the evolution of client-agency relationships
DESCRIPTION
Overview of the evolution of the agency-client relationship in the context of the socialization of media Helsinki National eMedia Conference KeynoteTRANSCRIPT
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Can a weaving spider collaborate?Or,A circular story about the evolving client-agency relationship
Mark LinderWPP Global Client Leader
National eMedia Conference 2008IIR FinlandHelsinki21 November 2007
+44 774 00 7927
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Advisors
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“JR”
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“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
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A “destination” model of communicationBesides, it’s easy to blow your own horn
Brand marketerInterpreterDecoder
The Mass Audience
Many receiversEach de-coding
InterpretingEncoding
Each connected with a group
where messagere-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
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Commission business model rewarded mass
Agency takes risk
Buys blocks of media space
Offers to client at a profit
Performs value-adding services
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Clients and agencies co-owned the business problemThe word “brief” did not existClient-agency partnership was in shared risk/ reward
Agency investment
Client spend
(Agency revenue)
Client profit
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A sidebar why the “USP” hinders true marketing
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The USP
1. Each advertisement must make a proposition to the customer: "buy this product, and you will get this specific benefit."
2. The proposition itself must be unique - something that competitors do not, or will not, offer.
3. The proposition must be strong enough to pull new customers to the product.
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“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.”
--Jill Caldwell, a social researcher
The USP helped create the Compliance School of communications
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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
"Nobody reads ads. People read what
interests them, and sometimes it's an ad.“
--Howard Gossage
"Nobody reads ads. People read what
interests them, and sometimes it's an ad.“
--Howard Gossage
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Osgood-Schramm (1954) Communication is a two-way processDid we hear?
Message
EncoderInterpreterDecoder
Message
DecoderInterpreterDecoder
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And there were a few other developments…
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Events of the 80’s and 90’s
• Re-engineering and Activity-based Costing Procurement moving into services
• Private agencies selling to public companies, monetizing the relationship
• High p/e source markets aggravating this
• Separation of media function
Result: damage to the trust between advertiser and agency
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And at the same time, the emergence of new technologies
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Acceleration…
The Internet Singularity
Loosely defined: the idea that a deeper and tighter coupling between the online and offline worlds will accelerate science, business, society, and self-actualization
1.Democratization and “macro-ization”2.Power law distributions and “long tails”
3.Internet ecosystems and network effects4.The Innovators’ Dilemma
The Internet Singularity
Loosely defined: the idea that a deeper and tighter coupling between the online and offline worlds will accelerate science, business, society, and self-actualization
1.Democratization and “macro-ization”2.Power law distributions and “long tails”
3.Internet ecosystems and network effects4.The Innovators’ Dilemma
Gary William FlakeMicrosoft / MSN
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Democratization
– Computing– Content– Commerce– Community
Democratization of Content
• Documents: Office, LaTeX, HTML• Images: digital cameras, Photoshop, iPhoto• Movies: camcorders, DVDs, iMovie, Xbox• Audio: MP3, GarageBand, podcasting• Publishing: blogs, RSS• Software: open source, VB, Flash• Research: search engines, wikipedia• Meta Data: tags, play lists, recommendations
Democratization of Community• Communication: IM, email, VOIP• Distribution: RSS, BitTorrent, P2P• Social: Friendster, blogs, Y/G/M groups,
Meetup• Romance: Match.com, eHarmony• Virtual Economies: Everquest, WoW• Reputation: eBay, PageRank• Preference: collaborative filtering• Affinity: implicit relationships via similarity
Democratization of Commerce• Hosting: Y! Stores, Office Live, Amazon• P2P Sales: eBay• Transactions: PayPal• Marketing: Overture, Adwords, AdCenter• Syndication: Adsense, RSS• Development: Web APIs• Trivial Work: Mechanical Turk, ESP game• Business Intelligence: Web analytics
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1966
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The new media landscapeNot how do we reach us, but how is it affecting us?
Dual Sync40 Million Homes
DVR3.5 Million Homes
Gaming80 Million Homes
Video On Demand 16 Million Homes
Interactive Program Guide20 Million Homes
Virtual Channels2 Million Homes
Ad Targeting108 Million
Homes
65.2% cell phoneU.S. penetration
Satellite Radio &
Internet Radio1.5 Million
Subscribers / 70%
Penetration
Interactive/Placed
Based Out of Home –
400M BB’s
Internet / Broadband150 Million Users / 57 Million BB Users
DVD Player50 Million Homes
Portable Audio
15 Million Units
CustomPublishing
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We are worked over by the media
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What about “non-media”
Advent of actual UTILITY in marketing!!
Why promise to be something, when you can actually DELIVER that thing!
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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
"I believe the next stage of brand advertising is going to be in the realm of 'branded utility,"'
says Palmer (with Johnny Vulcan)
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What role does an agency have?
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Android
SoftwareOperators Semiconductors
Handset Commercialization
Plus $10M in prize money for
developers!
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OHA launch video
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38Source: 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.
Is it any wonder who is on top?
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Examples
• Nike Run London• Innocent’s Fruitstock• Nokia’s Royal Artist’s Club• Charmin’s bathrooms• Flickr’s “Interestingness”
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Crowd-sourcingGardeningMe SquaredInterestingness
-- Flamingo, for Nokia
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Jennierose, crowd-sourcing
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As technologies socialize, virtual becomes real24
Niche social networking the fastest route to face-to-face networking
The content (or vertical interest groups) is the momentum to move social networking into the face-to-face world
Niche
The more you have in commonThe closer your connection is
The more likely you will meet up face-to-face
EVENTS
GIGS
DATING
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Business models are evolving
Relationship Knowledge Relevance Interaction Effectiveness
Opt in Dialogue Profile
Blyk
Advertiser-supported MVNO
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To recap…
1. Marketing was “accidentally” defined through TV advertising – the new technology that caused social change
2. 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
3. “Web 2.0” is having a similar impact on social change as television. How are agencies interpreting this?
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What is the role of agencies in this context? What is the role of media owners?
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Landscape is changing, and everyone seems interesting!
Tactical
Strength of Advertiser Relationships
Strategic
Traffic and Inventory Control DirectIndirect
Advertising / OptimizationNetworks
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 RelationshipsAre 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 Expandinginto Lead Generation
Ad Management
Online/ Mobile Advertising Landscape
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New media owners provide marketing services
WPP
Yahoo
Microsoft
AOL
Ad ServingAd
NetworksAd
ExchangeMobile
MarketingIn-Game
Advertising
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Aimed at long tail marketers only?Who has become Google’s largest customer?
Number of producers that realize those numbers
Sale
s o
r p
op
ula
rity 20% that = 80%
of volume
The long tail
Flow of effect
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Microsoft takes an educator role
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Interactive Digital Media & Search
Mobile
Data & Analytics
ID Consultores
Century Harmony Viral
Boole
Who are all these guys?WPP entries
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New models
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“Six smart people around a table can solve any problem”
We have separated into sectarian disciplines
• Research into its own industry• Strategy and planning into consulting• Media into its own agencies, separated from creative agencies• Media agencies from quantitative analytics (some exceptions)• PR was separate, is still separate
• Marketers change jobs more frequently• The traditional agency is no longer the hub• The media owner provides marketing solutions• Integration is a bigger challenge
-- Shelly Lazarus, CEO Ogilvy
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“Group” consolidation vs single-point accountability
By STUART ELLIOTTBank of America plans to end five years of having a single advertising holding company in charge of its marketing communications. 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.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.”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.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.….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.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.
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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. “
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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
Productiongoes to specialists
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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
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InsightsResearch
Media/AnalyticsPlanning
HolisticClient Team
One-to-manyCommsdesign
production
One-to-oneRelationship
Lifetime Value
IdentDesign
Concept/ Program
Leader
Social Networking
Branded utilities
Shopper/ Channels
Shopper/ eCommerce
Media/Buying
ExperienceDesign
Search
Mobile
OOH
SNS Content
Events
EthnoQuant
PerformanceMeasurement
Workflow/ CMS
Econometric modeling
Collaborative networkers
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A larger spider
InsightsResearch
Media/AnalyticsPlanning
One-to-oneRelationship
Lifetime Value
IdentDesign
Branded utilities
Shopper/ Channels
Shopper/ eCommerce
ExperienceDesign
Search
Mobile
OOH
SNS Content
Events
EthnoQuant
PerformanceMeasurement
Econometric modeling
Workflow/ CMS
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To recap…
1. “New media” companies see themselves as solving business problems, not just selling space
2. It takes time and effort invested to understand the dynamics of this fragmented marketplace
3. Meanwhile, marketers face the challenge of “pulling it together”
4. Single-point accountability migh be a more valuable concept than consolidation. Agencies who want that must develop programme management capabilities
5. Clients, agencies and media must become collaborative networkers
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In summary…
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Client of the future
• Strives for collaborative marketing management
• Does not tolerate sectarian planning
• Picks a primary partner as integrator and programme manager
• Moves to shared risk/ reward agency (and media) compensation
• Encourages trust. Does not allow procurement to take over business management
• Is not just about the blockbuster…takes risk, looks for everyday innovations
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Agency of the future is a programme manager
• Invests in understanding the sociological effects of the new media
• Re-builds strategic and conceptual skills, and invests in ideas and solutions
• Invests in leadership skills (this is different from “management”) to better collaborate with partners
• Embraces accountablity and is willing to be compensated accordingly
• Builds business and contracting skills
Insight into the socialization of all technologiesBringing its own investments(sound familiar?)
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What does this mean in Finland?
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Finland is an originating country
• The Nordics launch many born-global brands – not all B2B • Education orients youngsters to the world• Stable social democracy• Know how to trade• Confident yet liked in a leadership setting
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Polar access to the world
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My offer
• Help you – anyone – who wants to learn more about the other cultures
• Help work out a framework for market entry – how to identify and solve all the problems– Partners and distribution– Local marketing services
• Help you understand the new technologies and their impact on marketing
• Help you build back trust in the agency relationship
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To recap
1. Originally, clients and agencies were business partners, agency a programme manager
2. Cheap media and USP-thinking turned us into concept factories distributing impressions rather than advisers on new media
3. Trust declined during the 80’s
4. Technology democratised, consumer participates. New media much more complex and interactive. Agencies have to help understand
5. 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
6. Finnish clients and agencies have “originator” mindset
7. WPP is here to serve your future requirements