What can save the agency model?
Pushing back on procurement and in-housing, doubling down on agility and providing bespoke solutions – can these things save the agency model? The ThinkTV Stage at Advertising Week APAC heard DDB Sydney MD Priya Patel, GroupM CEO Mark Lollback, The Trade Desk business development director, Stephanie Famolaro and Facebook director of agency, Ellie Rogers discuss the ‘Agency of 2024’.
Key points
- The ongoing challenge of client procurement is helping drive a race to the bottom on price. “Procurement is making agency life incredibly difficult.” – Ellie Rogers, Facebook
- Clients might find in-housing is harder and more expensive than they think. “There are only five companies in Australia that have the balance sheet and the capability to truly in-house their marketing, programmatic or media work" - Mark Lollback, GroupM
- “There are clients who have gone in-house and then two years into that journey they are reaching back out and saying ‘can you take this back because it’s so bloody hard’.” – Mark Lollback, GroupM
- DDB Sydney’s Priya Patel said the agency time/output model is increasingly under pressure and therefore agencies must "have skin in the game for the benefit that comes long term."
- “I think the headline for all (agencies) but particularly media agencies is two areas: it is absolutely about agility and being bespoke. If I look at our 220 clients there is not a solution that applies to all” Mark Lollback, GroupM
In many ways some of these topics are perennial issues. But it’s also hard to escape the reality – in a room packed to the brim with agency people at Advertising Week APAC - that in 2019 many agencies are wondering how sustainable their current business model will be in five years.
As we begin to look to 2020, agencies are being expected to do more with less, to invest more in technological capability and people while also delivering more strategic thinking across multiple platforms and media channels. Yet as the Advertising Week APAC panel heard, remuneration models are not keeping up with the evolution in client need – indeed procurement is often driving the relationship into a space that is adversarial, commoditised and price driven.
There's also no denying that marketers have a responsibility too. GroupM boss Mark Lollback - a former chief marketer at Pepsi, ANZ and McDonald's - described how he used to handle the balancing act.
“I remember holding a pitch for media and creative and called procurement together very early in the process and I told them your job is to run the process. Full stop. My job is to make the decision and I think unfortunately there are a lot of senior marketing people who are just handing it to procurement and not taking responsibility for what comes out the other end. As an industry, we have to be careful we don’t get to the lowest common denomination.”
Agencies have to look at what has driven the rise of clients wanting to take things in-house. Here the panel was right in that doing this well is a difficult task for most clients – especially in areas like programmatic or media – but there are also clear market factors that have driven marketers to take control of their own capabilities, especially when it comes to digital and data.
If agencies want to stem a desire by clients taking direct control of these areas they need to find a way to move away from being a supplier and into what DDB Sydney’s Priya Patel rightly described as a “trusted advisor”.
Finally we can view the issues of the right agency remuneration structures, greater agility and more bespoke agency offerings as intractably linked.
Both the agency and the client will need to move fast in the next couple of years to evolve a more sustainable structure that reflects both the needs of clients and agencies for the 2020s.
This means giving agencies a seat at the table and helping them build more bespoke solutions - and baking in some upside to ensure they are invested in the long-term growth of the marketer’s brand.
