Myth: Marketers Need One-Stop Shopping for Digital Agencies

Fact: Bigger Isn't Better, and Consolidation Isn't Cheaper

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Jennifer Modarelli
Jennifer Modarelli
Does one-stop shopping make sense?

As long as I have been in this industry, I have been troubled by the many large corporate marketers that continue to entrust their precious and large marketing budgets to a single (or handful of) large advertising agency(ies). I understand that at some point in the history of advertising, this type of arrangement must have made sense. And that as recently as last week Keith Weed, CMO-chief communications officer of Unilever, announced the company's plans and reasoning to go this exact route in an interview at the 4A's conference. But with all due respect, I think this approach is risky.

We all know that the past decades have brought a seismic shift in how to successfully market a brand and reach customers. And in the years ahead, ways to communicate with your customers will evolve faster. The value marketers can earn on each marketing dollar has also shifted and grown in scope and complexity. So knowing this, why do so many corporate marketers continue to engage in an outdated agency-relationship structure?

It's time to update the traditional thinking to reflect the current environment. It's time for marketers to correct the misconception that consolidating spending benefits the brand. Here's what I see as the top five outdated ways of thinking and why marketers should fix them.

No. 1: "The bigger the agency the better the talent."
As reported in Ad Age in 2010, an exodus of creative of talent has been abandoning large agencies to start up their own small agencies. If that reality isn't enough to challenge the misconception that bigger is better, consider again that the true talent needed in today's environment requires a complex set of overlapping skills ranging from true visionary to technical engineering, with a process that takes an idea from concept to build in a short time. Large agency cultures simply cannot nurture this level of agility and vision, stifling innovation and stifling talent.

No. 2: "Consolidating all of our marketing under one entity means our administrative costs will be less."
Really? I mean, this made sense back when invoices were processed on paper and mailed, and brand guidelines could not be disseminated except through meetings and snail mail. But none of that is true anymore. Technology has taken vendor management and payment to a new level, and the incremental costs of working with more than one agency is nominal at best. Agencies can learn a brand's regional and global guidelines without having to have meetings or mail documentation; it's been this easy for decades.

No. 3: "Smaller agencies aren't as stable as large conglomerates. By consolidating our spend in a larger agency, our investment is more secure."
During our current economic downturn, this math has been tested. The revenue decrease in large agencies in 2009 was the worst on record, and in 2010, growth was lethargic at best. While it is true especially in this economic environment that large agencies undoubtedly have access to larger lines of credit, well-managed small agencies with proven track records are a solid bet that more and more Fortune 1000 companies are taking (if you subscribe to Crain's, check out Crain's Chicago Business online, March 7, 2011 "Upstarts Upend Advertising Hierarchy"). And unlike the large agencies, the smaller agencies are focused on you and your marketing results, not their stock price.

No. 4: "Bulk media buying means you'll get a better deal."
In the digital space, this is categorically not true, and I encourage corporate marketers to slice off a 3% part of their buy in 2011 and test this theory; it's easily measurable. There are no longer any "proprietary tools"; smaller agencies use the same buying and planning toolbox as the big agencies do. It isn't about how much you buy; it is about who does the buying and how they integrate their knowledge with other digital disciplines to make the smartest buy. For success, the buyer must be as ingrained in the actual medium and creative, a model seldom seen in any large agency. The best buyers in the industry are pushing publishers to do more with less. And since the best buyers understand this very complex environment, and innovation in advertising is occurring in the digital space, you can be assured these buyers do not reside in large conglomerates where innovation and smart buying is stifled through corporate hierarchy and less than agile processes.

No. 5: "Digital is an evolution of advertising/marketing, so my large agency can provide or source everything I need for these rapidly emerging fields."
Well, OK, they might be able to, but I know it'll be at twice the cost. I know it because I've seen it time and time again. A large agency most likely does offer digital solutions, but through the division that just bought a production shop -- emphasis on "production." Digital marketing is more than production, and it differs greatly from print and TV advertising in terms of audience and the audience experience. It's a two-way channel that demands its own strategy.

Marketers need to beware the big agency's newly hired Director of Global Digital Strategies, and definitely kick the tires on their newly assigned Social Media Guru. You can add the person and the title, but it won't get you the goods you need to succeed in the digital space.

I don't need to pull the unnecessary stunt of showing up on the red carpet incubating in an egg to emphasize my point, but I will borrow the premise of Lady Gaga's latest hit: You're born digital, you don't become digital.

The newly added pedigrees and the divisions of divisions may add comfort, and the big agencies do know how to outsource, but if corporate marketers are looking for the real thing, they should look in the right discipline and find the most knowledgeable talent.

Marketing success in the 21st-century digital space requires more than your grandmother's agency relationship can deliver. Large agencies simply cannot provide the agility and cost effectiveness a small agency can provide. From a financial standpoint, working with a large agency can cost marketers more while delivering less; from a team perspective, working with a large agency won't deliver the needed digital expertise and integrated strategy; and from a media buying viewpoint, it won't optimize their spend.

So my fellow small digital agencies, the formula for a successful agency-client relationship is changing as rapidly as our medium, and I am confident that the Fortune 1,000s in particular are rethinking their agency engagements. They are looking for something only we can do: truly innovate and lead in this two-way customer dialogue. They're re-calculating the value they get from their financial investment, too. Time to make some noise, smaller agencies, and hey, Fortune 1,000s, keep up the exploration; we'll keep you ahead of the curve.

ABOUT THE AUTHOR
Jennifer Modarelli is the owner and principal of White Horse, a 29-year old digital marketing agency specializing in the convergence of emerging and traditional media to create immersive web experiences. Modarelli joined White Horse in 1998 as its general manager and acquired the company as a principal owner in 2000.
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