Media: Why agencies must change with the recession

Completing his look at the downturn, Chris Ingram examines how agencies need to react to evolving clients and consumers.

A good few years ago, I read a business book called Paradigm Shift. Its theory was that every industry sector, when new, advances in leaps and bounds and then, over the years, the changes become tiny incremental ones. Then everyone is left fighting over tiny changes and the sector starts to vegetate. Then something happens - often an outside force - that, like an earthquake, completely changes the landscape.

I thought, erroneously, that media independents (agencies) were going to do it in adland and, although it felt like a revolution at the time, it didn't resolve nearly enough of the problems in the sector. But is now the time, given the unique combination of pressures I mentioned last time: the recession, technological change and environmental concerns?

Before assessing the agencies' position, it's worth looking at the main influences on them.

CONSUMERS

They are responding in a variety of ways and the old groupings to describe target audiences that most in adland hang on to are now even less relevant. However, some generalisations are safe:

- The majority of consumers are worried (and often depressed) about their own financial situation or, increasingly, that of the country as a whole and its likely effect on them.

- They are increasingly price-conscious and enjoy being so. Value for money is almost an obsession. Being "connected" in some way is crucial - be it for socialising, entertainment or information, or a blend of all three. And it is certainly no longer the preserve of youth.

- The empowerment this new technology has brought to consumers has become hugely important to them in a short space of time. Their changing expenditure patterns and priorities reflect this.

CLIENTS

Just as the UK government is forever worrying about its "special relationship" with the US, agencies worry about their relationship with their clients. "We used to be regarded as business partners and now we're just suppliers" has been the common complaint.

There are several reasons for this, but a key factor is that the marketing department has changed dramatically over the years:

- Its role is far narrower within its company than it used to be (for example, half of all marketing departments have no say in pricing).

- Its numbers are far fewer, they are less experienced and they are very busy.

- They are not cathedrals of strategic thinking, they are very busy processing "stuff" and their staff reflect this.

- Advertising is an area of significant expenditure, so it is assessed by the procurement department. Agencies have been generally woeful at dealing with the procurement department, so it is now prominently embedded in adland.

- Cost-cutting is regarded as a necessary, repeatable process and not a one-off. This is a fact of life and reflects the pressures the clients themselves are under.

- So, too, is "accountability" and ROI, even if, quite often, the wrong thing gets measured because it's easiest to do. This makes search marketing and creative uses of social networking highly attractive and clients are often frustrated with agencies' slowness to embrace these developments.

THE MEDIA

Overall, the classic print, TV and radio media have endured a torrid time in the recession, being hit by the double whammy of the economic climate and the migration to the internet of consumers and advertising budgets. Crucially, the increase in internet advertising "supply" and the medium's apparent accountability are having a severe knock-on deflationary effect across all media. Inevitably, there will be mergers and closures and this process has barely started.

However, although newspapers and TV will be diminished, they will not be killed off. They will need to rethink what business they are in. For example, newspapers can't afford to be just about "news" or "paper". Increasingly, they are migrating across different platforms and learning to adapt as they go.

Whatever commercial TV's problems, it is clear that event-led TV is going to be a power for the foreseeable future. Migrating this to other media to create experiences in different formats will be part of it. The record industry's extraordinary slowness in seeing that its business model was changing from recorded music as the profit driver to events should be a lesson for TV and adland.

In the world of communications, mobile and social networking are key parts of the landscape. They are developing and changing at great speed, driven by the consumer and technological innovation.

AGENCIES

So, where does that leave agencies? At the crossroads, I think.

- Right now, there is less advertising; less need for conventional advertising and more need for the complicated, less profitable stuff with a lower unit cost, which is a real pain to organise and integrate.

- Clients want to spend less and they want to know what they're getting for their money.

- However, adland has been hugely reactionary for more than 50 years. It didn't embrace commercial TV; it didn't embrace radio; it took 18 years to embrace media agencies and it is only starting to embrace the internet.

- So, if you are a big, slow-moving agency, these are scary times. However, this is a great time for new and small businesses with open minds, agility and a "can do" attitude.

- It's now all about the quick and the dead. Of course, big agencies who can re-engineer themselves should also be excited about the future. (This assumes they have been properly empowered by their owners who have worked out what the new-business model should be.)

So here (see box) is my big "to do" list for agencies - the big, established ones. Having met some of the smaller ones, I know they could teach me a lot more than I could teach them.

- Chris Ingram is the founder of Ingram Enterprise chris@ingramenterprise.com

THE 'TO DO' LIST FOR AGENCY CHIEFS

1. Be interested in what interests your clients and not you. They're interested in sales. Walk the floor: how often do you hear "sales" discussed?

2. Forget adland, you're in commsland. If you cannot accept that, prepare for a long and painful decline of your agency and your career.

3. Think of the media not as advertising media but as communications channels and retrain your staff to think that way too. Brainwash them if necessary.

4. Regardless of the recession, hire the best people, including those with general management skills. You ducked it in the good times, but you need them even more now. (And luckily for you, they will cost you less in this climate.)

5. Get more enquiring minds into your agency. Only enquiring minds can cope with today's speed and complexity of change - and make sense of it.

6. You've turned your prime asset, "creativity", into a commodity. How do you make "creativity" equate to "innovation" in clients' minds? They are desperate for innovation in many forms and pay handsomely for it (except in the case of agencies).

7. Stop thinking like an agency and think like a consultancy. Complexity is good: embrace it, rather than worrying about your profit margins - they will follow.

8. Where's your thought leadership? What's your understanding of the many-faceted consumer in this market? Where's the original research? Why aren't you leading them in this uncertain, confusing and forever-changing world? And having done it, ensure you get covered in glory.

9. If you haven't got the skills for this new world, get training - fast. If that doesn't work, buy it in BUT don't make it part of your holding company's 400 company collection to be either crushed or ignored. Embrace it as a key part of your new leadership team.

10. Now, and only now, concentrate on how you're going to make money out of this approach.

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