Seven Steps to Help Your Agency Fight Commoditization

Readers, Industry Leaders Suggest Specializing, Taking on More Risk in Order to Stop the Rot

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In my last column, I outlined how rapidly agencies and media brands are being commoditized. Since then, 48-year-old Bernard Glock, P&G's VP-global media and communication, retired from the world's largest advertiser, and his role was split between Dina Howell, the former shopper-marketing chief, and a senior purchasing executive. P&G also started a process designed to create a list of production houses that its agencies are allowed to work with. Such public moves from the industry leader underscore that this is a critical issue for agencies and media owners.

A lot of readers made time to comment on my column. Based on their thoughts and some further discussion with industry leaders, here are seven ways to combat commoditization.

1. Say no. Yes, it's obvious; yes, it's often impractical (especially in a public company), but it's one way to stop the rot. As one commenter put it, "The problem will get worse until we stop cutting each other off at the knees."

2. Realize you're on the same side as your rivals. Broadcast TV has staved off many of the commoditizing forces at work in other parts of adland. While the networks can be viciously competitive, they are good at holding the pricing line and being unified on key commercial issues. Funnily enough, they've managed to consistently charge more, despite the obvious pressures on their business such as the proliferation of alternative ad options. Meanwhile in other media and in the agency world, going behind a rival's back and offering to do their job for less is like a default setting.

3. Specialize. Said Robert Rosenthal: "The answer lies in recognizing that the other side of commoditization is specialization." Tim Williams, who has written and consulted extensively on this topic, said: "Agencies must understand that 'full service,' isn't a strategy, it's the absence of a strategy." Not sure I fully agree with that, but certainly it's no longer a strong point of difference.

4. Change the cost dialogue into a results dialogue. Here's some advice from Lawrence Boschetto, CEO of DraftFCB. "We need to be able to speak fluently and comfortably in marketing, procurement and finance to truly change the dialogue from a cost-centered conversation to a performance-based one. What clients are really looking for is optimization -- of resources (human or financial); of processes (so more is accomplished in a shorter period of time); and of results. Would a client be willing to pay more to get greater results? The answer should be yes."

5. Accept risk. As Nigel Bogle of BBH said: "An original idea is the polar opposite of commodity, and potentially transformational for brands. Hence it should be valued accordingly, and this case needs making more forcefully as the industry seeks to protect its future."

6. Stop selling ads as the answer to everything. One commenter said: "The minute this business decided it was all about the next ad, it began to perish." Agencies who really want to avoid the rush to the bottom will present smart, creative, business thinking and a range of answers, not an ad dressed up as an "idea."

7. Look for new revenue streams -- be a creative technologist. Bogle, whose BBH offshoot, Zag, has created a bunch of brands in which it owns a stake, is also focused on the idea that the industry needs revenue streams that are less subject to the threat of commoditization. "That argues for products, services, applications, content formats, that aren't available from other sources, which help build brands and in which the agency has ownership." Technology, he said, will allow agencies to "open up new revenue streams more protected from commoditization."

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