Is the traditional client - agency model now out of date?

One of the most tantalising observations about the new technologies is that we tend to overestimate their effects in the short term, and underestimate them in the long term. I say tantalising, because if you apply this thinking to the impact of the digital revolution on the business of marketing, you run the risk of forever declaring false marketing dawns, just as the rest of your peers are celebrating a new age of marketing.

For the last five years, possibly even for as many as ten, people have been calling the end of what is loosely termed the 'traditional' agency model, and old media stack that it feeds. The argument goes that as better alternatives are found to traditional TV (better in this context meaning cheaper), more interactive and more precisely targeted, the TVR (TV rating) and TVC (TV commercial) will be consigned to the scrapheap of acronym history.

More acutely, the big agency model, with its TV producers and accompanying margins, will cease to function under the strain of media that is free or low cost. Put more simply, cheerfully spending one million pounds on production for a TV ad that received ten million pounds in airtime made reasonable sense. If the media becomes essentially no cost, and the only requirement for eyeballs is a clever creative idea, then the acceptable production cost is minimal. Clients will pay good money for creative, the argument runs, but not production.

All this makes perfect logical sense except that it hasn't happened. It's been around the corner for the last five years. Many agencies have, until recently, acted as though we were still operating in a pre-digital mid-1990s.

RECESSION IS THE CATALYST FOR CHANGE

Suddenly, everything has changed. Since the start of this year, a new marketing dawn has broken and everyone is struggling to capitalise on it. And, while digital is the solution, it has been the recession that has been the catalyst for change in many aspects of the client – agency relationship.

Demand side first. Everyone knows that client budgets are squeezed. The process began a few years ago with the professionalising of the procurement process, and a cultural shift towards greater scrutiny of marketing costs and results. The tangible fall-off in consumer demand in many markets has sent shock waves through client companies and their marketing budgets. Companies are making their money work harder for them.

Furthermore, marketers who have seen that deals can be struck everywhere in the world outside of work – buying a new car or a new house, for example – are expecting better deals from agencies and media owners alike.

Imagine you are the marketing director of a brand that goes on TV once a year. Your total marketing budget is in the two to three million range, and half of that is spent on trade support. That budget is now cut in half. You have a choice: support your brand in the trade or support your brand with your consumers.

More marketers are taking the second option, but instead of using the money in traditional media are opting for a digital consumer approach. Rather than spending a million pounds on TV, press or radio, they are spending 50, a 100 or even 200 thousand on something digital. That in itself brings with it an element of risk (which is the subject for another article) but assuming they are well advised, and have a properly joined-up digital strategy (and don't just spend it on banners or search), the results can be spectacular.

Better still, were they to go and find one of the progressive PR agencies that is fusing digital and PR to quite extraordinary effect, the results could be even more spectacular.

The traditional agencies that have spotted this are moving fast to avoid being disintermediated. I have had extraordinary conversations in the last few months with what used to be called advertising agencies. They now come to us and don't want to talk ads at all. They want to talk content and context.

Perhaps you expect that with a nimble privately owned business, but what about the advertising aristocracy that is JWT? Having made unguarded comments to Campaign that were taken out of context, I was summoned into its lavish Knightsbridge offices to set the record straight. The net result is that in one of our upcoming campaigns, the task of creating a low-budget, spiky viral film has been handed to … JWT. It, too, has seen the light and is rapidly evolving its business to surive the new economic climate.

QUESTIONS STILL TO BE ANSWERED

The question, of course, is will the delivery match the rhetoric? How well are the small creative shops set up to deliver a cost-effective brand experience, and make the margin on it?

I'd predict that the agency model will evolve to in-sourced event production, at the same time as much of the low-margin TV production facilities will be out-sourced. That requires this new type of enlightened agency to buy up some of the smaller experiential brand agencies to create a pretty unstoppable proposition. And the bigger networked agencies with their rush to low-cost production? Again, it works well in theory, and I for one am hoping that it works in practice, too. I'll let you know in the autumn.

In both these cases, it's good old-fashioned economics that is driving change at both a supply and demand level, not a sudden belief in all things Marketing 2.0. In this sense at least, the recession is a good thing for marketing by forcing the agencies to adapt at a faster rate than they would otherwise.

The big question remaining for me is how far and how fast is this change going to happen? We could be looking at the beginning of a genuinely new order for marketing in this country, or in ten years' time we may still have all the familiar faces around, but they will touting different wares. The answer once again probably lies in the broader economy. If we bounce back reasonably quickly into growth, change will be limited to what we are doing now; the old stealing the clothes of the new.

If we languish in a period of stagnation for longer, then it's hard to see how the more excessive aspects of our agency world will survive amid prolonged austerity. That may usher in a more streamlined, less colourful agency landscape, which would make sound economic sense, but would make the marketing world a duller place.

ABOUT THE AUTHOR

Will Harris is UK Marketing Director for Nokia.

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