of sales and product investment. Beyond investing in these new, in demand capabilities, agencies must evolve their approach to business development and double-down on tools such as Salesforce to identify both net new and existing customer growth opportunities. The indie digital community has been investing in capable business development teams for years, but I see very few genuine sales leaders in the big holding companies. That’s a problem when the fight for market share intensifies.
So, as all agency owners are forced to review their headcount and revenue profiles, what better time to strategically take a look at the business top to bottom to make sure it is recession-proof and set to grow as the economy slowly wakes back up.
As much as anything, growth comes down to confidence and according to Econsultancy, 22% of indie agencies expect growth in the next 12 months versus only 17% in holding companies. Not a huge margin – but combined with the nimbleness these businesses have, you can begin to imagine how the Teslas and Hyundai Kias of the agency world can make their dent.