Marketing Model Shift Challenges Agencies

Marketing Model Shift Challenges Agencies

A recent study and Whitepaper by the Winterberry Group finds that the traditional marketing model is changing fast. Technological advances have ushered in a proliferation of channels that has diminished the impact of tried-and-true platforms such as television and print.

At the center of this industrial transformation, says the Whitepaper, the role of the agency has been challenged. Once considered core to the marketing effort (and a trusted counselor to executive decision makers), the agency has seen its portfolio of responsibilities fundamentally altered; first, by the advent of non-traditional channels, then by the emergence of nimble "specialty" players, including media-specific competitors, interactive shops, management consultants and media buying agencies.

The Winterberry Group conducted an extensive series of interviews with over 70 senior executives at leading agencies across the nation. The panel includes representatives from "full-service" agencies, shops providing specialty services, those serving the needs of niche markets, and select marketing services professionals from outside the "agency world," as well as marketers in the corporate and not-for-profit sectors, private consultants and other parties with extensive marketing industry knowledge.

Consumers, reports the study, weaned on the power of the Internet and weary of intrusive media bombardment, expect that relevant product information will be available at their fingertips. Marketers, meanwhile, are confronting new rules of customer engagement as well as enhanced ROI demands from the C-suite, resulting in the ascendance of "below-the-line" promotional channels once thought of as supplementary to the primary branding effort.

Anthony J. Hopp, chairman of the Association of American Advertising Agencies, is quoted as saying "The agencies that will succeed are the ones... that can find the new ways to engage and connect with consumers. If you're not doing that, you're not going to be in business."

This study shows how market and industry trends are driving systemic change across the agency landscape, and concludes that:

  • The complex demands of the multichannel selling environment require that agencies provide clients with a unified offering spanning both "above-the-line" and "below-the-line" marketing channels
  • Heightened demand for marketing program accountability is forcing agencies to adapt their service offerings, pricing structures, reporting capabilities and managerial focus
  • Compressed margin availability, expanded client scrutiny and the emergence of alternative service providers are raising the competitive pressure for agencies of all sizes
  • Integrated service providers are seeking to command a greater presence in the agency environment, but struggle to sell their strategic and creative offerings to marketers who associate their brand with other services
  • Clients are increasingly leaning on internal strategy and creative capabilitiesas well as procurement departmentsto support marketing initiatives and generate leverage in negotiations with external agencies
  • The prevalent "agency holding company" model is poorly equipped to provide the organizational agility and cross-channel service offering that today's marketers demand.

While approximately half of the respondents to this study indicated that their firm effectively provides a full service suite, an overwhelming preponderance noted that only half of their clients avail themselves of the comprehensive offering.

The impact of network television advertising has been substantially diminished, in part, by the growth of promotional and response vehicles that generate more impactful, measurable returns. These channels, which include direct mail, direct response broadcasting, event marketing, promotions, e-mail, online advertising and search engine marketing, now command the lion's share of marketing spending in the United States. Furthermore, they are poised to grow by an average of 7.9 percent per year through 2007, compared to just 5.2 percent for brand oriented "above-the-line" advertising.

Interview respondents have become "channel agnostic," preferring the communications strategy that generates the most significant response, no matter how far removed it may be from the branding effort. Statistics confirm the benefits of carefully coordinated multichannel campaigns. According to the Interactive Advertising Bureau, they generate a sales lift ranging from 7 to 34 percent when measured against a single-channel sales approach.

Though not new news to many, the Whitepaper may provide a valuable overview of The State of the Agency: Market Transformation & the New Client Dynamic, and is available in PDF format here.

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