Boy have they got problems. There are more of them around these days looking for work, preferably with a Client, which begs the question, why?
Winston Fletcher, one of the Grand Old Men of British Advertising had this to say recently: “Agency giants are being cut to size by specialist rivals. The largest advertising agency in Britain employs just 310 people. Not long ago the largest agencies employed 1,000 or more. Advertising agencies are shadows of their former selves.”
This has nothing to do with any short-term advertising recession. It reflects a long-term downward slide. In total, advertising agencies employ about half as many people as they did in the Sixties. In recent years, as advertising has boomed, advertising agencies have dwindled.
What is the explanation? Quite simply, advertising agencies do a lot less than they used to. They do almost nothing but create television commercials, press adverts and billboards While they continue to boast about their billings – the huge sums spent on the space and time to display their creations – they are no longer responsible for this expenditure. It has largely become the preserve of media buying specialists. In 1975 media specialists bought 1% of all advertising. Today they buy 85%. This seismic change has slashed agencies turnover.
Buying media is just one of many thing agencies no longer doing. Although many outsiders do not realise it, modern advertising agencies do hardly any package or logo design, direct mail, basic market research or public relations. They produce no in-store display material, design no brochures, build no exhibition stands, devise no sales promotions, and shoot no corporate videos.
Agencies have ceded strategic planning to management consultants. New product development and brand positioning are done by product and brand consultancies. Agencies failed to seize the opportunities offered by digital and interactive media, which have been cornered by young specialist companies. All this has fomented much discontent among the agencies’ largest clients.
At the Incorporated Society of British Advertisers’ Conference, there was disagreement between Carol Fisher, then CEO of the Central Office of Information, and Bruce Haines, President of the agency trade association, the Institute of Practitioners in Advertising. Speaking from the platform, Haines lamented the decline in fees paid by clients.
Fisher – responsible, at the time, for the largest advertising budget in Britain – responded that as long as agencies continued to do nothing but create adverts, while ignoring the cornucopia of alternative marketing communications available, they did not deserve another penny. The shrinkage in advertising agency services and the consequent reduction in their size and power, has partly been their own fault but it has also been exacerbated by clients who have constantly whittled away at their remuneration.
As a result, agencies have shed virtually all of their ancillary marketing services (which their clients do not see as ancillary at all) for two cogent reasons: they are unable to do them well and they are unable to make money from them.
They cannot do them well because the best specialists no longer want to work for them. Advertising agencies are obsessively focused on creative people and their adverts. The creatives strut their stuff and everyone else is there to buttress them. Naturally, people who are good at other aspects of marketing do not enjoy skulking in the admen’s creative shadows. In agencies they feel like second-class citizens, leading them to leave and set up their own shops.
Clients have aggravated the situation by slashing the agencies’ income. In the Eighties most agencies received 15% commission on their clients’ advertising outlay.
Now they are lucky to receive 8% – 9% from big spenders and less from many others. The 15% commission, which was universal, forced agencies to compete with each other by offering clients a package of marketing services – such as sales promotion, package design and new product development – either free or for a minimal fee.
The management of agencies offered these loss leaders because they could afford to and it was well worthwhile for all parties involved. They invented a name for themselves to explain the multiplicity of benefits they provided: full-service agency – it could have been a new Oliver Stone movie.
Nowadays nobody talks about full-service agencies. There aren’t any. The provision of diverse marketing services has moved from advertising agencies to marketing conglomerates: holding companies such as WPP, Omnicom and Interpublic.
These conglomerates own a plethora of specialist companies, which handle all aspects of marketing. Outsiders think the conglomerates are just grandiose advertising agencies, but they are not. The most successful adman in Britain, WPP Chairman Sir Martin Sorrell, is not an adman at all. Never has been. Today nobody has heard of the bosses of most advertising agencies. They are small, craft companies mostly owned by the conglomerates.
Curiously, neither the agencies nor their clients have cottoned on to this new reality. Both sides look back wistfully to the glory days, when advertising agencies were “full-service” (and wallowed in the commissions they were paid). To-day many clients – like Carol Fisher – want them to co-ordinate the multiplicity of communications media available. There is no reason why advertising agencies should do this. They are not paid to do it, the other specialists do not want them to do it and – despite their protestations to the contrary – they do not know how to do it. British agencies are world leaders in advertising creativity. (Whatever this misbegotten statement means!) They do what they do immensely well but what they do is immensely specialised. The marketing communications clock is not broken but it cannot be turned back.”
Mass Markets were fragmenting for many decades before the Internet came on-stream, and since then, the net has enormously accelerated the fragmentation. No more can broadcast advertising shape the tastes and desires of an undifferentiated mass market.
Ideas create new markets. Unlike market research, true interactive communication in many forms, provides a more immediate way to find out if those product ideas are any good. Mass Media were created to serve the marketing requirements of Corporations.
Today, corporations must establish more intimate relationships with markets because that is where the knowledge is. Engaging in ‘conversations’ with relevant markets will become an important source of knowledge and innovation.
The quality of this market intelligence has already (and will continue to accelerate in the future) proven to be more accurate than conventional research and will help determine market share. Without interactive communication efforts to create new products and markets will continue to take place in a vacuum. As manufacturers products come to reflect the information provided through the genuine conversations of interactive communication, instead of the ballyhoo and adversarial marketing tactics that poses as marketing today, companies will be far better served and so will their customers.
Oddly enough, with interactive communication, companies can have everything they’ve always wanted. Greater market share, customer loyalty and so on. All the empty promises that advertising has been promising their clients but failed to deliver!
This big business, with their handmaidens, advertising & marketing, have created mass media. And the biggest mass medium is broadcast, for which, read TELEVISION. And that is command and control management, complementing big business thoroughly. Both are all about imposing control top-down and both are driven by ratings, research and cost per thousand. Sad for them people are turning away from ‘broadcast’ in their millions! Why?
For a number of reasons.
They have acquired other interests and concerns, which broadcast is not providing for. And most importantly, people are heartily sick of the sterile pronouncements of corporations and broadcast media. And especially of advertisements! No longer are they affected by the old slogan that used to appear in shopping outlets, ‘as seen on TV’. Those days are over, if indeed they ever existed.
Current methods and practices in marketing are still based upon a long past society of mass communication with no regard for individual customer needs and as such, are in terminal decline. The fact is markets are changing a lot fasted than marketing, with the results that most marketing plans are obsolete before they have been written!
What most marketing departments fail to realise is that we continue to move into a new marketing age. This new age respects the fact that people in general don’t trust business, they find it insulting and demeaning to be so cynically manipulated and they are feeling this way in greater and greater numbers. There is an old adage in technology: Intelligence always moves to the edge of the network.
The same is true of most other things, especially advertising and marketing; there are far more intelligent ideas outside of advertising agencies and marketing departments.
Existing advertising agencies are fat, dumb and happy with current monopolistic profits and their general situation, so they badmouth any new idea, which threatens their incumbency or profits, or both. Advertising Agencies are also in denial until their profits are really threatened.
Just how dumb are they? The entire history of commercial television appears to have been a big plot erected on control from above rather than choice from below. Consumers have then been coerced into watching programs in which they have no real interest. The advertisers who pay for the commercial break believe, on amazingly weak evidence, that some great percentage of people actually watch their commercials.
The television advertising business is a science based on suspect data. That data is based upon a small sample, which decides how many households watch an actual programme, and doesn’t even measure the commercial break!
The way forward is through implementing interactive marketing communication programmes; all the problems of the past will disappear when that occurs.