Bob Liodice: New Agenda for Agencies

Shops Must Deeply Understand the Brands They Craft Messages for

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It's no secret that the marketing industry is being reshaped and remolded every day. And it's no secret that we as marketers can't play by yesterday's rules. That said, agencies face a new agenda: Their efforts must be interwoven with a client's brand performance. And they must do whatever is necessary to satisfy their "customers" -- the clients.
Bob Liodice
Bob Liodice

This is not about reach or frequency or generating awareness or stimulating interest. The old yardstick by which agencies have measured themselves -- and which clients have long accepted -- is out, caput, sayonara.

How to push clients
Agencies today must push their clients -- in high impact, measurable ways -- to build brand excitement, momentum, loyalty, equity and, most important, business. Accomplishing this will require agencies to devise brilliant brand-management strategies; conceive big, game-changing ideas; and execute with superior creativity and innovative media plans. Moreover, as I've stressed before, they will need to engage the consumer and put her at the epicenter of their efforts. Advertising Age confirmed this idea by naming "The Consumer" its advertising agency of the year.

For many agencies, this approach will necessitate a reinvention of their business model. It will require their people to find new, more effective ways to connect with consumers. They'll need to go way beyond the traditional modes of "understanding the client's consumers" and actually become the client's consumers -- consuming their media, participating in their social networks and living their lifestyles, in a display of true, deep, passionate consumer engagement.

At a recent ANA Senior Marketers Think Tank meeting, Bob Greenberg, chairman-CEO of R/GA, aptly described the new agency. It may, he said, have some traditional titles, such as planners and buyers. But there will increasingly be new ones, like interaction designers -- those who deeply understand the user experience, or how people interact with the brand in both the online and offline realms.

In addition, the new model needs to be grounded by data-driven insights. Agencies must retool their organizations to generate the analytical insights to foster new fact-driven campaigns.

Two agencies that have put a new relations model into practice with their clients are McKinney with Sony Bravia and Arnold with Ocean Spray.

Listening in on the 'conversation'
Sony missed the early entrance to flat-panel screens in the U.S. and had to play catch-up with market leader Sharp by developing a "big idea" for the launch of the Sony Bravia. The initial focus was on the "conversation" -- all the ways to craft a meaningful relationship with the consumer. With research indicating that many consumers are confused by electronics and return their products due to this fact and the divide between the sexes when it comes to electronics, Sony focused on sending consumers to the store already knowing what to buy. By positioning the Sony Bravia as "the world's first television for men and women," Sony was able to start a real conversation with their consumers and engage them personally.

Sony also decided to try something new with McKinney relative to their TV ads: creating commercials with separate endings. Some were based on what men like. Some were based on what women like. Sony partnered with TiVo and actually let consumers choose which ending they wanted to watch. Rather than worry about ad skipping on TiVo, Sony used the technology to help people go deeper into a rich, informative personalized experience.

Ocean Spray and Arnold Worldwide experienced genuine brand transformation collaboration. With a mixture of traditional media, and some much-needed innovation, Ocean Spray and its agency brought new life to a mature brand -- Ocean Spray cranberry juice. By truly understanding the brand and its consumers, the agency and client integrated the new message, going back to cranberries' roots, throughout all media platforms and internally throughout the company. The ROI shows $1.57 return for ever dollar spent on advertising despite a category average of 61 cents.

In a nutshell, the new agency must deeply understand the brands for which it creates campaigns, must be deeply invested in the success of those brands and must be deeply engaged with the consumers it targets.

Agency compensation
So how will compensation be handled in this new environment? That's the $64,000 question -- and one that the ANA's Advertising Financial Management and Agency Relations Committees have been seriously addressing, with the goal of achieving a mutually beneficial agreement.

Traditional compensation models are increasingly passe. At this point, commissions are nearly extinct, and there is growing frustration with the labor-based fees that replaced them, as they are based on input (hours worked) rather than output (value delivered). Furthermore, the once-heralded performance incentives don't appear to work, according to many agencies. All of which points to the new frontier of value-based compensation, the core principles of which are:
  • Never sell time, ever.
  • There can be no financial incentive to recommend one channel solution over another.
  • The agency must embrace any financial mechanism that rewards the quality of the idea.
  • Tailor compensation to the needs, circumstances and culture of each individual client.
In line with these principles is the immensely important need for agencies to break down their internal silos -- silos that obstruct the seamless integration of advertising, direct, public relations online and other marketing disciplines. We've had more than 20 years of high-minded blather about the importance of integrated marketing, yet today most agencies still treat each core marketing discipline as a separate profit center, an inherently un-client-friendly model that creates inappropriate incentives to horde client billings, rather than serve client needs.

As I said before, we all recognize that the marketing landscape is rapidly evolving -- and the agencies are an important component of that evolution. I am an avid believer that marketers have had to undertake a similarly gut-wrenching 180-degree transformation. Agencies should be no different in how they view their business models. This is the time for these transformations to really take hold.

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Bob Liodice is president-CEO of the Association of National Advertisers. He first joined the organization in 1995. He was previously exec-VP, responsible for member relations and business development, with a primary focus on strengthening relationships with ANA member companies and broadening the membership base. Prior to the ANA, Mr. Liodice was VP-global marketing and sales for Grupo Televisa. Previous experience includes more than 15 years in marketing and financial management at Kraft General Foods, where he served as category marketing manager for the Jell-O and Bakers brands. He is also a member of the boards of directors of the Advertising Council, Advertising Research Foundation, National Advertising Review Council, Partnership for a Drug-Free America and the Advertising Educational Foundation.
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