As Shops Transform, Marketers Must Adapt Too

CMOs Must Draft a Blueprint for the New Client-Agency Relationship and Redesign Their Role

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Avi Dan
Avi Dan
Some big marketers have begun shifting to value-based compensation instead of paying agencies a fee for labor hours. Value-based compensation aligns remuneration more closely with results, such as sales, share of market or brand awareness. This seems like a more reasonable way to compensate agencies, because there is no relationship between labor hours and results. It also aligns clients' and agencies' interests more closely, as both are measured by the same performance metric; however, it also compels agencies to have "skin in the game" by agreeing to forgo some upfront income for a chance at greater profits later.

Giving up a portion of their "base" income for future gains might have adverse impact on agency profitability. It will also have a profound impact on the agency model. The current agency model was invented in the 19th century and is, arguably, obsolete. Agencies are long overdue for a transformation. Some key aspects of a new model, mandated by fiscal realities, may include:

Hollywoodization. Just as Hollywood evolved from a studio system with its "contract players," agencies will shift their creative and planning framework to rely primarily on freelancers.

De-layering. The service structure of agencies will be akin to that of law firms, with senior "partners" and junior "associates." Middle management will largely disappear.

Virtual re-bundling. Economic realities will rekindle a virtual full-service approach. A diversified communications offering will become price of entry.

"The big idea," redefined. The best new companies of our generation understand how customer experiences create brands. Google and Facebook are experiential brands, as are Zappos, Twitter, Netflix, Amazon, Apple, Starbucks and Nike. The model will be more about creating brand experiences, less about messaging.

Media at the center. With everything now a media channel, deciding where to engage with the consumer will become as important as how. Media people will emerge as the nucleus of the new model.

Innovation. Economic reality will steer agencies toward experimentation with new revenue streams from music, gaming, design, software and new products.

So where will that leave marketers? The flux that marketers will find themselves in as agencies transition from the old to the new model will require chief marketing officers to redesign how they interface with ad agencies and reevaluate the creative process. The archetypal client-agency relationship template will evolve from each party living within boundaries to an integrated alliance, from an iterative process to a much more organic system. More than anyone else, it will be up to CMOs to draft a blueprint for the transformation of the client-agency relationship and redesign their own role. That said, how would the skill set of the CMO be redefined?

Active creative participation. A creative framework that depends more heavily on freelancers will compel CMOs to take a hands-on approach to steering the creative process. CMOs will have to make creative calculations on their own. Ask yourself, is the project highly conceptual and groundbreaking, or is it a revision or improvement of an existing ad? Or is it something in between? The thought process and creative process for each are entirely different, and you need to understand the different dynamics when dealing with creatives.

Process audit and design. With leaner agencies, single-mindedness is vital. CMOs should develop and champion a time-saving and labor-saving streamlined marketing and advertising process. You should ask yourself continuously, are assignments properly established and budgeted? Outcomes quantified, agreed to and documented? Is the approval process logical and prompt? Timetables unambiguous? During the transition, CMOs should establish a marketing and advertising process design plan to avoid operational bottlenecks.

Eclectic skill set. With experience supplanting messaging as key to brand-building, CMOs will have to develop a more eclectic skill set, with exposure to fashion, music, dance, painting, literature, film, design and architecture. They will need a deeper understanding of popular culture, trends that influence it, and how social media and technology work as an expression of culture.

Ethics oversight. As consumers are becoming more ethical on issues such as sustainability or obesity, marketing will have to keep up. CEOs will become chief ethics officers of their companies, ensuring principled brands. If you build ethics in from the start, you provide a valuable reference point to maintain integrity.

Media theocracy. Rather than being media agnostic, CMOs must recognize that media is now the heart of marketing. In a technologically infused age, the key for marketers is to be where their consumers are on the web. While targeting people according to their web-surfing behavior is part of this, it also involves being invited into consumers' increasingly fragmented lives by being responsive to their needs or harsh comments.

The end of silos. Sales are the principal criterion for measuring value. But a brand's sales are by no means entirely within the sphere of agency work alone. This is an implicit invitation to the agency to begin making integrated contributions beyond advertising. CMOs should invite agencies to engage in all areas of marketing. This will lead to better results, as channel bias will fade.

The CMO role will become even more challenging, and more complex, requiring a modified skill set. Value-based compensation is becoming a reality as more marketers are adopting it. Agencies should welcome it, conceivably improving upside potential; they will align better with clients and emerge with a better model. But most important, as CMOs steer marketing to a new era, it is vital that they commit to fair agency profitability. Without it, agency training and recruiting will deteriorate, and with it, quality.

Avi Dan is CEO of Avidan Strategies, a management-consulting firm with expertise in client-agency relationship management. It specializes in strategy and positioning development; agency search; agency compensation; and marketing and advertising process architecture development and implementation. Avi Dan can be reached at [email protected].
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