By Andrew Patterson
The old adage that “50% of advertising doesn’t work, you just don’t know which 50%” is possibly one of the most quoted lines in marketing courses.
Advertising agencies have long dominated the sector planning, producing and executing campaigns on behalf of their clients, often with eye watering budgets, and lavish client entertainment allowances to match.
But as marketing budgets tighten and new advertising options emerge, including the advent of social media, many businesses are choosing alternative strategies to communicate with their customers placing pressure on agencies to redefine their business model.
Traditionally agencies have received a commission on advertising placements from media companies as well as charging clients for work undertaken on their behalf, usually on a retainer basis.
While that model largely still exists, agencies are increasingly being forced to provide additional value and insights for their clients beyond simply planning and booking the advertising schedule and then banking the commission cheques that roll in.
Traditional model under pressure
Competition in the sector is also intensifying with full service agencies now being challenged by smaller start-ups who can use digital technology to their advantage as well as being able to operate without the overhead incurred by larger agencies.
Justin Mowday, CEO at Auckland based DDB says the agency model has always had to adapt to change and right now is no different.
“Our particular advertising model has been around since our founder, Bill Bernbech pioneered the model in the late fifties, early sixties, so he's the B in DDB. In fact, he's the guy that Mad Men and all those shows were written about.”
“I believe he was also the instigator of the agency model where experts in different fields all come together collaboratively around a client's problem, and that's pretty much the fundamental approach ad agencies still work on today.”
“One of the big changes we've seen recently, which has been driven by technology, social media, and various other areas like data, is more specialization in different areas, but more requirement for them to come together as one group around a client's business. That's quite a shift from the way we operated previously.”
DDB structures its work flow into teams with each team working on specific client accounts.
“An example of recent innovation was the launch of Dynamo, which is a new part of our group offering. For the first time that puts direct marketing people such data analysts, data scientists alongside traditional media planners, all in the one room working together. That seems fairly simple to give a client a cohesive programme but it’s a shift from the way we worked previously.”
Trying to understand more about which 50% of the advertising spend is actually working has also become a big focus for full service agencies dealing with increasingly value driven, cost conscious clients.
“One of the transitions we've seen over the last decade is to move away from gut instinct and trial and error to some really fact based decision models about what works and what doesn't. With these models we can now look at a campaign we used to do in a direct marketing sense and make the call to say, actually, it would be more efficient, according to the data and the response levels, to do that on TV and vice versa. Or we can do something that would have included mass media, outdoor, and maybe even digital components and take that below the line thereby driving it direct to consumers.”
The waves of creative disruption that are sweeping through marketing as much as technology also require a constant process of adaption.
“History is littered with examples where pressure and change has brought about some really interesting innovation, and I think that's exactly what's happening in the advertising industry right now. We’ve had to fundamentally reassess some of the ways we work and some of the principles that we adhere to in this new digital era."
“However, what makes this new environment really exciting to work in is that we have the opportunity to not only talk to consumers on a one way basis, and do that really well, but now we can also include two-way engagement in the mix. We can get a much deeper impression of a brand or a client's business with that consumer and to get them to respond. Then we can take that a step further, not only respond, but potentially then shape the marketing from the consumers perspective and actually co-create some activity that may happen between the brand and a consumer. That's an amazing step forward from where we were previously.”
“I think marketing is at its most powerful when we move to those sorts of phases. We challenge ourselves internally by saying we have to create content, or a piece of engagement with a consumer so powerful that they want to play with it, participate with it or pass it on. That can still be a television commercial such as the Westpac flatties campaign we did recently or Lotto Wilson, people pass that on. If it's so compelling in its content, they'll stop their MySky box, fast-forwarding to watch that bit of content. Often, they'll also share it with other people as well.”
Social media impact
But how much has social media really transformed the landscape and how are companies embracing that opportunity it offers to engage with customers, particularly given the speed at which the marketing landscape is changing?
“In all honesty, the report card has been mixed. Unfortunately some brands have leapt into that space and treated it as a free channel to push promotional messages at people. I think that's really harming the opportunity it can offer. We need to remember that people go into social media not to see brand messages, or ads, or to see price promos, they go into social media to connect with other people.”
“To make it work, you have to find a really relevant way to have a role there. You have to understand the consumer, you have to understand their motivation for being there, and then think about how the brand can play a valuable role in that process. A good example was a campaign we did for Lindauer last year based around the girls' night out. Of course Facebook has great functionality where it allows you to set up events. So Lindauer could play a really valid role in enabling women to get together with other women to have a girls' night out, using the event functions. So you have to find a relevant way to have a presence there. Don't just pop up and slam your message at people.”
“I also think social media is one of the areas in the digital landscape that we're still figuring out as an industry. We're past the true experimentation phase, that was two years ago, and so we've learned some principles as an industry. We know some things that work and don't work, but the great thing about the whole digital space is there's constant innovation. There are always new things you can do. So I think the modern form of an ad agency in direct marketing is embracing some experimentation.”
“Increasingly we’re seeing clients willing to put aside some money out of the marketing business to try something different or give something a go that they've never done before. It’s actually been a while since clients have been willing to experiment which is really refreshing.”
Gen Y the new target
Gen Y has become the new force for marketers to consider.
Digital natives, savvy, opinionated and street smart this generation aren’t as prone to accept advertising messages as willingly as their parents.
As employees in a sector popular as a career choice with young people, they also create challenges around the expectations they have of their employers.
“As employers we have completely reevaluated how we mentor and harness their talents. It is challenging. They have expectations beyond any workforce before them. They want to move ahead, be faster than the generations previously. We also find they have a lot less patience. So that forced us to really think about how we mentor them. We also adopt really detailed development plans. What we've found with Gen Y employees is if they know where they're going and approximately what time frame they might get there, it actually works pretty well.”
“15 years ago, when I started out working at Saatchi's, the client gave you the brief, we burrowed away in a room for six weeks and you pitched your idea to the client at the end of that process. Now we're in the room together, we're around the table and working collaboratively. I mention that because in a Gen Y sense, that gives them a lot of opportunity for input and for their ideas to be heard. They start to learn why some of those ideas are right and others are wrong, why some fit with the strategy and some don't, within that process.
But as customers, Gen Y provide a completely different set of challenges.
“One of the things we’ve found with Gen Y, which is really encouraging, is they have a much greater social awareness and appreciation of the way that they want to live in the world and in the way they want to be seen and treated. What's also important with Gen Y is that they appreciate a two way conversation. That's not to say you can't do some of the more traditional advertising as well but that depth of involvement and the ability for them to have their say and contribute to the brand or be a part of the marketing in some way, that certainly works really well."
“Even in the new world of advertising and marketing, the same principles still apply. I need to get your attention, in some way. I need to reward you with a piece of entertainment or usefulness that is compelling enough that you will listen to my message, remember it and then act on it. So really nothing's changed. This is exactly what Bill Bernbach did in 1961 with Volkswagen, and that's what we're still doing today. Same principles, we just have new ways to engage with consumers. And it's no different with Gen Y. We need to get their attention, we then need to engage them with something that's really relevant, and these days what's also important is that we reward them as consumers.”
While there's plenty of creative disruption blowing through agency land, don’t expect the advertising agencies themselves to disappear anytime soon.
|Founded:||1945 globally, 1996 in NZ|
|NZ turnover:||not disclosed|
|NZ annual growth rate:||not disclosed|
|Major clients:||Cadbury, Clorox, Coca-Cola Oceania, George Weston Foods, Hutchwilco, Lion, NZ Lotteries, NZRU, McDonald’s, Mobil, SKY, Stihl, Tasman, Tourism Australia, Volkswagen, The Warehouse, Westpac, YWCA|
|Recent highlights/awards:||Named NZ’s Most Effective Agency at the Effie awards. Named Digital Agency of the Year for Aust/NZ by Campaign Asia-Pacific magazine.|
|Ownership:||75% DDB Group Worldwide (Omnicom), 25% local ownership|
|Intl Affiliations:||DDB Worldwide, Omnicom Group|