Today there’s more pressure than ever on ad agencies to succeed and thrive. How can they cope when the core of what they do and who they do it for is eroding?
Big brands as a collective have been taking a lot of hits lately. So has the notion and the value of a brand. As far back as 2011, an Ernst & Young study identified a schism between established versus emerging markets when it comes to brand loyalty less than 30 percent of Westernized countries’ consumers purchasing decisions are influenced by brand loyalty. A just-released study by Momentum Worldwide confirms that this trend continues: “More than half of those surveyed in Britain, Japan and the US report indifference towards some of the best-known brands in the market,” writes Marketing Week, but in emerging economies such as Brazil, Mexico and the Philippines, “more than a third of those questioned would consider brands as a member of their own family,” a condition known as “brand affection.”
A 2013 study by Edelman found that brands are not connecting with consumers in 16 areas of consumer importance like “communicating openly and transparently about how products are sourced and made” and “underperforming in asking consumer about their needs.”
It’s Not Just About Brand Affinity
In my recent piece, “Trust: The $1 Trillion Advertising and Marketing Problem,” I cited several recent studies that should also raise concern for brands. Americans’ trust in large industries is waning, consumers trust advertising less and less but do trust word of mouth and online reviews and recommendations. Millennials rely on consumer generated content as much as 50 percent of the time, and for Gen Z (18 – 24 year olds), brand affection is only as a high as 23 percent.
And then there’s the just-released Deloitte’s 2014 American Pantry Study of more than 375 brands across 30 product categories which shows American household brands losing ground to private label and store brands (88 percent of respondents say that they feel store brands can be just as good quality-wise as the national brands but cost less). If consumers don’t feel branded products offer enough of a distinct advantage to pay more for them, brands will continue to struggle to retain market share.
Rethinking Ad Agency Strategy
None of these stats bode well for FMCG brands, and nor, as a consequence, the ad agencies who have historically relied on them for the majority of their revenues. As brands struggle to keep up with fast-changing consumer behavior patterns, different patterns for different generations of buyers, and new channels and devices by which to reach and attract buyers, ad agencies have to pivot even faster in order to remain relevant. As I see it so far, their go-forward solution should include:
1. Replace or drop the word “advertising” in your description. These days, not many “advertising agencies” purely deliver only advertising services. Most deliver multiple services from strategy and planning, to advertising to social media and event marketing. This should be acknowledged by both the agency and the clients issuing the RFPs.
2. Get real about “branding”. Agencies love talking about the “brands” they service and all the “brand-building,” “branded campaigns,” “branding,” “brand visibility” and “brand ___________, fill-in-the-blank” being performed for these brands. But a brand is something quite different than branding and all the other terms meant to basically convey trying to build awareness of and maintain a feeling about the brand. In order to do the latter, there must be the former and if the consumer has less affinity than ever towards the former, solutions involving the latter just stokes the flames of your client’s discontent.
3. Strengthen your consulting practice. In the fee-based world most agencies now face (some of whom are even venturing into performance-based compensation structures), intellectual capital, deep subject matter expertise and true marketing tech savvy can command more than the revered Creative Director could ever alone.
4. Lighten-up. In the past decade, as agency conglomerates got built and went public, they became reflections of the lumbering corporate behemoths they represent, beholden to earnings reports and less agile and quick to innovate as businesses. It’s time for agencies to reverse this trend and shed weight or de-couple from the mother ship in order to act more swiftly, as the urgency of our times demands.
5. Look to emerging markets. If Westernized countries suffer from brand fatigue, shift your focus from the home front to emerging economies. At least there you can do more of what you’re used to.
6. Act more like your clients’ consumers. If brands are losing ground to consumer generated content, online product reviews and word-of-mouth recommendations, you need to play in this space like a user so you can advise your clients accordingly. Engagement-wise, too many agencies (if they’re visible at all), act more like the brands they’re promoting with one-sided, broadcast-like social sharing and an “it’s all about us” approach. Stop focusing so much on your next big creative idea and explore your own engagement metrics for a bit.
7. Take some cues from direct response marketers. Creative ad shops seem to have eschewed direct response marketers for as long as I can remember, but these folks know a thing or two about making money based on performance. And although their creative may not be as glitzy or as big-budget as a traditional branding campaign, they sure understand audience segmentation and delivering the right message at the right time in the right space. And that’s where all advertising is headed.
I know I’m not the only one lately to be writing on the topic of ad agency self-reflection and change (as witnessed by the below Additional Reading list, for example). The time for denial and acceptance is past – it’s time for transformation and growth.
- “How Tech Took a Bite Out of the Ad Industry,” Ad Age
- “What Are 10 Great Ad Agencies Of 2013, According To CMOs?”, Forbes
- “Take These Five Steps Before Your Agency is Disintermediated,” Augustine Fou
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