Simple Ways To Rethink Your Agency Business

"Maybe we're coming at it from all the wrong ways."

Have you ever uttered that sentence, or one like it?  Have you ever had the nerve to completely deconstruct what you're doing -- and admit that you might be doing it wrong?  It takes nerve and courage.  It's hard for someone to debunk their own internal mythology, the set of "tried and true" guidelines  that have driven lives and careers to date, in order to start over  -- but that scenario is on the agenda for many right now.

The state of the industry is forcing many people to deconstruct and rebuild their businesses.  It's not as dire as it sounds; ad spending is still strong and getting stronger, but the economy is questionable and no one knows what's going to happen next.  Some of the most successful businesses have been created in the most unsettling of economic times, and many people recognize the uncertainty as opportunity in disguise.  If you can sustain revenues when business is down, or if you can create new revenue streams where there previously was none, then you're well-positioned to be successful when business recovers.



As a result, many agencies are rethinking the ways they generate revenues. So I figured I'd share some of what I'm hearing from the business.

First off, agencies need to be paid for thinking, not doing.  Whether you call it strategy or planning, your intellectual capital is your most valued asset -- but most of your revenue comes from execution.   More and more agencies are rethinking this paradigm and rediscovering the value in the brains of the people they employ.

Second, performance is not a primary model for compensation, but it is a value for growth.  Most agencies will not create work on spec anymore, but they will sacrifice parts of their payments in performance kickers.  These kickers are typically where the profit is found. If your agency is any good, you should be willing to put your money where your mouth is.  Besides, if you succeed, your clients succeed.  That's where the strength of the relationship lies.

The third trend is that more agencies are getting into the brand business themselves.  Agencies have long been the launching pad for many ideas, but those ideas were typically owned by their clients.  Recently you see more agencies creating and owning their own IP.  Agencies are creating brands.  They're creating soft drinks and Web sites and movies and music.  They're getting into their clients' business in a way they never have before. Which leads me to the question of, when will an agency pitch a brand client on a line extension that they could co-own or have a larger ownership stake in?  What's to stop Pepsi from launching Jalapeno Pepsi, with their agency as an owner (other than an awful taste, of course)?  Is that day so far away?

The pundits say the agency model is broken, but it's only because they need something to write about.  What's most interesting to me is how you can find new ideas in these companies -- ones that just require some thought and attention.

So don't be afraid to question your own business and look for new ways to operate.  It takes courage to start over, but rarely are the results less than you expected them to be.

3 comments about "Simple Ways To Rethink Your Agency Business".
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  1. Mark Burrell from Tongal, September 22, 2010 at 1:15 p.m.

    I'm not sure if it's only the pundits saying the model is broken. There seems to be a mass exodus of top brass from the agencies which to me is more telling that it isn't getting any better.

    I think it's hard to reinvent yourself though if you've been dominant for so long. Generally that reinvention and/or disruption occurs from the outside.

  2. Sandy Miller from Success Communications, September 22, 2010 at 6:09 p.m.

    I wouldn't say broken but it is definitely out of alignment. It's always been a challenge to pitch creative and Intellectual property because if the client doesn't go with you and thier new campaign looks familiar, how you do prove your ideas influenced them.

    In addition in some agencies they pay for placement of media and then bill the client. If the client doesn't pay then you are on the line for it. Many smaller agencies crumbled because of this when the economy tanked.

    Agencies need to stand up for themselves and what they do. If you are pitching for work then clients need to pay to see it. If they work with you then you can always deduct costs from the campaign costs.

    This is really a matter of retraining. Getting agencies to put value on their work and for clients to see they have no choice but to respect the new system.

  3. Rick Lavoie from RUCKUS, September 27, 2010 at 1:34 p.m.

    Your third point of agencies getting in on the brand business is true but very few. Can you honestly name more than 5 that are doing it successfully?

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