By Jeremy Bullmore, campaignlive.co.uk, Friday, 19 November 2004 12:00AM
A: In the US, towards the end of the 19th century, there was a large number of highly competitive media agencies. They collected readership data and ad rates for many thousands of newspapers and magazines for which they then acted as brokers. They worked on commission and they competed on price. Advertisers bought space - empty space. They bought not advertising but the opportunity to advertise. As now, they were keen negotiators; and as they extracted more and more bangs for fewer and fewer bucks, the media companies' margins became painfully slender. They had a choice: either resign themselves to the eternal poverty of the commodity supplier; or find a way of making the space they sold more valuable.
Enter the full-service advertising agency. "Fantastic news, Mr Advertiser! Not only will we sell you the space, we'll also invent the words and pictures to fill it with - and at no extra cost!" Such agencies prospered.
You can't, of course, write good advertising without knowledge of the product and the market - so agencies progressed from cut-price suppliers of empty space to top-table business counsellors. Advertising expenditures rose inexorably; clients got rich; commission rates went unchallenged; and for a surprisingly long time, everybody was happy. Nobody felt the need to query the price of creative work because nobody paid for it.
With the collapse of the commission system and the decoupling of creative from media, all that has changed. Both bits, creative and media, increasingly beset by procurement personnel, find themselves faced with an ancient and familiar choice: either resign themselves to the eternal poverty of the commodity supplier; or find a way of making the service they sell more valuable.
Since 1972, the smarter ad agencies have been telling their FMCG clients that the only way for them to resist the predatory demands of ruthless supermarket buyers is for them to build strong brands, free themselves from the single dimension of price, and achieve differentiation through style and consumer insight. Thirty-two years later, the smarter agencies are starting to take their own advice.
So to return to your question: yes, you should certainly be worried.
But you know what you've got to do about it.
Q: As an agency chief executive I'm fed up with client procurers screwing our margins to the floor while we're powerless to prevent it. I see the IPA is wrestling with the idea of introducing an industry ratecard. I know a ratecard isn't an ideal answer but it's surely got to be better than nothing. What do you think?
A: I hope you've already ploughed through the ponderous history lesson above.
As long as you feel powerless in the hands of the new procurement police, you'll remain powerless. How much time and money have you invested over the past 12 months in marketing your own agency? And by marketing, I don't mean cold-calling itinerant marketing managers or going on cruises. I mean building your own brand through performance, publication and platform.
I mean making your own brand more valuable.
Turning to the IPA for salvation is understandable; it's also unworldly.
Can you see Procter & Gamble, Unilever and Nestle expecting the Food Manufacturers Federation to publish a ratecard with which to confound the wicked procurement police at Tesco, Asda and Sainsbury's? And do you honestly believe that all your competitors would meekly comply with such a ratecard when a small and surreptitious discount could land them that morale-boosting, headline-grabbing, ego-buffing, £19 million lager account?
Q: Dear Jeremy, will creative agencies generally always have suits and planners, or are we moving towards a time when creative agencies just do creative work?
A: It's possible for artists and writers "just to do creative work". It's not possible for advertising people "just to do creative work". Books and paintings don't have to do anything. Advertising has no other purpose.
No good advertising can be written in ignorance of product, market, competition, history, distribution, and reputation. Advertising needs to be planned; but not, of course, always by planners.
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This article was first published on campaignlive.co.uk