Are Traditional Ad Agencies Relevant Anymore?

Posted on March 17, 2009

In an odd sort of way, I admire traditional ad agencies for their ability to sell a single tactic (advertising) within one part of the purchase funnel (Awareness) and collect some pretty handsome fees — regardless of whether the ads generate measurable sales.  I just wish they’d do one thing: ditch their primary association with advertising.  Let me explain.

In its purist sense, an advertisement is a one-way message (monolog) designed to communicate what the sender wants the recipient to know/believe.  In a perfect world, these messages would be timely, relevant, and targeted — but this is not often the case.   The ad would influence people to connect with (and ultimately buy from) a brand, the brand would make a lot of money, and a portion of these proceeds would filter back to the agency in the form of more retainers, production fees, and media buys.  OK — so that’s the perfect world scenario.

Here’s the reality: most people want a brand dialogue — not a monolog.   Agencies (more than any other industry) should know this — after all, they are supposed to be communications experts.  The emergence of the social web has changed the customer buying dynamic forever, and while most ad agencies have someone on their staff with a “social media” title, commitment to permission marketing is more than a person/department — it is an organizational paradigm shift within the agency itself.  Simply stated, you can’t shove a permission marketing role into an interruption marketing culture and expect success.

So what’s the answer?  Change the paradigm.

If we consider the purchase funnel (Awareness, Consideration, Purchase) then we know that there is a “courting process” that happens between a brand and a prospective buyer that culminates in a purchase.   It doesn’t usually happen after the first or second broadcast or print ad exposure.  So advertising (as a marketing tactic) fits neatly into the “Awareness” stage as effective ads can indeed create awareness for a brand, product, or service and if trackable (direct response), can direct this newly captured interest to the Consideration stage to be developed into a brand preference for purchase.

The problem is that advertising is just one of a dozen other “Awareness” tactics ranging from sponsorship, to contributing to a third party blog, to sampling.   So why make ads the center of the agency’s value proposition?   At the Consideration stage, there are more than another dozen tactics (hosted forums, hosted blogs, podcasts, blog radio, live chat on your website, etc.) to engage prospects and convert them to customers.   Finally, there is the Purchase stage where the culmination of the trust built through the Consideration stage results in a sale.  Then there is the continuous brand monitoring and referral/detractor behavior in online communities.

It is curious to me that any industry would describe itself along one dimension (in this case, one tactic) such as advertising. It is akin to a pediatrics doctor calling himself a pediatric flu doctor — as if he/she’s only licensed and qualified to treat a select age group for one ailment.  Companies today have many ailments — but all share the need to increase sales.  For too long, traditional ad agencies claim they can increase their clients sales — uh, provided that the answer is more advertising.

I believe they can do better than this.  I applaud the few ad agencies demonstrating the courage to re-invent themselves, however, I wished they’d ditch the word advertising and perhaps substitute a more appropriate word association and then actually structure themselves (process, staff, goals, etc.) toward doing the one thing their clients hired them for in the first place — to drive sales.  Particularly in today’s challenging economy, advertising doesn’t excite a client watching their business decline, but sales does.

We’ve actually developed such a transition program for traditional ad agencies seeking to make the change.

Think about it.

1 Reply to "Are Traditional Ad Agencies Relevant Anymore?"

  • Chris Norris
    April 8, 2009 (9:31 am)

    The title of this post is something I have spent quite a bit of time pondering lately. Your insight is dead on and I see a complete shift coming in the next 10 years that will completely change the agency landscape.

    The biggest issue with agencies today is that they are no longer agencies but really holdings in a portfolio of investments by the companies that put them under an umbrella. The ad agency or any other that has been bought cannot redefine itself as it needs to as you propose because the parent company that owns them will quickly remind them that is not what they do and not why they were purchased i.e. we have x agency over here that does that so let’s go sell the client their services also.

    Problem being the client is looking for ROI now more than ever and the agency is not equipped or empowered to respond. The end result is that they “talk to themselves” and the client complains they have x number of jr. level people working on their businesses and the cycle continues as client wants lower fees and the agency wants new and bigger business.

    The largest threat to agencies today is companies killing the retainer. They want ROI and demand that the initiatives that are proposed are “performance based” and that they deliver. Companies look at this from the perspective of “I am expected to deliver results and I expect results from my agency, I am not tying myself to a retainer without seeing ROI if at all.

    Branding was great in the 80’s and 90’s but now it is all about ROI which is a top down effect by the number of CEO’s that came from the financial side of businesses in the form of finance and operations. They want branding but more importantly they would throw it out in a heartbeat for consistent ROI that delivers profits.

    Unfortunately most Sr level corporate executives do not understand how to bridge all of the forms of messaging and agencies are so segmented now that there is not a consistent dialogue to solve for all of these issues so the agency world gets more and more segmented. This ultimately will allow for smaller, more efficient and smarter companies to start taking businesses from the bigger guys as ROI drives the need for lower fees and better results which agencies are not equipped to deliver on.

    If you have ever worked at a medium to large agency i.e. 250 people or larger and 4 or more locations, you will realize the challenges are glaring and the business model is about to change to the detriment of many.

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