A selection of key concepts from

Agency 2.5
How Agencies Are Transforming for the Future

Presented by Tim Williams

ignition consulting group www.ignitiongroup.com

Agencies are at an

Inflection Point

1. 2. 3. 4. 5. 6. 7. 8.

Fragmentation and addressability of media and audiences Democratization of creativity Inexpensive and instantaneous production Online interconnectedness Digitization of everything Brand advocacy in place of brand management Pricing pressures due to oversupply of providers And

Agencies?

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.

The Last Advertising Agency on Earth

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

Competition both upstream and downstream

Management consultancies Brand consultancies Marketing research firms

Media Production houses Client in-house resources Crowdsourcing Agencies

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%

If I were gency, I w ul be really w rried ab ut being di inter ediated. More and ore, agencies are al ost in t e way sometimes.

ir

ci ti

f N ti

Becky eger erti er ( N )

Production
de-coupling

Ideation

Execution

Another way agencies are losing leverage in the relationship

Crowdsourcing as competition

Media brand owners Content collaborators Content curators Program producers etwork creators Data providers Data aggregators Rights managers Brand guardians
Source: The Future Foundation

Future roles for

agencies?

Imperatives for transforming the agency

Interrupting Engaging

Exposure

Engagement

Reach Frequency Cost per thousand

Attentiveness Receptivity Buzz potential

Efficiency

Effectiveness

The Best Job in the World

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

Instead of reaching 80 million people, lets reach a million in your target and spend 10 minutes with them.
Michael Lazerow, CEO

Implications and opportunities for marketing organizations

1. 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.

Imperatives for transforming the agency

Mass media as channels Everything as channels

Three main classes of media PAID EARNED OWNED

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
T-Mobile Dance

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

Viral videos as media

PAID EARNED OWNED

OWNED

Microsoft.com OfficeLive.com msn.com Xbox.com

The brands online properties as media

OWNED

The brands online properties as media

OWNED

The product itself as media

PAID EARNED OWNED

Instead of this this.

Implications and opportunities for marketing organizations

1. 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.

Imperatives for transforming the agency

Brand perception Brand experience

Agencies are missing revenue opportunities by stopping at prepurchase

Pre-Purchase

Purchase

Post-Purchase

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

Lee Clow TBWA/ChiatDay

Parker Stoner, Swanson Russell Associates

Behavioral Economics: A new strategic imperative for agencies

Hundreds of agencies have developed models for how advertising works. Whats needed now is for agencies to base their business on how people work.

Rory Sutherland, President

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

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

-- or -Placing chicken soup next to the cold remedies.

Behavioral Economics

Agencies should be in the business of

Choice

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.

Imperatives for transforming the agency

Consumers as audience Consumers as media

Which is your mental map?

Marketer in control

Consumer in control

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 Rothenberg CEO, Interactive Advertising Bureau

Consumers as media

United Breaks Guitars

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

Consumers as media

Customer service is the new media department.

Pete Blackshaw

Implications and opportunities for marketing organizations

1. 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.

Imperatives for transforming the agency

Persuasion Utility

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.

Imperatives for transforming the agency

One-to-many One-to-one

The ideal agency of the future?

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

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

Broadcasting

arrowcasting

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.

Will It Blend?

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

Narrowcasting

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.

Imperatives for transforming the agency

Digital department Digital competency

Digital marketing is the new mainstream marketing.

Digital spending will double in the next five years but advertising budgets wont.

THEN

NOW

From great in traditional to great in digital

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

THE NEW CREATIVE HYDRA

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

Verbal Designer

Visual Designer

Experience Designer

Implications and opportunities for marketing organizations

1. 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.

Imperatives for transforming the agency

Controlled communications Open conversations

Paid
Broadcast advertising Print advertising Out of home advertising Promotions Events Direct mail Trade shows Product placement Search engine marketing Online display advertising Sponsored online content E-mail marketing Interactive kiosks Mobile marketing Video gaming Website development

Offline
Media relations Community relations Employee relations Investor relations Crisis communications Media training Sales training Search engine optimization Online product reviews Online endorsements Blogs Microblogging Podcasts Opt-in online content Webinars Social media

Online

Non-Paid

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 elses job, a CCO follows what consumers are telling the brand and each other.
Chuck Brymer, CEO DDB Worldwide The Nature of Marketing

Social media audit Helping to develop social media policies and procedures Ambassador training Submitting to online directories Blog creation, seeding and maintenance Blog monitoring and participation Tweeting and retweeting Social network development Online groups and forums Online publicity Posting and seeding videos and other branded content Tracking, analyzing and reporting results

Social media as an agency service

Advertising in the future will be much more like PR. Well be run more like a daily TV show or an interactive newspaper than an advertising factory.

Richard Pinder COO, Publicis Worldwide

Implications and opportunities for marketing organizations

1. Learn to market consumer-to-consumer instead of just brand-toconsumer. 2. Shift the agencys 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.)

Imperatives for transforming the agency

High Volume/Low Margin Low Volume/High Margin

Relative value of agency services

HIGH

Value perceived by client Cost incurred by agency

LOW Prescribe Create Execute

Diagnose

Which are you?

Architect General Contractor Sub-Contractor

Project Lifeline

Higher Value Services

Consumer insights Strategic planning Concept development Reputation management Product development Marketing ideation Connection planning

Lower Value Services

Programming and coding Pre-press work Print production Broadcast production Video production Revisions and resizes Media buying

Implications and opportunities for marketing organizations

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

Imperatives for transforming the agency

Full scale Agile

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

Rashid Tobacowala

The Agile Manifesto

1. 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 Director 2. Planning Director 3. Channel Director 4. Content Director 5. Project Director

Implications and opportunities for marketing organizations

1. 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.

Imperatives for transforming the agency

Selling time Selling value

The Vendor-Client Relationship

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

The branches of the compensation problem

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 budgets Agency services shopped based on hourly rates.

What is the root? The billable hour

Salaries + Overhead + Desired Profit Expected Hours Hours Worked

Hours Worked

= = =

Hourly Rate

Fee Charged

Value Delivered

Whats 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 client 3. 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 Hicks President Crispin Porter & Bogusky

Cost-Led Pricing

Product

Cost

Price

Value

Customer

Customer

Value

Price

Cost

Product

Price-Led Costing

Estimating hours isnt pricing. Counting costs isnt pricing. Setting an accurate billable rate isnt pricing.

Costing is a science. Pricing is an art.

Chief Compensation Officer

Neal 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 Garfield Advertising Age columnist and author of The Chaos Scenario

The complete Agency 2.5 seminar is available on a custom basis to agencies and organizations.
Direct inquiries to Tim Williams at twilliams@ignitiongroup.com
@IgnitionGroup @TimWilliamsICG

www.ignitiongroup.com

An invitation to visit Ignitions new online resource center

www.ignitiongroup.com

Books by Ignitions Tim Williams

Positioning for Professionals:

How Professional Knowledge Firms Can Differentiate Their Way to Success

Take a Stand for Your Brand:

Building a Great Agency Brand From the Inside Out

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