Why Your Agency Shouldn't Do Product Development

If You Can't Dedicate the Resources, Stick to What You Know

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Marc Brownstein Marc Brownstein
At a recent conference of agency CEOs, there was lots of buzz about all the usual hot topics: convergence of digital media; relevance of traditional advertising; talent recruitment and retention; agency compensation, etc. Yet there was a new topic on the table this year: agencies jumping into the products game.

Specifically, many agency executives were discussing how their shops were developing new products that they would then market in-house. Products consisted of everything from content sites to jeans brands to video games.

On paper, it makes a lot of sense. If agencies can make products famous, surely they can invent them as well. In fact, I have been tempted over the years to create consumer products. Brownstein Group never took the plunge, mainly because we never had THE killer idea that I was prepared to fund. And maybe that was for the best, because I believe that most agencies will fail trying to "be the client."

Some reasons why:
  • Agencies aren't structured to be in the consumer-products business. Our structure lends itself quite well to creating ideas and servicing clients, not being a lab for tangible products.

  • Small-to-midsize agencies, in particular, are vulnerable to failure because they do not allocate the proper resources to product development. It is often viewed as something the creatives can dream up in their spare time. Won't work. If you are serious about being in the consumer products business, start a separate company and get proper funding.

  • Product development is a distraction to creative development.

  • The bottom line in the consumer products industry is that companies need to deliver the right high-quality products to market, at the right time and at the right price while maintaining profit margins. Are small agencies prepared to live up to these standards? It often seems like a no-brainer to develop products inside the agency; the reality is that it is a very different business model.

  • Agencies will likely pull the team tasked with creating the products off of the assignment as soon as a big new-business pitch comes in the door, establishing a pattern of start and stop creation. And creating a culture that won't go to the wall to build a blockbuster product.

  • If you insist on being in the consumer-products business, then help a client create new products by proactively bringing them non-advertising ideas. And share in the revenue. Seems to be working for Crispin.
Now, there are certainly agencies that have succeeded in being both agency and client. But it's been my experience that if you stay focused on being the best your agency can be, profits from typical agency services should take care of themselves.
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