What is the right set-up when working with an agency? Recently, I have tried to answer this question in a workshop I held with several marketing executives. In this blog post, I will give you a short summary of the outcomes.
The solution is not obvious, as the relationship between advertisers and their agencies becomes more and more complicated, resulting in an increasing level of frustration on the client’s side. Recent research shows that client trust in agencies has been eroding dramatically in the last six years.
The reasons are manifold. Above all, digitalization has fundamentally changed the demand for marketing services. It is no longer just about creativity as consumers get information from numerous sources and from an increased number of media channels. The crucial point is that the communication environment has become more complex.
Three consequences of a complex communication environment
First, advertisers demand real-time communication instead of campaigns and advertising analytics to precisely target their communications. Thus, IT plays a more and more important role in marketing.
Second, as the number of consumer touchpoints and media channels increases, more and more specialized agencies are used. Research shows that the average multinational company operating in a large European market has about 50 agencies. But who steers its multi-channel management?
Some clients see this task as being on the agency side. These clients demand more and better collaboration among their multiple suppliers, each addressing a slightly different role but all under the brand or company umbrella. Good collaboration is seen as a prerequisite. Clients ask that their multiple agency partners co-operate.
Third, the number of collaborative projects has increased at the expense of long-term contracts. This results in a less intense work with the respective agencies. In return, those invest less due to missing security and volumes in qualified personnel. But just in the light of digitalization, expert advice is needed.
By consequence, most agencies currently don’t fulfil the changed needs of their clients resulting in a significant erosion of trust in agencies by clients. We have a rather unhappy picture of client-agency relationships which is frustrating, fragmented and stands in sharp contrast to the last millennium’s stereotype of advertising agencies seen as Holy Grail of innovation. Today, however, when a CIO is looking for inspiration, he rather makes the pilgrimage to Silicon Valley to visit some start-ups.
“Clients want to trust their agencies and want these ‘trusted’ agencies to collaborate in a more trusting relationship with each other. But in both areas, trust is declining.” (Jeremy Caplin, CIO Aprais Agency Assessments)
The underlying challenge lies within the fact that digitalization is even questioning the business models of the agencies’ clients. From their perspective, it is more about introducing completely new products and services for the digital customer. Sometimes this entails fundamentally different service processes. It may also result in the need to change the company’s structures and procedures. This is more the field of management consultants given that such projects require a high level of expertise in process modeling and re-organization.
What has to be done to solve the problem?
Creative minds might target their efforts towards the business of their clients:
"The task for tomorrow's agencies will be more about developing business cases. They must provide their customers with target-specific communication products that support marketing and with which value and profit can be generated in a digital market", explains Christoph Bornschein, digital agency CIO.
I am currently doing research in the field of advertisers' expectations of agencies. As part of this, over the last few months I have I interviewed more than 60 marketing executives, which clearly showed that the expectations that advertisers’ have of agencies are shifting:
First, real-time communication, customer analytics and multi-channel management are in the center of this demand. Advertisers seek experts who are able to improve their company’s processes and organizational structures. Behind this lies the need for multichannel management.
Second, when it comes to the preferred organizational structure, the full-service, as well the lead-agency models are perceived to be outdated. The first one is seen as too ponderous and expensive, and the latter represents a bottle-neck for creativity.
In contrast, the single-source agency model - where the customer steers multiple agencies - has much potential for innovation, but the downside entails high project management efforts. From the clients perspective, the agency model of choice seems to be the fluid network. With this, the client manages many collaborating agencies. Each agency is responsible for specific communication means, such as advertising, social media, press, events and so on.
There has to be a facilitator in the center of the fluid network covering planning and consultancy. This facilitator leaves the implementation to its network partners and ensures an infrastructure is designed to guarantee the agencies to get quick and easy access to all relevant information, documents and systems.
In analogy with IT-management, the facilitator can be seen as scrum master because the preferred way of collaboration is agile project management. The disadvantage of high project management efforts is more than compensated by the high innovative potential through pooling the know-how of the network partners.
However, most of my interview partners ignore the fact that agile project management needs strong, continued interaction between them and their agency. But there is strong evidence that the model only works when the clients themselves are ready to collaborate and professionally integrate all departments.
“Clients who are not open to understanding their role in how well things work between themselves and their agency partner cannot and will not get the best out of them.” (Jeremy Caplin, CIO of Aprais)
The way in how advertisers and agencies work together is a crucial factor in the digital era. Thus, one may ask why creative people still work in the agency’s offices when it’s a proven practice of management consultants to realize their project work on the client’s site. The answer actually lies in the close interaction between advertiser and agency. So agency guys, join the client!
Moreover, transparent mutual assessment and feedback drive continuous empowerment. Thus, whenever trust is becoming an issue, all parties should initiate a structured process of mutual evaluation and dialogue in the spirit of a true, open partnership. The time for straight-up-and-down-thinking is over. Transformation needs heart and mind, the zany and the traditionalists.
Thus, the advice I give to my scholars at Brand Academy, and the advice that I personally believe is the most important is trust. Build a trusting relationship with your agency, and reap the rewards.