Commoditization may be the biggest threat facing agencies and media companies today -- yet we hear precious little about it, and few can articulate a strategy to combat it.
Adland has proved fairly adept at fending off unnecessary government legislation that threatens their business -- this is where the leading associations have done their most effective work. And, while many organizations are often accused of being slow to respond to new technology and behavioral changes among consumers, most senior executives can at least outline how they think their companies are adapting.
Yet commoditization seems to slip under the radar, despite the fact that it's arguably the biggest threat of all -- treating ideas, creative executions and media brands as widgets that can always be made more cheaply elsewhere. Perhaps that's because it's an insidious force that's been enveloping the marketing business for decades, rather than a one-off news-making event like, say, the advent of TiVo. It doesn't command headlines because it's not sexy and not always readily identifiable.
The recession has been a catalyst for what was already an increasingly procurement-driven approach to buying creative thinking and execution. Many of the major agency reviews, and almost every major media-agency review in the last six months, have centered on saving money. That's not surprising or unreasonable, but the way it's been achieved in some cases -- by demanding an insanely detailed breakdown of costs, then working on the assumption that costs can be standardized -- should scare the crap out of agencies. One senior ad exec said recently: "We're getting to the point where we're going to be told what our creative director's salary should be."
In the compensation realm, major marketers like Coke and Unilever are shifting to paying little more than cost unless agencies hit performance targets. That's not a bad thing if the targets are mutually agreed upon and realistic, but in some cases the feeling seems to be that they're not. And then, of course, there are the payment terms being stretched. Agencies and media companies feel they're being treated like credit lines rather than valued partners.
Despite the evolution of digital tools, which allow marketers to explore creative solutions in environments in which they will get feedback and can continuously evolve the content, some report a rise in the pretesting of creative. Pretesting is a great ass-covering tool for midlevel marketing execs, but a pretty surefire way to suck the life out of creative. As one top creative put it: "We can game the systems, of course we can, but it makes all the work much the same -- and usually bad."
Then there's the increasing use of media auditing. Auditing services don't have to be a destructive force and can provide marketers with useful insight. The danger is that they break down media by input-costs (one publisher reported being asked to quantify the cost of ink per-page in a certain publication) which are then misused by marketers to treat two completely different editorial or entertainment environments as comparable entities that can be pitted against each other in a cost-based competition.
One executive suggested to me that the best hope for agencies and media owners is that marketers realize this kind of behavior isn't going to help them get better ideas or execution in the long run. But that hope seems like pretty flimsy weaponry to be carrying into what is fast becoming a war on margins.
I've already started collecting some thoughts on ways to combat commoditization, but before I publish them I'd like to hear whether anyone else has solutions to offer to this growing problem. E-mail me at email@example.com.