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"The Slow Death Of Ad Agencies Has Gained Speed"


This one will sure cause some hate mail from my many friends in the ad agency world. But let's face it, the ad agency model isn't that different today than it was decades ago. Sure, technology has driven production changes. But I'm not talking about that.


First, I do need to flag a disclaimer. There are always exceptions. And there are agencies who have fundamentally changed their business model every few years. While I never worked with them while I was in the corporate world, I'd point to RGA as one of the most stellar agencies around. Under the leadership of Bob Greenberg, they are the "Apple" of the Agency World. They have redefined everything. They get it. Always have. Always will. Of course, others do too.


In almost every industry and every organization, business models have changed dramatically. Departments, groups and teams no longer look like their predecessors and certainly don't function like them either. Layer in technology and supply chain changes and you end up with a brand new model. Think travel reservations, insurance quotes, filing taxes and just about anything else you do.


Yet, clients and ad agencies conduct business like they have for decades. From the pitch stage to the presentation dance. From the research phase to the creative and execution phases. It's fundamentally flawed for many reasons. First, one of my mentors, Len Vickers of GE and Xerox, always had a cardinal rule: "Never outsource your thinking." Len was ahead of his time. When I first interviewed with him, he made it clear he wanted innovators on his team. Not people who would manage outsourced vendors, but people who could create the big picture and execute it flawlessly to each and every market segment.


Then there are the mechanics. As a CMO, I was always bugged by the retainer model that most ad agencies use. Some may call it a retainer model. I call it a blank check. Seriously, some of the agreements were a blank check to bill for everything and anything. I always thought it was weird and "cheesy" to try to bill an additional 18% for out-of-pocket services. Seems to me that it belittles the whole value chain. But I was also willing to pay for innovation. And pay-for-performance was icing on the partnership.

But what really bugged me was how few agencies could bring added-value or innovation to the table. They had to go back to do research and brainstorming. Meet with the creative teams. Test ideas and tweak and test.


Blah, blah, blah. Or as one of the more creative guys in my neck of the woods would say. Da Ba Dee, Da, Ba Di. (Okay, maybe it's Da Ba Dee, Da, Ba Dah.)

I prefer the brain surgeon model. Take the MRI, look at it and give me your analysis and recommendations right then and right there. If your agency person can't walk in and get you excited with some of the right thinking right there on the spot, that's not the agency person for you. And by the way the same is also true for the agency or consultant. If you are meeting with a prospect and he or she doesn't get you excited, you'll never get excited doing work for them. A few years ago, I went to meet the folks at Vericenter (now Sungard). Within five minutes, I knew I wanted to work for their CEO, Gray Hall. He was brilliant. His depth of understanding and incredible bandwidth of intelligence blew me away. And he never disappointed me during our consulting relationship.


All I'm really saying is there needs to be an overhaul of the model. That's also very true of the marketing function within a company or organization. I've consulted with a number of companies who initially hired me to review their agency process, often times to do an agency review. My answer is always the same. You probably don't need an agency at this point anyways. You need to overhaul the marketing function first with a better organizational model and with the right talent.


Now I'm not the first to think along these lines. Companies are already making the change. Agencies too. And that's why the slow death of ad agencies has gained speed.