Agencies as Business Transformers: The Current State of Play

For more than a decade agency clients have struggled to rekindle brand growth in the face of challenges on many fronts media fragmentation digital transformation ecommerce disruption generational shifts Boomers to Millennials and the constant pressure of quotincreased shareholder valuequot to support inflated client pay levels in 2018 CEOs of SampampP 500 companies received on average 145 million in total compensationWe should not be surprised that advertisers failed in their brandgrowth missions There were too many variables changing at the same time and marketing did not have the experience or the understanding to generate growth in this frightening new world Their agencies were of little help Consequently advertisers pivoted to costreduction strategies margins had to be generated one way or another and when toplines falter costs will be cut This more than anything else explains the rise of procurement and the decline of CMOs in the executive suiteMedia and creative agencies took it on the chin and under pressure from their holding company owners they too focused on cost reductions cutting headcounts and juniorizing their staffs all the while struggling to handle increased client digital and social workloads This strategy appeared to be working if all you measured were holding company share prices WPPamp8217s share price grew from about 25 in late 2008 to nearly 120 in mid2015 stagemanaged by the everaggressive Martin Sorrell Omnicom and IPG share prices grew as well although not at the same high rateHowever these agency costreduction strategies were tactical successes and strategic failures Hidden from the investing public but more visible to clients was the decline in agency capabilities at a time when more rather than less brainpower was required Client relationships became unstable agency reviews were more frequent and clients changed agencies and accelerated their investments in inhouse capabilitiesThe share price bubble burst for WPP in 2017 WPP agencies could no longer costreduce their way to growing margins and WPP shares slid to 54 by the end of 2018 Sir Martin departed WPP earlier in the year and Mark Read took his place as CEO announcing that henceforth WPP would be repositioned as a creative transformation company with a simpler offer quotWhat we hear from clients is very consistent they want our creativity and they want us to help them transform their business in a world reshaped by technologyquotamp160he declaredMark Read was not the only new holding company CEO with changed priorities In late 2018 Tim Andree replaced Jerry Buhlmann at Dentsu Aegis Network and he announced his intent to change DANamp8217s offer to help clients grow quotNo business has a future if it does not stay ahead of the latest developmentsquot he said quotThat means higher levels of integration amp8230 It means greater focus on longterm sustainable growth using marketing as a driver of business value and transformation And it means higher levels of operational excellenceamp8230 This is what clients are telling us and why weamp8217re evolving to meet their needsquotTim Castree CEO of GroupM North America interviewed last month by MediaVillage described how GroupM is elevating its game and refocusing its teams to help clients reignite brand growth quotItamp8217s not about doing a better job in media planning and buyingquot he explained quotItamp8217s about helping clients identify the things required to effect brand performance improvements It requires a change in mindset in capabilities and in measurements and standardsquotIndustry leaders are coming to terms with changes in client needs Cannes notwithstanding the longstanding industry myth that creativity is all that matters is being replaced by the recognition that consultinglike disciplines are needed to identify and implement pathways for growth Holding companies and their agencies are adopting new strategies for themselves Itamp8217s been late in coming more than a decade late but itamp8217s well on its way Accenture and Deloitte will not have the consulting marketplace to themselvesCartoon credit Robert Leighton The New Yorker The Cartoon Bank With permissionClick the social buttons above or below to share this content with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Agencies as Business Transformers: The Current State of Play

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Michael Farmer

American Lung Association and the Ad Council Unveil New PSAs Highlighting the Significance of Early Detection for Lung Cancer - Ad Council InSites

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Agencies as Business Transformers: The Current State of Play

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