The Media Playbook. Michael Drexler

real value to each client’s individual businesses and enhance operating efficiency.

       Committed relationships that share client concerns and help to expand long-term business opportunities.

       Digital media platforms, exchanges and trading desks that represent the best interests of the client with full operating transparency.

      These are just some of the important steps that need to be taken if agencies are to continue to grow and thrive with their clients. The rapidly changing media world has become increasingly complex on many levels. It requires a better client understanding of how an agency functions today and what clients believe is lacking. In my opinion, agencies must begin to think more like consultants or the consultants will take over the agencies.

       MD 2014

      Is the Advertising Agency Business Going Full Circle?

      “Emphasis on ROI and metrics that leverage every marketing investment … is creating significant pressure on clients and agencies.”

      It is no surprise that the recent reincarnation of McDonald’s’ relationship with the advertising agency business may be changing the industry … back to the future. Specifically, creating a dedicated agency that brings back an integrated full-service team of creative, media, research and account management.

      

      

       All Advertising Disciplines Working Together

      When clients and agencies first began working together the various disciplines of marketing were generally under one roof. Different agency functions were brought together when needed, with an account lead representing the agency to the client. It seemed to work well for many years until financial resources began to sputter. Clients looked for a different compensation arrangement based on fee rather than commission (only the media buying function remained largely commission). Clients wanted more for working media and to pay agencies compensation only for specific scope of work on their business. If the workload requirements changed so did the fee, and agency cost accounting was based on time sheets plus an overhead factor and a markup for profit. Agencies believed that creative and account service were paramount and that’s where the money was spent for talent. Media got the short end of the stick until media departments learned they could build their own business with outside (usually non-competitive) clients in addition to the agency clients and charge separately for planning and buying. The next step was the media department spin-off with media creating their own agency name and their own business, complete with staff, resources and financial structure.

      For the last several decades the agency business existed with media agencies completely separate from creative agencies and almost every function within the holding companies responsible for their own P&L. Integration was undoubtedly more difficult and the idea of holistic marketing was more of a dream than a reality.

      The emergence of the digital world has made it much more complex. Many digital agencies have sprung up, often specializing in one form of digital or another (such as search, social, mobile, video, etc), and creative became more attached to media planning and buying. It continues to increase with options such as native advertising, bots, branded content, sponsorships (and more) along with publishers and DSPs involved with programmatic buying, trading desks and ROI metrics. And the holding companies (and independent agencies as well) are making digital acquisitions so they can stay ahead of the game and feed off new revenue streams. But the real integration still lags in many cases, especially between traditional and digital media.

      Along comes McDonald’s creating an alternate model that seems to fit more harmoniously with the agency of the future. Under the Omnicom holding company a new custom-tailored agency named “We Are Unlimited” has emerged dedicated to most all McDonald’s marketing functions. It’s reported that the majority of people will come from Omnicom (and OMD) as employees of the new agency and some will be brought in from outside sources as partners. But they are all fully committed to working together on behalf of McDonald’s. Even the compensation arrangement will have a performance (KPI) component.

      What McDonald’s is saying is that marketing must be viewed in its entirety and that all resources must be brought to bear on unified objectives. Everything must work together with a common focus. Compensation should be built on staffing and resources (including overhead costs) but the real profit margin should be a shared responsibility that allows McDonald’s to also benefit from achieving certain goals established at the outset. I expect most of the arrangement will be spelled out in a very explicit contract that all parties will agree to and sign off on. Transparency, of course, will be the most obvious ingredient.

      The concept of bringing several agency disciplines and media resources together as an account team unit (embedding creative) is also being done by some other holding companies as greater emphasis on ROI and metrics that leverage every marketing investment in the short term is creating significant pressure on both clients and agencies.

      Forming a new dedicated agency as Omnicom has done for McDonalds may be a snapshot of the future as more clients reexamine their business requirements in a complex and fast-changing digital environment. It is a fallacy to argue that this model may not be able to attract top creative talent, because big accounts have always attracted top talent. As far as finding the right agency partners, that’s what the review team is supposed to do. And it also helps to obviate the holding company turf wars and conflict issues by creating another alternative that perpetuates shared interests. Eventually the new dedicated agency is planning to bring on some smaller accounts as it secures its footing. But bringing creative and media resources back together is something to watch in the quest for simplification.

       MD 2015

      The Agency Model: Bent, Not Broken

      “If the agency is held monetarily responsible for a brand’s success in the marketplace, then they must have a bigger seat at the marketing table.”

      It seems that everyone has declared the agency model broken. I disagree. It is just bent out of shape by at least three seismic marketplace fractures, to which it is trying to accommodate.

      Fracture One: Short-term Accountability – Beginning in the mid-1980s major agencies merged into holding companies in a drive for growth and economies of scale. With unexpected suddenness, old relationships were strained by the quest for greater profit margins and the loss of familiar talent that was eliminated in the shuffle.

      The new agency holding companies realized they could make even more money by forming media buying companies. Buying services, while introduced in the late 1960s, never received the imprimatur of legitimacy that was to follow in the wake of the new goliaths. Today, the media agencies are larger than their creative counterparts. For example – it is reported that Mindshare (a top-ranked media agency) bills roughly $24B worldwide, while JWT (a sister WPP full-service/creative agency) bills an estimated $13B.

      With all this money at stake, everyone became instantly accountable. The average CEO’s tenure is now less than two years and a CMO can expect even less security. Instability at the top trickles down and can infect relationships throughout the ranks.

      Furthermore, to ensure economies, purchasing departments were granted license to partner with marketing departments in the management of agency resources. Their cost-cutting measures create further financial tensions at agencies. Compensation consultants, of whom I am one at times, have occasionally been known to exacerbate the situation.

      Finally, around the beginning of the new millennium the search for the holy grail of IROI (immediate return on investment) began in earnest. Everything needed to be measured as we in unison chanted “accountability.”

      Fracture Two: New Compensation Practices Naturally Follow – By holding the agency responsible for advertising and sales results in the marketplace, the standard for