Advertising Agencies are in a Commodity Business

Advertising is salesmanship mass produced. No one would bother to use advertising if he could talk to all his prospects face-to-face. But he can't. - Morris Hite

Traditional ad agencies are fundamentally broken and ripe for innovation. This isn’t exactly new news but it is something that bugs the heck out of me because a) I truly think there is a ton of potential for agencies b) I don’t read much about agencies making the hard decisions to actually do something to avoid being a commodity (and I read A LOT about the ad industry) and c) they profess to know brands but don’t follow their advice themselves. To quote my friend David Cook, “It’s like going to a dentist with bad teeth.”

Agencies are distraught over how quickly clients switch agencies, how their creativity goes unrecognized by clients, how their profits are being squeezed despite the value they can create and the thinking they offer, how they’re marginalized and are not given a seat at the table, etc., etc.

For the most part, they still think through the lens of mass media, they’re all over the map in terms of clients, taking any piece of business in any industry, they don't know their client's business like they should, they apply for, win and tout awards that are flawed and meaningless with regard to the purpose for which they were hired – selling (hence, my quote to start this post) and on and on.

Any market in which the only critical factor is price is by definition a commodity market. - Scott Bedbury, former head of marketing, Starbucks

The fact is advertising agencies are now in a commodity industry and it’s a situation of their own doing. They are not unique in what they do, what they say, how they say it, what they offer, and they are unable to tie what they offer to results. Real results. They simply don’t stand for anything.

Yet they claim to know brands and positioning. They counsel clients on focus, on clear brand differentiation, on talking to customers. They need to take a dose of their own medicine or they’re going to quickly become more irrelevant and commoditized than they already are.

For fun I took a look at the web sites of five huge, history-rich and and very traditional ad agencies and evaluated them. (NOTE: The agencies I used to work for and with didn’t fit the huge size or the quintessential Madison Ave. shop in my mind so I'm not trying to push the peanut under the rug on that one.)

I call it my Agency Irrelevancy Scorecard®. It's a proprietary, top-secret system that takes a look at their theme/tagline, client industries, any proprietary trademarked processes, how they do on touting real business results, and what their core competency is.

Leo Burnett
Line: We’re idea-centric.
Clients: electronics, greeting cards, fast food, credit cards, cars, cigarettes, cereal
Trademark process:
Start clean – “we use exhaustive analysis to get to where a client’s brand can live and where a big idea can flourish.”
Amplify – “brand amplification is our media-neutral approach of taking a big idea and amplifying it so that it resonates with consumers.”
Stay restless – “we’re never quite satisfied. We believe the only way that our brands can become, and remain, leaders is by pushing ourselves and our work harder than the competition pushes us.” (This reminds me of a Chris Rock bit where he was talking about people wanting credit for things they should be doing, “I take care of my kids"- YOUR SUPPOSED TO YOU DUMB@$#%*!
"I've never been to jail"- WHAT YOU WANT, A COOKIE?”)
Results that are hokey: There is an entire section called “Delivering Results.” It consists of internal ratings of creative work and awards that have been won. Those aren’t results. Results are how much did your work contribute to sales, and how much are the sales.
Their core area of expertise (industry, medium, method): none listed

DDB
Line: “Before we describe "how we do it", it might be an idea to tell you what the "it" is. The "it" is the creative generation and execution of ideas that change the way people think about brands.”
Clients: beer, tourism, board games, jeans, grooming products, food, cars
Trademark process: None
Results that are hokey: Overall, they do a good job in most case studies to put some number to it, e.g. Unilever Marmite “command a 30 percent price premium and double digit growth.”

However, they also have this one for bud.tv, which as an initiative holds the record for loudest sound of a toilet flushing away money in an online space.

“created a video spot that reached a viral audience of 2.4 million viewers on video sharing websites, blogs and via email across the country. In two week period after its release 300% increase in traffic and 340% increase in online discussion.”

Now, let’s assume bud.tv were actually a successful product – 2.4 million viewers doesn’t mean sales. Remember Steven Heyer’s “Don’t mistake presence for impact.” And, since I doubt the goal of the campaign was to do something in a two-week period, I’d be curious why they ended the time period there.
Their core area of expertise (industry, medium, method): none listed

Y&R
Line: We energize business.
Clients: copiers, cars, tools, soup, airlines, professional services
Trademark process: BrandAsset® valuator – energy is a quantifiable value in a brand. “only Y&R can measure it”
Results that are hokey: Their work for Land Rover led to “1.4 million unique visitors to a site and 11,000 requests for the new LR2.”
Their core area of expertise (industry, medium, method): none listed

Ogilvy & Mather
Line: An agency defined by its devotion to brands. We believe our job is to help clients build enduring brands that live as part of consumers’ lives and command their loyalty and confidence.
Clients: professional services, hair and soap products, cellphones, routers, toys, food
Trademark process: proprietary way of thinking and working called 360 degree brand stewardship ®
Results that are hokey: I can’t find any specifics on their site, which is one way to avoid creating hokey results. In their Motorola work, they did say that their “360 Degree efforst have had a dramatic impact on the brand, increasing market share and making it top-of-mind with hip, tech-savvy consumers.”
Their core area of expertise (industry, medium, method): none listed

J. Walter Thompson
Line: We create ideas for our clients that people want to spend time with.
Clients: liquor, oil & gas, apparel, television, cars
Trademark process: none, I can barely navigate the web site
Results that are hokey: Not even a description of the campaign, just some posted work
Their core area of expertise (industry, medium, method): none listed, which, like the others, likely means they'll do it all, if you just pay them

Again, most agencies simply don’t stand for anything. They can't claim to be the best at this type of marketing, or the expert in this particular industry, or to have found a great way to tie what they do to real business results. If you work for an ad agency and are reading this, think about where you work. Does it honestly stand for something that in the mind of the customer makes it more remarkable than the others? If so, let me know. I can think of less than a half-dozen agencies that are nationally known that have created a unique, relevant space for themselves. The rest are rearranging the deck chairs on the Titanic.

My next post will be thoughts I have on a few possible remedies that could help pull agencies out of the commodity business and try to ensure relevancy in coming years.

Comments

[Scott]

What are the 6 agencies that are differentiated?