A new agenda for advertising

Moray MacLennan, the new president of the IPA, outlines his plans to redress the imbalance between how advertising is perceived by people on the street and in the boardroom.

I'm sure that everyone who takes on the role of the IPA president thinks that they do so at a pivotal moment, a critical time, a tipping point. I'm no exception.

I have spent three months talking to agencies in all sectors, journalists in all sectors, clients, analysts and commentators, and they are all agreed on two things: the next few years will be a period of rapid evolution, verging on revolution, and that the industry body, the IPA, can play an important role in helping to ensure that things turn out well, rather than not so well, which is where "the President's Agenda" fits in.

The key questions I've been pondering are where and how the IPA, using its resources and expertise, can have the greatest beneficial effect for all of its members. Current services will, of course, continue, evolve and adapt, but what should be the focus? In my due diligence phase, there were two areas which dominated conversations, and I would imagine they will come as no surprise: the threats to freedom of commercial speech and the new digital technologies. It may come as a surprise to some, however, that neither issue will be the focus of my agenda, so I should explain why.

Public protection

There is a frustration in the industry, anger even, that advertising does such a good impression of a "sitting duck". The fact that seemingly any issue in our "broken society" can be resolved by restricting advertising. Frustration that simplistic and flawed arguments are so readily lapped up by journalists, politicians and the public; that the analysis and objectivity we to bring to bear on business and communication issues on behalf of our clients is so frequently absent; that we are being out-communicated - something we should be reasonably good at.

Legislators, pressure groups, non-governmental organisations, lobbyists and journalists have a list, and it's a long one, of what the public "need protecting" from. Tobacco was the greatest killer. I now read it's obesity. It will then be alcohol and, after that, it will be cars. The pattern is consistent - they have a strategy. It will not be enough for us to point out that pressure groups and NGOs often have commercial agendas that have little to do with what is right. Unfortunately, it is not even enough to be right. We need a strategy.

There is a demand from member agencies that the IPA should be more proactive, and it will be. A strategy is being developed. But there is a prerequisite for success, and that is to have a single voice; that single voice will be the Advertising Association.

The IPA is fully committed and, together with ISBA, will offer resources and input, but there must be a single leader - the AA. So, not "the Agenda", but while I'm on the subject, please sign Campaign's Action for Ads petition (go to brandrepublic.com/campaign), which is a welcome initiative.

New technology

And so to digital. Technology has changed and will increasingly change our society, marketing, the nature of communications and the shape of companies. It will affect agencies' structures, processes, income, products, measurement, training, hiring, and acquisition policies. Nevertheless, it shouldn't be the prime focus for the IPA for the next two years. The role of the IPA in all of this is clear. It is to offer relevant information and training, stimulate debate, help inform regulation and encourage accountability.

You'll be relieved to read that there is to be no "future according to me", as a) you've heard, and will hear, more than enough of those, b) I don't know what it is, and c) it's really not the point. It is not for the IPA to propose the answer. It should facilitate and stimulate, and we agency businesses will then make our decisions and fight it out.

So this revolution, seismic shift, change-or-die situation isn't "the Agenda". It's not where the IPA can have the greatest beneficial effect for all its members.

"The Agenda"

The focus of recent presidencies has been to increase the professionalism of the industry. They have been very successful, the achievements concrete, and it is because of this success that we can take the next logical step.

The IPA should now move from what has been an essentially inward-facing agenda to an outward-facing one.

To prove that there are no new ideas, the roots of this agenda can be traced back to Chris Powell's reign almost 15 years ago. He talked of "elevating the status of advertising in the business lexicon" and "building corporate awareness of the worth of advertising". We are now in better shape than ever to pursue this goal. The time is right for the IPA to write a marketing plan with this in mind - to have an objective, target audiences, a strategy, and success criteria. So here is the plan, which will form the backbone of my agenda and the reasoning behind it.

The objective here is to promote the value of advertising in the boardroom, so that we can establish ourselves as central to the success of brands, companies and the UK economy.

The audience is, first and foremost, as you would expect, the boardroom: chairmen, chief executives, finance directors and also those who directly influence them - equity analysts, pension fund managers and financial journalists. But boards do not operate in a vacuum, and two additional audiences must be addressed, one big and one small, in order to consolidate our position. The big one is the public.

At this point, you may be thinking that too much is being bitten off, but it is essential that we face up to the issue of public opinion and sentiment to what we do. People increasingly dislike the phenomenon that is advertising. This is something we cannot ignore.

The small audience is the Treasury. While we do work closely with the Department for Culture Media and Sport and the Department of Trade and Industry, the Treasury is at the heart of government and our industry is at the heart of its prime concern - the UK's competitive position in the world economy.

The messages

I will give you the argument to the boardroom as simply as I am able.

Boards, chief executives and financial directors are increasingly judged on organic growth ("acquisition destroys value, organic growth builds value", as the saying goes).

Intangible assets account for two- thirds of corporate value, worldwide. This is likely to increase, especially in the UK, as the economy continues to shift so dramatically away from its manufacturing base. Within this, brand value accounts for 20 per cent on average, and up to 70 per cent in sectors such as luxury goods.

Advertising's concern is exclusively with these two factors and, therefore, is fundamental to the value chain.

IPA member agencies are as good, if not better, at advertising than anyone else in the world.

IPA member agencies are, therefore, central to the future health of companies and UK plcs.

And that's it in a nutshell, but just to flesh it out with a few facts. The consultancy Brand Finance recently conducted an analysis of more than 5,000 listed companies, covering the largest 25 stock markets in the world. The Global Intangible Tracker 2006, published in association with the IPA, encompassed companies with a total enterprise value of $36.2 trillion (whatever a trillion is), of which £22.2 trillion represented intangible invested capital, 62 per cent of the total. Of this, brands accounted for 20 per cent.

Moving on to organic growth, analysis of the IPA dataBANK shows that an average £1 spent on advertising produces £5 in sales and £2 in profit. Based on an annual investment in total commercial advertising of around £31.4 billion, advertising can, therefore, be calculated to add value to the UK economy, over and above its investment in media itself, of some £160 billion per annum.

IPA member agencies lead the world. They are better trained, qualified and more professional. When it comes to monitoring and the measurement of advertising effectiveness, the IPA Effectiveness Awards scheme, launched 27 years ago, is the most rigorous.

Second, there is digital leadership. Broadband Britain is regarded as the laboratory for the world, and the IPA agencies are seen as the test tubes.

Third, creative leadership. In 2006, for the first time, the UK beat the US to the number-one slot in the world ratings for creative excellence. Despite the fact that seven-times more money is spent on advertising in the US than in the UK. I know it's not a competition, but actually, yes, it is. The report states that in 2006 "the very best UK work was the most brilliant".

But for some in this audience, a focus on creativity reinforces their feeling that what we do is right at the end of the process - a gloss, ever-changeable, unpredictable smoke and mirrors. They view our business as being at the commercial end of the creative industries, at the fluffier end of the spectrum. In order to ensure that it's viewed as central and integral, in the engine room of value creation, we need to reposition it as being at the creative end of commerce. We must show how creativity is inextricably linked to business success.

This audience understands the value and importance of a competitive advantage that is established deep in the customers' psyche that lasts, rather than the increasingly shortlived advantages that can be gained elsewhere. Creativity is, of course, what we do, but we need to talk about it so that our audience sees its value - I go back to the profit and loss statement and the balance sheet and, in particular, the newly required "narrative" or non- financial reporting.

Here, the message hasn't got through to the extent that it should have. Both non-financial reporting in the Business Review and financial reporting in financial statements are still weak when it comes to intangible assets. There is an information deficit, a "black hole" it has been termed, in company reports and investor presentations about levels of investment in marketing and how well it is working. The majority of companies required to provide greater transparency to acquired intangible assets under international accounting standards have chosen to hold back. This failure to get to grips with correctly managing intangible value creation (and, as the saying goes, "what isn't measured isn't managed") is a root cause of why advertising's contribution is so poorly understood in the boardroom. And the reason why there is still major resistance to rewarding agencies related to the value they create.

We will build on current programmes and introduce new initiatives to this audience, focusing on developing new customer insights and fresh ideas that are so fundamental to the profit quest.

Which brings me on to the customer, the public - the big audience. Here, the IPA's role is not to lead the case for promoting freedom of commercial speech, but to try to help ensure that the background noise to the main thrust of targeting the boardroom is positive, or, at least, not so negative. I agree with Campaign (I'm not stupid) that we need to "demonstrate the power of advertising as a force for good".

If people think that their lives would be better without advertising, we should aim to do at least one thing - make them realise it would be worse. Ultimately, advertising delivers lower prices and better products. It also provides information which gives people power - power to accept or reject; it provides choice. So the objective here is not to be universally loved and carried shoulder high, but for the result of what we do to be appreciated for what it is.

The public is the ultimate ally, not only for the boardroom, but also for government - and even the Treasury.

The Treasury, though, poses an interesting challenge. It is, after all, fairly busy and is not desperate to hear from us (although we did offer some input to its Cox Report). Nevertheless, it recognises that the creative industries are key to the UK thriving in competitive global markets (accounting for 8 per cent of GDP). It believes it's important to support it as "a vibrant creative industry that helps attract other businesses to the UK". The problem is highlighted in a recent Treasury report that talked of the "creative industries", music, design and fashion, but no mention of advertising, despite the £160 billion contribution that we make. The facts are on our side, we just need to communicate them effectively.

In terms of what the IPA will actually do to execute this plan, it is a matter of building on existing programmes (for example, the second issue of The Development of Intangibles Reporting has launched and is in the post to 350 FTSE chairmen) and, of course, developing new ones. Sadly, there is not enough room here to elaborate. And finally, not forgetting targets. These will be set so you can declare success or failure in two years' time.

It has been painful for the industry over the past few years, but the fact is we have managed to become more efficient and more creative. It seems to me to be the right time for an outward-facing agenda, promoting the value of advertising in the boardroom, the Treasury, and the public. It is far from being a plea for a seat at the top table, but rather a statement from an industry confident in what it does. "Over-ambitious" I can see written, perhaps in this publication, but ambition is not so bad. I have confidence in it being delivered because we are fortunate to have an organisation in the IPA that has the talent, dedication and drive to make it possible.

If the business is at a tipping point, then, hopefully, this agenda will help tip it the right way. If it isn't, then it can only do good.

- Moray MacLennan is the M&C Saatchi Europe chairman and the president of the IPA.