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Marketing Chessboard: Past, Present and Future of Advertising

If you don’t understand the marketing chessboard your ad agency may be in checkmate. The marketing chessboard has been drawn up by clients and advertising agencies have watched it happen.

The strategic side is where the real dollars are and where the real growth will be in the future. One good indication of this is that clients spend more money with consultants than with agencies on a revenue-to-revenue comparison. In addition, this high ground revenue stream is growing 30% - 40% each year. Is there any doubt where the future is?

If you're looking for help on understanding the challenges this presents in growing your marketing firm please contact us.


Marketing Chessboard: Past, Present and Future of Advertising

  1. 1. Marketing Chessboard Understand the new landscape advertising agencies face with the high ground often occupied by consultants and the low ground covered by design firms and freelancers who are thrilled to compete against agencies on the basis of price. See why agencies are getting “middled,” and why clients don’t care. It’s all explained in this powerful outline. In one sweep, we will show where agencies are now and the direction in which they’re heading. Consider this a call to change and a warning not to stand still.
  2. 2. Overview  No longer do companies battle each other in the marketplace. The battles are being fought on a marketing chessboard.  If you don’t understand the marketing chessboard, your marketing firm may be in check.  The marketing chessboard has been drawn up by clients, and advertising agencies have watched it happen.
  3. 3. Ad Agency Situation Analysis The Client Is Changing  Clients today are looking for business-building ideas, speed, and firms that understand how to stay within budget.  Now is the time to think more strategically to determine exactly what your clients want – and deliver it better than anyone else. It’s time to generate exceptional creative, faster than ever, while boosting profits and lowering costs. The Consumer Is Changing  The consumer today is exposed to more messages than ever before and from all different types of media. Great creative can make a brand standout and generate that so important conversation. Now is the time to rethink the business and generate new ideas targeted to this new consumer – to make your agency more successful. Win awards. Attract new clients. Boost staff morale.  Time for more creativity from all members of your team… and to have a creative process that is faster, better, and more profitable… clients will be more satisfied and loyal. Marketing Is Changing  Social media, conversations, listening to the consumer and more are changing the way agencies do business. Clients are demanding more. Consumers are becoming smarter. Now is the time to change how you view marketing – to improve your agency’s social skills and get an unfair advantage over your competition.  It’s a time when technology can bring you inside information, to make your creative more focused and insightful…. speed up your operations, to make you more efficient and cost-effective, to make your agency more profitable and even grow your business. You Need To Change  This is a fantastic time to be in advertising, full of incredible opportunity for growth and success – if you’re open to change.  If you fail to change… you will be increasingly redundant. It truly is “change or die” time.  To change successfully, you must question everything you do. And discover new ways to do it better!
  4. 4. Introduction to the Marketing Chessboard 1. The battle for mindshare in the boardrooms of corporate America are being played out on a daily basis– and with billions in fees at stake, firms around the world are investing to better understand the game. 2. Positioning yourself for success requires a thorough understanding of the players, environment and “rules” of the game. 3. Most marketing firms fail before they even start to play the game – they don’t understand the rules. 4. The most common symptom of their flawed approach is the all-too-common assertion that the client “Doesn’t get it!” 5. Reality check: The client “Does get it!” The client understands the game they are playing – a chess match where the stakes for companies and individuals are high, with little time and few clearly distinguished options for trusted-partners (players) in this competition. 6. Positioning yourself and your agency as a viable business-building partner is vital – to do otherwise relegates you to mid-level management as a production resource.
  5. 5. Strategic Internal External Tactical This is the Marketing Chessboard…
  6. 6. Strategic Strategic up top – meaning the higher you go the more strategic you are. This is where the big decisions are made - business decisions, brand decisions… Internal External The lower you go the more Tactical – meaning the decisions are smaller and smaller. At the very bottom are the hundreds of small decisions to be made. Tactical Internal simply means you work inside the corporate world. All the layers, roles, responsibilities, organizational charts and structure can be outlined on the left side of the grid. Everything over here is the land of clients and their staff. External is the outside world that affects the clients world. This is the land of marketing firms, consumers, media, messages and more… How it all works will become clear soon…
  7. 7. Strategic With the basic Marketing Chessboard outlined we can place a few navigational landmarks: The CEO is firmly established at the upper left – deep inside the organization and is in a very strategic position. With many direct reports we’re only showing a few players in the strategic arena. Internal External Lower on the board is the rest of the organization, again with only a few players represented. This is where the marketing department works hard on ensuring the strategy is implemented. Tactical CEO A Few Landmarks … The CEO has 5 primary responsibilities they think about all the time: finance/banking; direct reports; a few key customers; the board; and the one they just discovered a few years ago - the brand. KEY POINT: Most CEO’s Feel they understand their brand, and never see it as an issue. What they may have is a “sales” issue, a “growth” issue, a “competition” issue. These could all be brand issues, but the CEO will miss that… Until a trusted advisor informs them of this!
  8. 8. Strategic From their roots of just sCellEinOg advertising space, agencies evolved into full-service strategic partners to clients – owning the entire right side of the board. By the 60s and 70s ad firms were titans in the world… able to shape brands, markets, culture. Internal Old Agency World External This was the peak of the traditional advertising agency. Giants like JWT, Y&R, Ogilvy & Mather, et al were firmly established as leaders in the field. These titanic ad firms fully occupied the tactical side of execution and delivery to media as well. Most of their revenue was being generated by the media commission…. and media buying is about as tactical and external as you can get. Tactical Dominance of the Traditional Ad Agency… Their strategic ideas created new markets, transformed industries and drove business growth.
  9. 9. Strategic Internal Audit Old Agency World External Tactical CEO The Auditors Show Up… Required by law, an outside group of individuals investigated the client-side business. Soon they became experts and specialists in the various industries they studied. Meaning, auditors soon discovered each bank, as an example, operated slightly differently – some were more profitable than others. And the audit houses started to grow…
  10. 10. Strategic Management Consultants Form Relationships With CEOs Internal Audit Old Agency World External Tactical CEO Management Consulting Armed with inside knowledge and specialization, the audit firms recognized there is value to what they soon called “Best Practices.” Management Consultants were born and were soon growing faster then the audit houses. Arthur Andersen, PricewaterhouseCoopers, Deloitte Touche, Tohmatsu, Ernst & Young etc soon owned the strategic high ground. They were able to deliver operational insight that improved the bottom-line: Tangible Results!
  11. 11. Strategic Management Consultants Own the Strategic High Ground… Internal Audit Old Agency World External Tactical CEO Management Consulting (Trusted Advisors) The ad agencies ignored this growing threat and continued to focus on their own industry. As the large shops grew and expanded around the world, mergers became the new strategic playground. After all, they were making tons of money with the tactical execution (media), more so as the number of media outlets continued to expand. From three television channels to dozens and later hundreds, each time the media grew so did the commissions. Of course the traditional agencies failed to notice that with each media impression the net value of that media buy was being reduced. The introduction of the Holding Company model (WPP Group, Omnicom, Publicis, Interpublic) kept the merger mania strong and drove agencies to go public. They needed the revenue for more mergers. As a public company they opened their books. The clients started to notice how much revenue the agencies were generating… And asked themselves “were there any ‘Tangible Results’ from this expense?” …As Ad Agencies Focused on Growth
  12. 12. Strategic Strategic Consulting Marketing Consulting The Management Consulting Concept of “Best Practices” Spreads… CEO Internal Audit Old Agency World External Tactical Brand Consulting As the traditional marketing firms continued their focus on mergers and maximizing revenue, they took their eye off the strategic high ground. After all, everything above the strategic line was in essence given away for free – and did not represent a significant source of revenue. This vacuum was filled by a new breed of consultants focused on the external world: Strategic, Marketing, Branding, bringing the “best practices”, expertise, and specialist into the world of research, marketing metrics, branding. They were getting paid for their ideas and insight! Management Consulting (Trusted Advisors) The number of media messages continued to explode and soon the value for any one impression was almost nothing. The CEO started to recognize that all the ideas agencies generated resulted in more advertising for the agency, and less results. More advertising, more media buys, more revenue for the traditional ad agency. Fewer and fewer break-through ideas that could transform the CEO’s business. Marketing was becoming more and more tactical.
  13. 13. Strategic Throughout the history of advertising, there have always been the bastard children of marketing: the small specialty shops, design, PR, direct. These have also been known as Below-The-Line (BTL) and are included as part of the full service agency model. Small independent shops started to grow as they were able to offer a lower cost alternative to the full service agency. Advertising Fragments and Specializes Internal Audit Old Agency World External PR Promotion Creative Design Direct Tactical Web Media Specialty CEO Management Consulting (Trusted Advisors) Strategic Consulting Marketing Consulting Brand Consulting BTL And with the advent of new technology (desktop computers, etc.) that lowered the cost of entry into this growing market, soon there was an explosion of specialty shops competing for the client’s marketing budget. Some of the specialists, like the large direct marketing firm Wunderman, became best-of-breed in their field. The larger agencies and the holding companies noticed this, and soon they were competing on this new playing field. Creating or buying them up. A very tactical playing field…
  14. 14. Strategic Strategic Consulting Marketing Consulting Brand Consulting New Agency World Is Reduced Internal Audit Old Agency World External PR New Agency World Promotion Creative Design Direct Tactical Web Media Specialty CEO Management Consulting (Trusted Advisors) The traditional business of advertising was larger then ever, more channels, more opportunities, and bigger budgets. But their world had been reduced – squeezed between the new consultants strategically and a new breed of creative shops tactically.
  15. 15. Strategic Management Consulting Internal Audit Old Agency World External New Agency World Promotion Tactical (Trusted Advisors) PR Creative Design Direct Web Media Specialty Brand Mgr CEO Old Reporting Point: High Up the Organization In the old days, just a few short years ago, the traditional agencies reported to a brand manager – someone who controlled budgets, who had been with the company for many years, who knew and understood the agency world. High up the strategic ladder this person was able to recognize and act on true business building ideas, shifting budgets and resources as needed… Strategic Consulting Marketing Consulting Brand Consulting
  16. 16. Strategic Management Consulting New Reporting Point: Deep within the Organization Internal Audit Old Agency World External New Agency World Promotion Tactical (Trusted Advisors) PR Creative Design Direct Web Media Specialty New Mgr CEO The new breed of client contact is now a tactical manager: younger, less experienced in the ways of agencies, handed budgets and deadlines, and expected to only be in that position for a short time before moving on through the organizational chart. Today the average tenure for a marketing manager is 18 months... Strategic Consulting Marketing Consulting Brand Consulting KEY POINT: 18 months is about the average client-agency retention rate today. Brand Mgr
  17. 17. Strategic Management Consulting Internal External New Agency World Promotion Tactical (Trusted Advisors) PR Creative Design Direct Web Media Specialty Audit New Mgr CEO •Results •Fast •Budget What this new breed of client is demanding from the market, the creative vendors she works with, is “show me results (meaning something I can put on my résumé), do it fast, and most importantly do not go outside my budget!” Strategic Consulting Marketing Consulting Brand Consulting
  18. 18. Strategic Management Consulting The strategic side isn’t worried about incremental growth. Internal External New Agency World Promotion Tactical (Trusted Advisors) PR Creative Design Direct Web Media Specialty Audit New Mgr CEO This is what we call the Bipolar Client: The strategic side is focused on areas of great import – where perhaps a “Big Idea” can once again transform an industry... The tactical side is focused on containing cost and providing incremental growth. Strategic Consulting Marketing Consulting Brand Consulting New Bipolar Organizational Focus Crush the competition anyway possible, operationally, politically… And hope marketing does NO HARM! •Results •Fast •Budget Provide Incremental growth and do NO HARM!
  19. 19. Strategic CEO Strategic Management Consulting Internal External New Agency World Promotion Tactical (Trusted Advisors) PR Creative Design Direct Web Media Specialty Audit New Mgr Consulting Marketing Consulting Brand Consulting New Bipolar Organizational Focus Crush the competition anyway possible, strategically, operationally, politically… The line between Strategic and Tactical was once open, fluid, where ideas, staff, and agencies could freely roam up and down the organization. Today we call it the FREE LINE – much of the work done by a traditional agency above this line is for new business, or for free to win or keep the account. Very little advertising revenue is created above this line. XXXXXXXXXXX FREE XXXX And in the fractured and fluid market that all creative services firms compete, this line has become a barrier – IF you are perceived as being “creative” or tactical in anyway, the market/competition will push you back down, into the world of tactical. Even if you have all the strategic chops in the world – just ask Y&R (huge branding experience) why their client Accenture went to Landor (“strategic”) for their branding work. •Results •Fast •Budget Most of the revenue for creative firms/traditional ad agencies is generated down here through projects, mark-ups, media billings, and/or timesheets (retainers).
  20. 20. Strategic CEO Strategic Management Consulting (Trusted Advisors) Internal External PR New Agency Promotion Creative Design Direct Tactical •Results •Fast •Budget Media Web Specialty World Audit New Mgr Consulting Marketing Consulting Brand Consulting For Agencies That Don’t Change, the World Gets Smaller… Crush the competition anyway possible, operationally, politically… And hope marketing does NO HARM! XXXXXXXX – FREE XXXXXX We’ve all seen the once great advertising agencies - Cliff Freeman & Partners, DMB&B, WRG, etc. – forced to close up shop. Unable or unwilling to recognize the changing Marketing Chessboard. Revenue on the strategic side continues to grow at a whopping 20-30% each year as more and more companies strive to find that trusted advisor that can give them an edge over the competition. Revenue on the tactical side only grew at an anemic 2-4% over the past decade. Almost all of that growth in the specialty disciplines, often at the expense of traditional media.
  21. 21. 6 Ramifications For Agency Leaders 1. Understand that the Marketing Chessboard will continue to get harsher for agencies who don’t know how to adapt. 2. Learn from the tactical firms and how best to challenge them:  Work with many points of contact within the organization.  Work cheaper and faster.  Live on a project basis.  Less emphasis on strategy and more on tactics.  Dumb down account service to reduce costs.  Offer more “face time” with project managers running the work. 3. Create an action plan to adapt now:  Take the best thinking from tactical firms and best practices from strategic firms.  Find your own trusted advisors.  Understand how to manage change. 4. Build your business model so you can prosper in this new environment:  Your agency needs to be positioned and branded properly – focus and discipline are key.  Most of your competitors are operating without any strong positioning other than a hazy label.  There is little concentrated branding going on among agencies, meaning few agencies have a clearly defined brand. 5. The way forward is not clear, and it certainly doesn’t resemble the past.  The future belongs to those agencies that try the most to see what sticks.  Having a clear and easy to understand expertise helps you survive and grow.  Keep building your strategic skills and understand the consulting methodology – those skills will greatly help you adapt and grow in the Marketing Chessboard. Understand that to live in the past, you will die. Adapt to the present and you can survive. Plan for the future and you can really prosper – a Chess Grandmaster anticipates every move!
  22. 22. Strategic CEO Strategic GO TO THE TOP: Challenge the Management Consultants with better processes, procedures, methodologies and tools; build a consultancy around packaging “Business Building Ideas” with outstanding creative execution. Better reports. Better communication skills. Better results. Management Consulting (Trusted Advisors) Internal External PR New Agency Promotion Creative Design Direct Tactical Media Web Specialty World Audit New Mgr Consulting Marketing Consulting Brand Consulting Ad Agency Options… Crush the competition anyway possible, operationally, politically… And hope marketing does NO HARM! XXXXXXXX –FREE XXXXX GO LOW: Become a low cost provider focused on speed, efficiency, measurement… •Results •Fast •Budget GO VERTICAL: Cut through the free line by becoming the “world leading authority” (expert) on a market, audience, approach, category, etc GO AROUND: Create a strategic flanker brand – a marketing consulting firm separate from your agency. GO DEEP: Develop your skills at all aspects of communication, including operational/internal. Become an expert at improving teamwork, communication, etc. For your clients, streamline their operations, help with internal branding, etc. In a fluid and fractured market there are many options for change – and many paths to successful growth KEY POINT: You are no longer limited to just being an “ad agency”
  23. 23. Leaders' Mission: Create Change 1. Adopt an agency vision (focus)  Where is our agency going?  How do we get there? 2. Get the agency staff change ready  Review the “as-is”  Discuss options  Envision a future 3. Review your operational strategy and adapt  Redesign processes to drive the structure  Build a “to-be” structure supporting the vision  Support the redesigned operations with all agency resources  Align your employee programs with the agency’s new vision 4. Make the changes needed to support your vision  Ensure that heavy duty training is an integral part of planning
  24. 24. One Last Reminder The sign of a highly successful enterprise is its willingness to move beyond methods that are currently working well with the expectation of discovering something even better.
  25. 25. Brought to you by the Sanders Consulting Group  Operating over 30 years, helping over 5,000 agencies  Known around the world as the leading new business consulting firm  Working with some of the best managed agencies on the globe  Selected as the new business training provider to the largest agencies in the world  We show you how to win, not just play the game Visit www.sandersconsulting.com e-mail: info@sandersconsulting.com Call 412.897.9329 Bob Sanders President Sanders Consulting Group New Directions For Agency Growth