I did so in part because I believe there's an important shift in the industry that's beginning to challenge the dominance of the Burnetts and J. Walter Thompsons and provide opportunities for smaller, creative-driven agencies.
OPPORTUNITIES FOR SMALL SHOPS
Advertisers today don't seem to want much of what traditional full-service agencies are selling. The result has been the division of accounts among numerous agencies and the addition of shops such as Fallon McElligott, Leap Partnership and Wieden & Kennedy to the rosters of big marketers. Coca-Cola Co. has moved from one agency to more than 26 in the last few years.
The traditional agency was set up to move a marketing idea from the client to the consumer. Along the way, the agency and its departments added value by managing the marketing process in the account service department, using its research department to define the strategy, producing ads with its creative resources and, finally, placing the ads in the media that the customer would see.
Today five factors are challenging this model.
1) Growth of client marketing departments: Marketers no longer pass projects and responsibility off to the agency as they once did. Their marketing departments and personnel are being held responsible for balancing increasingly complicated investments across a wider array of media and non-media alternatives.
To do so, they have expanded and improved the profile of the professionals making the decisions. Pepsi-Cola chief Roger Enrico summed it up in Martin Mayer's 1991 book, "Whatever Happened to Madison Avenue": "Why should great marketing minds go to work at an ad agency when all the key decisions are now being made at the companies?"
2) Growth of consultancies: Marketers now often generate strategic vision on their own or with the help of management consultants. Observed John Deighton of Harvard Business School, "Much of the strategic thinking in marketing is being supplied by the marketing-intensive practices of the management consultant industry .*.*. The talent being recruited by consultants and clients is in many cases better at strategy than the talent that is going to the agencies. So you're having agencies playing the role of consultants to clients who are more broadly educated than they are. That's a problem."
3) Growth of media buying services: Media billings assigned to buying services have grown more than 200% in the last 10 years, despite little increase in total media spending.
4) Agency acquisition and financial concerns detract attention from creativity: While mergers did provide benefits, they also meant more layers of communication between clients and creative departments and bureaucratic overhead that I believe make the development of innovative ideas much slower if not altogether impossible.
5) The emergence of interactive media: The pending combination of commercial video content with addressability will again change the relationship between marketers and agencies.
TRADITIONAL AGENCIES OBSOLETE
The ability to manage targets in groups as small as a single household will make marketer-controlled databases of product/service users the most valuable asset in the marketing mix. This combined with the impact of low-cost distribution via the Internet will make the traditional agency model obsolete.
So what will the implications of these trends be?
In the future, breakthrough creative that can run in any medium will be the most valuable and differentiated service agencies provide.
It also will be the least likely to be internalized by clients.
Agencies will need to position themselves to take advantage of marketers' a la carte preferences or risk being passed over.
But large full-service agencies that have "unbundled" their services will face a greater potential for client conflicts across those services. And they have had little success in convincing clients that their interests are best served with competing clients being served under the same roof.
Smaller agencies will be able to compete on a more even level with larger agencies as the economies of scope associated with the traditional full-service structure disappear.
Mr. Hicks is president, Crispin Porter & Bogusky, Miami.