I believe it is a result of two primary factors: technology and price. And these factors will continue to disrupt the relationship between advertisers and agencies for the foreseeable future.
Over the past several years we have seen unimaginable change. New devices and software that have made both content and advertising virtually inextricable. Video across multiple screens that is being distributed or streamed, with advertising linked directly to the context of the environment. Cross media communication measured and tracked in real time. Automation that evaluates, optimizes and programmatically handles the buying transaction. And, most significantly, Big Data access and development that digs deeper than ever into media habits, purchase behavior and observable social activity to more precisely anticipate marketing results.
The fragmentation and complexity of media today has not only required changes in agency capabilities, structure and resources but it has left advertisers uncertain about the future of media and what to expect from their agencies. I have talked with several CEOs and CMOs who have attended conferences from the trade media and advertising associations about mobile, video, search, social and how the various media should be integrated and priced; they have found them informative yet overwhelming and often confusing.
When agencies have had to redefine themselves, integrated communications often leads the challenge. Advertising placed across multiple devices must incorporate both above and below the line marketing strategies holistically. That means people and processes as well as agency financial considerations have to be reevaluated to form a cohesive, integrated, operating structure.
Many of the digital acquisitions made by agency holding companies in the past few years are still siloed. While the specialized expertise is valuable it is often not fully integrated strategically.
While agencies must continue to pursue the development of new assets that can bring greater insights, ideas and applications to clients they must prove real value for increasing return on investment, lowering client costs and still manage their own business profitably.
Price is often a chief reason for clients to consider agency consolidation. A client will conduct a review in order to reduce costs, streamline operations and improve business efficiency. Unless performance or service is an issue, most holding companies are generally well equipped to handle all media responsibilities. Trading one holding company for another makes it almost a zero sum game (because as soon as an agency loses a client in a particular category they go after another in the same category from a competitive agency).
What is necessary is to establish the proper criteria and evaluation process for selecting an agency as well as creating a defined ongoing monitoring procedure at the outset of the review to improve the long term working relationship between the advertiser and agency. This is also where financial contingencies for potential changes in scope of work should be incorporated into a contractual agreement.
As clients and agencies continue to work together they must regularly address the pressures on cost, with full transparency, within the framework of developing new technologies. It is an essential requirement for the relationship to endure and prosper.
The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of Media Village management or associated bloggers. Image at top courtesy of freedigitalphotos.net.