Transformation 2014 was witness to the most upbeat and optimistic group of agency attendees in years. There is growing confidence that as agencies get digital and social, they understand their role and their potential to change clients’ businesses. Agencies are recognizing that the profitable path going forward is to combine technology and creativity to innovate and transform businesses.
Thanks to the strong, recurring themes throughout the conference, this Research Insights will concentrate on four major challenges and opportunities facing agencies today, as well as new business:
1. Agency reinvention and innovation
2. Collaboration, culture and talent
3. Value of agencies
4. Purposeful marketing and good citizenship.
You are encouraged to visit the 2014 Transformation website to access more information, including videos, the daily conference newsletter, event coverage, onsite blog posts and much more.
The overall tone of the conference was set by outgoing 4A’s Chairman Chris Weil, CEO, Momentum Worldwide:
"First, what we do works. What we do builds brands and drives demand for brands. When we drive demand for brands, we drive growth. When we drive growth, we drive sales, we drive jobs, and we drive business forward. And with the tools we have available to us now, we can prove that growth.
"Second, we do this with human capital, and what we need to deliver for our clients in the future will differ from what they’ve asked for in the past. We need to bring new talent into this industry to be successful.
"Lastly, we need to build brands that care. We need to lead the dialogue in the boardroom about how we build a sustainable future for our clients and their brands because the consumer is demanding that. So if we’re an industry that drives the global economy forward and we do that in a sustainable way, we will attract the next generation of talent.”
The results of Agency 2020, a study conducted for the 4A’s by Effective Brands, was presented by founder Marc de Swaan Arons. The results reinforced the themes of Transformation. Agencies described as “overperformers” were defined as those enjoying more than 10% annual revenue growth over the past three years. Those agencies differ from others in that they are:
More focused on new revenue streams and how they can add more value in innovative ways
More focused on collaboration
More responsive to trends
Less inclined to overanalyze ROI
Less focused on budget restrictions and client cost cutting.
According to the study, overperforming agencies excel at attracting, developing and retaining millennial employees. What motivates these employees?
What demotivates them?
Agency Reinvention and Innovation
In a members-only presentation on “Progressive Agency Business Models,” Tim Williams, Founder, Ignition Consulting Group, urged agencies to pay attention to these changes:
- Profitability statistics are more telling than income (according to consultant Michael Farmer, agency income “per unit of work” has fallen 40% during a steady 20-year decline)
- The share of marketing dollars going to advertising is declining
- Agencies have lost sight of what they really sell. Agencies identify themselves in the promotion space, when they should be looking at product development and the places where customer experiences happen.
Williams contends that agencies must focus on activities where client needs are unmet, where markets are underserved and where there are fewer providers and higher margins. Being a “full-service integrated agency offering wide variety of services” is increasingly turning into a losing proposition from a long-term profitability perspective, he said.
Williams presented examples of agencies that have embraced disruptive models and enhanced their value:
- Agencies as product incubators: Deutsch’s Inventioni.st, Wieden & Kennedy’s PIE
- Tech and innovation labs: BBH Labs, Barkley’s Moonshot, Sanders Wingo Behavioral Science Lab
- Agency content studios: Deep Local, Allen & Gerritsen
- Experience design: Veryday
- Agencies as talent networks: Victor and Spoils, kbs+’s NSG/SWAT, Bernstein Rein’s Boom Ideanet
- Intellectual property ownership: Rockfish’s Coupon Factory, Smith Brothers Agency licensing its Digital Insights Generator tool
- Behave as a startup: Brunner’s BHive Lab, Venables Bell’s vbp orange.
[Note: In June, the 4A’s will release a new Research Insights that explores the emergence of agencies as inventors, innovators and product developers in considerable depth.]
Collaboration, culture and talent
When asked about the secret to The Atlantic’s turnaround story, Bloomberg Media Group CEO Justin Smith replied that the answer is talent. According to Smith, “the greatest stars should be in the HR/Talent group”—it is that important.
Smith’s interviewer, Andrew Benett, Global CEO, Havas Worldwide, agreed that executives must understand how to drive motivated and engaged employees and “walk the walk” on talent. Benett believes that across almost every industry today, the thread of entrepreneurialism is the winning ingredient for what makes great companies great.
The Star Group presentation focused on its employee-centric culture, embodied by a literal “Cultural Commandments” document that all employees must sign. It concentrates on “People, Partnership, and Accountability” and emanates from the core belief that people working in partnership achieve the best outcomes. A metric of their success is that more than 30 people who left the agency have returned. Star Group’s suggestions for how to achieve a great corporate culture are:
- Keep communication open, with events like town meetings
- Hire the right people
- Foster collaboration, since great ideas come from anywhere
- Invest in technology, including in internal communications
- Cultural assessments should be built into employee reviews
- Focus on personal growth and recognition.
In previous years, the focus of the term “collaboration” was all about getting a client’s agencies to play nice with one another. The term has now morphed into anything that will lead to good work, including better collaboration between client and agency, and hiring and assembling the right teams within agencies.
Esther Lee, AT&T SVP, Brand Marketing, Advertising & Sponsorships, declared that, as critically important as it is, collaboration is “flabby” and we need to get better at it.
How to create the right structure for purposeful collaboration that helps the business? Marla Kaplowitz, CEO, MEC North America, says, for the media agencies, a lot of it is “walking the halls,” being part of the client’s business and being present to know what you need to be doing so that you can deliver for clients day to day.
On the importance of collaboration, Dana Anderson, SVP, Marketing Strategy & Communications, Mondelēz, believes that giving and collaboration foster great ideas and creativity. “Givers” (those who are generous with their ideas) are by far the best collaborators, so “give until it hurts,” she
said during a well-received, humorous address.
Value of Agencies
Insights and Strategy
Based on the results of the Agency 2020 study, Marc de Swaan Arons declared that the biggest opportunity for agencies to grow and remain relevant is to provide marketing and business strategies to clients. At the top of every client’s list of priorities is the need for strategic support. While clients are accustomed to paying for this, they are just not used to paying agencies for it.
Moreover, agencies are in a unique position to do something clients cannot readily do for themselves: identify and leverage insights into big ideas that grow businesses.
John Hayes, CMO, American Express, cited a number of changes in society (e.g., the sharing economy and its impact on car and insurance purchasing; how money is only #20 in a list of things that matter to consumers; how people like to support local businesses).
He believes that agencies must lead clients in recognizing societal shifts. In the case of Amex, his agency partners played a key role in the development of new products and services intended to leverage these insights, such as the hugely successful Small Business Saturday. Hayes went so far as to say that if an agency partner isn’t telling him when he’s wrong, debating and challenging him, then that agency is not a valued partner.
Ken Martindale, President & COO, Rite Aid, added that the agency’s role is to ensure the customer has a seat at the table in every decision. In this case, the societal change that is transforming Rite Aid’s business is the shift from health to wellness. Martindale credits his agency with understanding the increasingly complex business of pharmacy (thanks to insurance, health-care providers, drug industry, the ACA, government regulations, etc.), and helping the client navigate these waters.
Martindale identified his three biggest marketing challenges in the next five years:
1. Continuing to innovate and become more creative and more effective at building personal relationships with consumers.
2. Figuring out how to use the massive amounts of data available.
3. Leveraging technology in the office and in the stores (e.g., in-store wellness ambassadors with iPads can print coupons on the spot).
Dairy Queen’s CEO & President, John Gainor, talked about the insight that led to a transformative rallying cry for the company. When research showed that DQ is an important part of many people’s lives and memories, the idea of “Fan Food, not Fast Food” was born. This theme was a way to connect the essence of the brand to consumers on an emotional level, and franchisees (the primary customers) loved it.
Tim Mahoney, Chevrolet Global CMO, pointed out that an important insight for the automaker is that only two percent of the population is in the market for a car in any given month. The goal, then, is to get Chevrolet into the consideration set and build sustainable demand—with the key metric being “how many people think Chevy is a brand for them?” Chevrolet relies on its media agency for help connecting with the right consumer at the right time.
With the luxury of a long lead time before a new car introduction, General Motors shares where the product is going with its creative agency three years out. When asked about the use of data to make marketing decisions at Chevrolet, Tim Mahoney replied that the challenge is to take input, consumer insights and product truths and find a way for them to come together. It is more of a process than a formula.
McCann played a crucial role in monitoring and leveraging societal changes for Chevrolet. It identified the “new” American family, which dictated a change in featuring talent. Chevrolet is now using real— but diverse— types of families in its ads to be more authentic. With the belief that great brands are built on consistency, Mahoney identified components of the litmus test that all communications must pass:
- Smile, but not belly laugh
Filter Failure and Analytics
AT&T’s Esther Lee said clients have difficulty understanding where human behavior is going with all the technological advancements and that agencies are in an excellent position to take the lead. In her experience, agencies sort through all the confusing developments and filter through it all, make sense of it and present the best opportunities to the client. “You sit at the center of an ecosystem of tools, you have all the data pools, you have the trust of the clients and you have a relationship with the media owners. You put that all together in service to real-time marketing,” she said.
A similar sentiment was express by Barry Lowenthal, President, The Media Kitchen: “Agencies do well in a confused marketplace. They’re the ones that can sort it all out for clients and make sense of multiple platforms.”
Says Ian Schafer, CEO & Founder, Deep Focus, “Agencies are in the best position to do what marketers are weakest at and what agencies excel at—interpret, make sense of data, synthesize it, etc.—because agencies are best at understanding the source of those data: the consumer.”
According to Miha Mikek, Founder & CEO, Celtra, agencies cannot win playing against tech experts in Silicon Valley. Silicon Valley, however, doesn’t understand marketing—that’s the strength of agencies and that should be their focus, he contends.
Why shouldn’t third-party and tech entities that manipulate data do the synthesis? Google’s Tara Walpert Levy, Managing Director, Global Ad Market Development, said, “Because these are third-party companies that generally want something more from marketers (more business, more data), whereas for agencies, that IS their core business; they have no other agenda. Restaurants don’t raise their own cattle. While it is incredibly important, they connect with others to do that. Agencies should lead and manage the business they’re in—they’re in the best position to leverage and interpret the data.”
Advice for Agencies from Client Executives
AT&T’S Esther Lee revealed areas where clients are struggling that present opportunities for media agencies:
- Scale and agility
- Data and analytics
- Programmatic buying
- Collaboration (how can media agencies drive convergence with creative?)
- Be a true business partner, not just a media partner.
DQ’s John Gainor said that agencies need to listen and understand strategies of the company. They need to figure out how to become a resource to help the client achieve its objectives.
Mondelēz’s Dana Anderson provided guidance for clients and agencies on how to get to great work, the foundation of which is a relationship of mutual trust.
From clients, agencies need:
- To work with experienced people, not junior-level staff
- Just a few client people in the room
- To start upstream. Don’t assume agencies just want the creative brief in a vacuum. They want to know when the product was created, who made it, the entire history.
- Brutal honesty. Don’t be polite.
- The sharpest strategies possible
- Clients to test the direction, not specific scripts
- Clients to respect and understand the way agencies work
- To know that a client’s “yes” really means yes.
Clients want to see confidence from the agency (not cockiness). Confidence is alluring, and it helps the client say ”yes.”
Purpose and Good Citizenship
While “good citizenship” was deemed by some to be a better alternative to the overused terms “corporate social responsibility” (CSR) and “cause marketing,” regardless of the moniker, there was a great deal of emphasis on this theme throughout the conference.
There was a consensus among social responsibility panelists that the top priorities include:
- Do just a few things very well (vs. too many things merely adequately). Coke simplified its efforts to concentrate on “women, water and well-being,” a focus that has economically empowered 550,000 women in Third World countries and improved water efficiency system wide by 20% in four years, despite increased production levels.
- A 27-year partner of Children's Miracle Network Hospitals, Dairy Queen has raised more than $86 million through activities such as Miracle Treat Day, an annual event during which at least $1 of all proceeds from each Blizzard sold at participating locations goes towards benefiting local community children's hospitals.
2. Engage employees
- Select issues that resonate with employees (versus a top executive’s pet project). Getting employees engaged and enthusiastic about the initiatives pays off. At JetBlue, youth, education and community were identified as top priorities by employees, so literacy became a focus. Numerous programs were then developed (e.g., a national inflight and online “Soar with Reading” program in partnership with PBS; an event where Burbank crew members read to preschoolers at a local school). For community and environment, JetBlue partnered with Kaboom to build playgrounds in cities they serve, making a difference in 86 cities.
- A paint company in Spain sells tins of optimism instead of paint. They contributed paint to a troubled inner city, and crime went down as the neighborhood got more colorful. Just as important, all the company’s employees participated in the painting event. (This anecdote came from Marc de Swaan Arons, in talking about the Agency 2020 survey.)
- “You can’t do a head fake on cause or purpose-based marketing, because consumers will sniff that out,” said Matt Jauchius, EVP & CMO, Nationwide. Reinforcing its commitment to its local community, Nationwide has walked the walk for more than 50 years. They have supported Ohio-based Nationwide Children’s Hospital with fundraising programs such as an annual NASCAR event, where drivers drove for specific children and recently raised over $3 million for the hospital.
- Secret deodorant’s successful “Mean Stinks” anti-bullying movement grew out of the brand’s stated purpose: to help women of all ages live fearlessly. Susan Credle, Chief Creative Officer, Leo Burnett USA, explained: “You don’t claim it; you are it.” Brands have to act overtly to do something good. Among other results, Secret became the first P&G beauty brand with over one million Facebook likes.
Rosemarie Ryan, Co-Founder & Co-CEO, co:, gave a presentation called “Storytelling vs. Storydoing™,” which reinforced the importance of authenticity and purpose in a brand’s communications. While not using the word “purpose,” that concept is undeniably the premise behind storydoing. She pointed out that 80% of CEOs believe their products are differentiated, but only 8% of consumers agree, and she quoted investor and author Ben Horowitz as saying that “a company without a story is a company without a strategy.”
Ryan declared that, instead of the traditional linear approach of identifying an opportunity, planning, hiring an agency and then creating a campaign, it’s better to start with the story. She
cited a study of 42 companies in seven categories that revealed that storydoing companies can spend three times less on media than storytelling companies, and yet generate more social media buzz and higher valuations.
She posed six questions to the audience:
- Do you have a compelling story to tell (e.g., Target’s Mission & Values)?
- Does your story define an ambition beyond commercial aspiration (e.g., JetBlue “inspiring humanity”)?
- Is your story understood and cared about by the entire company (e.g., Zappos, with its relentless focus on corporate culture, employees and customer service)?
- Is your story being used to drive action throughout the company (e.g., IBM’s Smarter Planet strategy)?
- Have you defined a few iconic transformative actions to focus on (e.g., Red Bull’s Stratos supersonic jump)? Another example is when Starbucks’ Founder Howard Schultz returned to bring the company back to its core values, beginning with a three-hour shutdown of all stores for barista retraining.
- Are people outside the company engaging with, and participating in, the story? (Think “Nike.”)
Purpose and Agencies
Marc de Swaan Arons said that “purposeful marketing” is a megatrend. Clients embrace it, but they do not perceive agencies as having clear positioning or a societal purpose. Agencies considered overperformers rated themselves a bit higher than other agencies did when asked if the “positioning of our agency is societally purposeful” (57% vs. 48%), but they rated themselves considerably higher on the statement: “We ensure that all employees are fully engaged with our purpose” (71% of overperformers agreed, vs. 51% of other agencies).
Bea Perez, Chief Sustainability Officer at Coca-Cola, urges agencies to be sustainable and actively engage in a measurable way. Bea advises agencies to ask questions if they don’t see sustainability in an RFP. She lauded a proactive agency that brought up sustainability during Coke’s launch of Fanta in Turkey; the result is that Coke is now building playgrounds in Turkey.
Aside from implementing sustainability measures, it was not made clear how agencies could be in a position to exemplify “purpose” in the same way clients can. This is more of a challenge for agencies, which operate in the B2B space, than for consumer-facing businesses aspiring to improve the human condition.
No agency conference would be complete without some discussion and advice about new business. Here is advice from Catherine Bension, CEO, SelectResources International:
- Get on the radar of the search consultants.
- Be strategic in determining which accounts to pitch or not (most agencies are opportunistic, not strategic).
- Listen closely to what problem the client is trying to solve.
- Explain why you think you’d be the right fit for this client.
- Be prepared, even for the first chemistry meeting. Homework counts this early.
- If you’re a high-profile agency, be aware that expectations are high and you can fall off the pedestal. So don’t put too much on the table at the first meeting—it’s too soon.
- In presenting ideas, casting is most important. Clients want to meet the team that will be working on their account.
A few points and practices from New Business All Stars/Survivors panel, which was moderated by Greg Stern, CEO, Butler, Shine, Stern & Partners, and included Diane Fannon, Principal Brand Management at The Richards Group; Kristin Bloomquist, EVP, General Manager at Cramer-Krasselt; and Dave Lubeck, EVP, Executive Director Client Services at Bernstein-Rein:
- All three panelists agreed that roughly 20–25% of their business comes via consultants.
- Build awareness of your agency with consultants: get on a plane and know why you’re talking to them, have your story, know why you’re different. Treat them like new business prospects—you need to convince them, too.
- Problems with project work: The process of hiring for project work isn’t streamlined. There are too many competitors. The agency is not in the know the way they would be as long-term partners. Contracts often aren’t designed for project work.
- Size of account: Small is often OK, but too big is not. One agency said it doesn’t want a client that would dominate its portfolio, as it would make them dependent. Walk away.
- Deciding whether or not to participate in a pitch: One agency said that if the process does not involve an agency visit by the prospect, they will not pursue it. That agency’s screening process involves asking four questions: Can we make a difference? Can we do great work (creative, media, social, strategic)? Can we make a fair profit? Can we have fun? If the answer isn’t yes to all four, the agency won’t participate.
IN CLOSING, A ROUNDUP OF ONE-LINERS, ADVICE AND INSIGHTS
“An idea is nothing without technology, and technology is nothing without an idea.” (Julia Doria, EVP, CMO, and Doug Hagge, EVP, Chief Strategy Officer, Bailey Lauerman.)
“Driver of change is society itself, not smartphones.” (John Hayes, American Express.)
“Not big data, but smart data.” (Jennifer Bow, Strategic Partner, Datalogix.)
“Data is not a problem; making sense of it is.” (Tim Mahoney, Chevrolet.)
“From the dawn of civilization through 2003, five exabytes of info was created. Now that much information is created every two days.”(Jennifer Bow, quoting Google’s Eric Schmidt.)
Dana Anderson on collaboration: “People—monkeys can do it!”
Millennials prefer to think of themselves as “empowered” rather than “entitled.” (Rising Star panelist.)
“Why do you need product-and-benefits messaging for Porsche? Because the guy needs to explain why he spent $90k on a new car!” (Tim Mahoney.)
“AMC’s successful shows so far have been all based on instinct, taste and judgment, not on an algorithm.” (Arlene Manos, President, National Advertising Sales, AMC Networks.)
“The wrong way to make expensive decisions is to base them on gut and innuendo.” (Measurement Mandate panelist.)
Branded entertainment, branded content, native advertising, content marketing—it’s all the same thing. (Agencies as Content Creators panelist.)
John Montgomery, COO, GroupM Interaction, USA, identified the three big issues facing media today—mobile, cross-media measurement and addressability.
The Media Kitchen’s Barry Lowenthal said, “We need tools to prove that mobile is as important as we know it is.”
And finally, we want to give a shout-out to Mike Donahue, 4A’s EVP, Strategic Partnerships. Not only did he do the heavy lifting on Transformation’s programming, he was also responsible for a great Monday morning opening moment. After a 4.4-magnitude earthquake wake-up call, he deftly had the music swapped out so that 4A’s President-CEO Nancy Hill came onstage to Carole King’s “I Feel the Earth Move.”