Fling Media

Tuesday, August 01, 2006

The Agency Model is Dead

I hate definitive statements. I struggle to even make such a bold claim. But the belief that “agency model is a dead” is so core to my beliefs as someone that has worked as a creative professional for many years, that I could not ignore it any longer.

I know what you may be thinking, it seems pretty contradictory for a new agency like Blue Flavor to claim that agencies are dead, but it is the model that is dead, not the agency itself. It is our belief that agencies need to adopt a new way of thinking in order to survive, as the clients have already adopting a new way of working.

In the early days of discussing what we should be, we unanimously agreed that we did not want to adopt the traditional agency model, we saw that it was broken and not long for this world. So much so that before we even had a name, we referred to ourselves as “the anti-agency agency.” While we are hardly out to change the world, we think this belief at the core or who we are and how we work.

So in this article I’ll do my best to explain our beliefs and why I feel that the traditional agency model is six feet under ground.

The Decline of the Traditional Agency

There are many signs of the decline in the traditional agency. The first, most obvious is that the leaders in the advertising agency space, for example the Publicis Groupe Chairman and CEO Maurice Levy recently saying that ad agencies must “change, change and change.” Or there is the recent merger of Draft with Foote Cone & Belding, which AdWeek described as “believed to be the first time a so-called ‘below-the-line’ shop assumes control of a ‘traditional’ agency.”

Those who watch the agency space have been noticing these shifts occurring over the past few years, not just in the advertising space, but across the board to niche agencies focused on public relations, graphic design, and even the web.

It seems to defy logic that in this age of multi-faceted outlets of information and a ever-growing media landscape that business should be booming with more avenues of reach, not seeing an industry scurrying to restructure.

But that is exactly the problem.

The On-Demand Age

Since the late-eighties, early-nineties, we have seen a massive proliferation of information sources. First came cable television, providing people with information, like news or weather, 24-hours a day. If that wasn’t a big enough revolution, then came the Internet with the promise of all the information in the world through our computers, completely changing how we gather information. Most recently we see the overlooked digital media revolution, simplifying how we store and retrieve information, from music on our iPods to seeing traffic jams on our mobile phones.

Over the past 20-years information has shifted from a push model to a pull model. Take news for example, a few years ago we got our news pushed to us through the method of a morning newspaper at our front door, or the local news broadcast at 11 PM. The time and medium of delivery was defined, we needed to adjust our lives in order to receive it.

Today how we gather information is far different. We pull it from various sources when we need it or when it is convenient to our schedules, our expectation is information will always be available on-demand. The pull model is becoming an increasing pervasive method of gathering information, only to store and retrieve it later using the method or medium of our choice.

How does this impact the Agency business? Here are five coffin nails to the traditional agency model:

Coffin Nail 1: Segmentation

With the proliferation of information sources, we see increased segmentation of media channels that cater to specific audiences, like MTV is to youth or Lifetime is to Women. The cable industry, who had a enormous spectrum of spaces on the dial to fill, quickly coined this specific broadcasting as “narrowcasting,” though it could also be called niche marketing or target marketing.

With so many choices available to the average consumer, people looking to use traditional media to advertise or sell their product or service have a much harder time getting the word out. The power of pervasive media channels was chiseled away. For a company to reach the same number of people they did just a few years ago, they must spend a considerable amount more money to publish it to more mediums. The reality of marketing today is it costs significantly more to get remarkably less.

Coffin Nail 2: Big Ideas: They don’t always reap big rewards

Also a victim of segmentation are big ideas, creative and advertising milestones, that when seen move or inspire us. The epitome of the big idea are slogans like “Just Do It” “Think Different” or even “Where’s the Beef?” It’s not to say that the agency world can’t or doesn’t produce this type of work today, but rather these big ideas do not impact culture they way they once did.

The big idea has turned into creating something “viral,” which is basically the 21st century take on the oldest form of marketing: word-of-mouth (it is also usually a funny or new take on an old idea). Take Burger King’s Subservient Chicken website, where you could instruct a man in a chicken suit to perform for you online. While it did little to make your mouth water for a flame-broiled chicken sandwich, it did communicate that Burger King is not your typical fast-food chain, an alternative to the status-quo.

With few outlets and the lack of pervasive media channels, communicating big ideas today are simply too costly and not as efficient as they once were.

Coffin Nail 3: The Cost of Trial and Error

Finding the right message or the “value-add” for your product or service doesn’t always happen over night. It may take several attempts to find the right message and medium that works. With many marketing budgets stretched further then ever before, companies are unwilling to dive into any water if they cannot see the bottom beforehand.

Increased segmentation means that trial and error is a much more costly proposition that is once was. Without trial and error is becomes difficult to find a way to communicate your value and create a really successful marketing campaign. To counter this we see a heavy reliance on focus groups and market research these days which can have the tendency to provide answers without ever really asking what the question is.

Coffin Nail 4: The Growth of In-House Resources

Smart companies know that the most inexpensive means to counter segmentation and produce cost-effiencent trial and error is to bring creative resources in-house. A single agency project could equal the cost of an full-service internal creative team. Meaning that what the company gets is not just one project from an award-winning agency but a dedicated team to define and refine the company’s message on an ongoing basis.

Also gone are the days of the agencies monopoly of the tools of the trade. Desktop publishing has equalized the playing field allowing anyone with a computer, a book or two and some time to figure out even the most complex application the ability to produce agency-level work. For a very small investment any company can be equipped with all the same tools you would find in any typical agency.

Coffin Nail 5: The Talent Pool

Where to find resources has also changed. In the past companies looking to build any in-house team largely recruiting from pool of ex-agency folk. But now agencies and companies recruit from the same talent pool, some college educated, some self-taught.

While agencies may have top names on the door, the reality at most is that low-level resources do the majority of heavy lifting. Meaning that agencies share the pool of freelancers or consultants, only the leadership is different. To be fair to agencies, some lessons can take forever to learn on an in-house team, whereas the learning curve is minimized under an experienced mentor.

In the end given that most agencies rely on the freelance pool to ebb and flow with client demand, this gives a significant edge to in-house teams to cut out the middle-man and work directly with the same talent at a fraction of the cost.

The Final Coffin Nail: Creativity is not a cornered market

The final coffin nail to agencies is the most important one as it is a departure from conventional wisdom: creativity is not a cornered market. No one kind of organization has a monopoly on good ideas or good design. The concept that an agency will always produce superior work to that of an in-house designer is completely false.

As seen in the above points, access and ability to perform marketing has been equalized between agencies and in-house teams. Though the agency does tend to retain a benefit from this perception as more experienced individuals, especially when dealing with large organizations. This doesn’t make agencies more creative, just more apt to gain approval.

This isn’t to say that agencies don’t still have a place in today’s marketplace, as I believe they do. It is their ability to shift their services, possibly very dramatically to cater to the New Client, that means life or death. And as the Client, knowing how to use an agency is key.

The New Client

In the book “Freaknomics” authors Steven D. Levitt and Stephen J. Dubner when discussing the concepts of information asymmetry—when one party to a transaction has more information that the other party—provide an excellent example of the agency model:

“If you were to assume that many experts use their information to your detriment, you’d be right. Experts depend on the fact that you don’t have the information they do. Or that you are so befuddled by the complexity of their operation that you wouldn’t know what to do with the information if you had it. Or that you are so in awe of their expertise that you wouldn’t dare challenge them.”

The New Client—someone that understands the information pertaining to the task or transaction as the person asked to perform it—uses resources like the Internet, books, their social network or professional experience to eliminate information asymmetry between themselves and their vendors.

Just like you would research any large personal transaction, like your home or a car, you use the resources available to you to become as knowledgeable as you can about the transaction you are about to perform. As the information becomes easier for us to attain, the more we tend to gather.

Here just a few of the growing list of tendencies of the New Client:

Tired of Smoke and Mirrors

If the client is knowledgeable, putting out a lot of smoke and mirrors, or creating an illusion of ability or confidence, is the fastest way to get fired before you are hired. Exaggerating the truth or outright lying is unfortunately one of the hallmarks of sales. The New Client knows this is prepared to grill you on the details and the first whiff of smoke.

Internal talent and innovation

The New Client knows that with strong internal talent one can do incredible things. The New Client seeks to grow the strength of the in-house team and often gives them wide latitude to explore and try new things without fear of failure.

Internal Opposition

The New Client knows how to manage internal opposition and is able to gain confidence in stakeholders. Keeping the ship steered in the right direction is a crucial skill as it can the make the difference between building a money pit or building a mansion.

Knows how to use an Agency

The New Client knows their internal strengths and weaknesses. They not only empower an agency to succeed when used, but keeps them focused on what they add to the team. They understand that knowing how and when and how to use an agency is the key.

The New Agency?

I would love to say that there is a such a thing as a New Agency, but I have failed to see traditional agencies really grasp the transformation of the marketplace. All the big agencies know they need to change, but it seems they aren’t exactly sure why. What I can tell you is how Blue Flavor came to be and how we work. It is very much tied to the failure of traditional agencies as we adapt to what we experienced first hand and how we are trying to become a New Agency.

When we started Blue Flavor, we came from both in-house teams as well as the agencies. We did not have dreams of making millions of dollars, rather we had a very simple goal which is true today: we want to work on great projects and have a good time doing it. We’d been in our fields long enough and dealt with enough agencies to know what kind of company we didn’t want to be.

It is about Clear, Open & Honest Communication

We observed that the fatal flaw of an agency was a tendency to hide details from the client, the ongoing attempts to maintain information asymmetry in favor of the agency. By keeping the client in the dark the agency tries (or is perceived to try) to earn as much money possible on each project or even irrevocably tie the client to the agency through excessive licensing restrictions on the work produced. This age-old model seemed dishonest, unfair and little cruel to customers that were just looking for some help.

We wanted to create an agency that offered the advantages of an external agency, while sharing everything we know in order to make the client successful after we depart from the project.

We feel that clear, open and honest communication is more important than the perception that we know what we’re doing. We’ll build trust by educating, being honest, admitting mistakes and learning/teaching along with the client. No agency is perfect and if you think they are, you’re not seeing through the smoke and mirrors.

The Blue Flavor Way

We adopted a strict model of transparency, eliminating vague pricing, markup or licensing costs. We gave our clients the promise of total honesty and not sugar-coating the facts. We removed any middle-men, having no project management or sales resources between us and our clients, instead we have our clients work directly with talent. We embrace internal resources to try to create a mash-up team of in-house and agency resources collaborating on a common goal.

We take a very iterative approach to every project. We have no rigid process we force the client to go through, instead developing one to the needs of the project. We also don’t do big presentations of deliverables producing three versions and asking the client to pick Door 1, Door 2 or Door 3. Rather we choose to work transparently with the client to mutually build the deliverable over many iterations, graying the line between company and agency.

Our approach is not perfect, we had many challenges in our short life as an agency and we certainly do not have all the answers. We’ve found that we are still able to produce great work, satisfied clients and have fun doing it.

To be totally honest we are already seeing an increasing need for account management, project management and production support as we grow, but we believe that the key is finding the right people to do this work, that are knowledge and have expertise beyond their core role. Being able to provide answers, make advice and who share our way of thinking is crucial. It is our belief that if you cannot find these people, it is better to stay small than sacrifice our ethics for the almighty dollar.

Conclusion

Is the agency model dead? Okay, obviously agencies will continue to be around for many years to come. But the traditional model, the old way or working is dead. Where creativity and ability was once trapped in the agency space has been set free. The Client is in control of their own destiny, knowledgeable about their customer, how to best form a valuable bond between them and empower internal teams to explore the relationship.

Agencies will always be there to help you in your time of need, but before you begin working with one, ask some of these questions:

• Tell me about your agency? What do you believe? Who are your biggest clients? What percentage of your revenue do they contribute to?
• Explain to me how your billing system works, what is your markup percent? What is your average salary? What is your average project size? Tell me about your overhead?
• Who will be doing the work on my project? What percentage of senior-level staff be working on my project versus junior-level staff? What can you do to assure me that you will maintain those ratios throughout my project?
• What is the experience-level of the staff that will be working on my project? How many contractors will be working on my project? How much to markup their services? Can I approve contractors before they begin working on my project?
• Do you believe in my product or service?

Remember, run at the first sign of smoke.

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