Shifting Sands... the creative agency dilemma

When the ground on which foundations are built becomes unstable, it behoves one to consider the long-term effects. The advertising agency offer is based on the foundation of consumer insight and understanding leading to effective communications on behalf of their clients.

It is necessary to look more closely at these shifts.

Media Independents

The rise of the media independents, driven by the need to manage large cash flows profitably and to create volume leverage against the (increasingly concentrated) media owners, has altered the advertising landscape, perhaps forever. Under this pressure most advertising agencies have unbundled their media planning functions and they have delegated (abrogated?) this to the independents.

Any CEO of an advertising agency quickly grasped that by outsourcing the media planning and buying functions, they would effect massive cost savings. These cost savings came from lower staff complements, less floor space and importantly savings in computer and software costs. They also lost the in house expertise and the ability to access and interrogate AMPS, RAMS and TAMS and mine this data for target market information.

Despite this, the creative agencies (now devoid of media expertise) still claim to offer "integrated communication" and "through the line solutions". But they rely on their Media Independent partners to do the AMPS "runs" and inform them on matters of target market definitions.

Some have filled the gap by appointing strategic planners who (in theory) will evolve communications strategies using whatever information they can lay their hands on.

The One Man Band

The rise of the media independents has also spawned a growing number of "one-man-band" agencies. A barrier to entry in starting an ad agency in the days prior to the media independents was the cost of setting up the media department and "accreditation" from the media owners. The media independents now offer this.

Very often these "one-man-band" agencies are founded on one client with whom an individual has had good relations in an agency over time and is trusted by the client. Because they are trusted they also provide strategic counsel. And they can offer this service at lower costs than the agency because their overheads are lower.

These "back-pocket" advertiser clients often pay the media independents directly and the "one-man-band" is, in turn, "paid a commission" by the media independent, not by the media owners as in the past. Or they are on a fee-based remuneration, again lower than the full service agency, because of their lower overheads. They are able to keep their overheads low by outsourcing everything that they are not specialised in; creative, media planning, production, etc.

And they represent a threat to the bigger "creative" agencies by offering a perceived better service at a real lower cost.

The In-house Agency

The growth of the in-house agency, in which a full range of services is provided, is a phenomenon that is also on the increase. A combination of cost savings, dedication and "client" specific strategic knowledge is the probable cause for this trend. Some buy their media direct and others make use of the media independents. They are often users of the software that provides access to AMPS, RAMS and TAMS.

Bottom line is these advertisers have decided that they can do it better and cheaper than an agency!

The Specialist Strategic Planning Agency

In the midst of all of this change are the break away, strategic consultants and brand planning agencies. Often ex advertising agency, they provide no more than they used to supply their clients in the full service agency. They provide the brand-planning expertise that was once the domain of the agency. And they get paid for doing this whereas, typically, this service was expected by the client as part of the commission earned, and was not chargeable.

Their independence from creative whim and Loerie (or Lion) hunting probably sets them apart as "objective" and "intellectually honest", in the eyes of their clients.

Global Campaigns

The "one message/all countries" strategy, increasingly applied by multinational advertisers, is also eroding the role of the erstwhile full service agency as well as the creative agency. For these clients, they often do no more than ensure that international material is translated and placed. Strategic insight and creative input is not needed and not paid for. Why hire top gun strategists and creative staff when there is no way to pay for them?

This trend is more perilous than meets the eye. The multinational/global advertisers usually negotiate their fees and/or commission structures in New York, London or Paris and they are generally lower than local advertisers are willing to pay. To make up the agency bottom line, an agency's local advertisers end up subsidising the internationals.

This puts even more pressure on local advertisers to seek less costly and more effective advertising solutions and they support the one man band, the planning agency or they go in house, to achieve that.

Black Economic Empowerment

A small one-band-agency, a small planning agency or a consultant does not attract the attention of BEE accreditation whereas the bigger agencies do. That the BEE process creates a medium term cost inflationary pressure cannot be denied. Meritorious or not, the cost implication is real and this, too, feeds the cycle of cost pressure, service expectation and delivery thus adding fuel to the dilemmas facing the "creative advertising agency".