Michael Farmer’s book, Madison Avenue Manslaughter, predicts a stark future for advertising agencies, facing tougher workloads and lower fees. This has forced industry leaders to explore new revenue models. "The situation raises a fundamental question about exactly what business we are in," commented one of the COOs at The Blueprint’s recent event. "Is it communications, advertising, IP, or product design? This complexity of services is creating confusion about how agencies describe themselves. We need to put an end to ‘scope slippage’ and get paid for everything we do.” Another diner added: “An obvious way to combat this hamster wheel is for agencies to move further upstream into business transformation, ensuring the ear of the C-suite. This has tended to be the tactical preserve of the big consultancy firms, but by championing the transformational business value of effective marketing, agencies deserve an equal footing in this respect."
There was a strong consensus among the Working Dinners group that agencies need to take a collective stand on pitching for free. This may need to be addressed at holding company level, but the long-term benefits would be clear. Traditional management companies are astounded at how many insights and innovative, business-building ideas are given away by agencies during a competitive pitch. With the communications landscape becoming ever more complex and interconnected, it feels like this situation may need to change.
The Working Dinners’ agency leaders agree that charging by the hour also needs to disappear, with a greater focus on billing for value rather than day rates. According to one of the diners: “There needs to be a shift from retainers to projects, or perhaps even to a subscription model. We are a design-led business, solution-based. Creativity is a big part of that, but not the only factor. We need to be agile and to constantly prototype, to offer a different – but equally valid – style of consultancy to the likes of, say, McKinsey. It means we have strong production teams who aren’t afraid of scope, and the consultancy positioning means we can charge for all work, including client services.’’ Another diner commented: “The solution is to focus intensively on ‘the agency’s UX’ – building a strong 'capabilities culture' to enable a full suite of solutions to be offered to clients, under one roof."
Several of the diners’ companies are experimenting with product-based performance metrics, which – after working closely with the leaders of a brand to align around an agreed set of objectives – would see the agency being paid a proportion of products sold. The Blueprint’s view in this area is that entrepreneurialism should be at the heart of the future agency model. The best agencies have a unique, powerful blend of strategic acumen and creative magic, and tying the output of this directly to sales metrics is a clear signal of confidence in the value provided by the agency as a critical, engaged business partner, rather than as a passive supplier.
(Picture credit: Son of Alan)