It was all so much simpler when David Ogilvy and his ilk were
ruling the UK advertising agency scene in the 60s and 70s. You expected
the creatives to run amok, knew that wine-fuelled lunches were the way
business was done and accepted the odd stretched deadline ’because
Julius has decided it’s all got to be redone in red’.
But as we creep toward 2000, on the edge of another recession, the
agency world is undergoing an awakening.
The pressure is on for marketers and they are passing that pressure on
to agencies. ’Increasingly, marketers have to justify their adspend
internally,’ says Nick Shepherd, general manager of coffee and food at
Kraft Jacobs Suchard. ’But I’m not sure that agencies are equipped to
respond to that need.’
There is a general feeling among many of our top advertisers that
fundamental changes are needed in the services agencies offer, the way
they are structured, and most contentiously of all, the way they are
At today’s annual Incorporated Society of British Advertisers
conference, director-general John Hooper expects fur to fly at the
session discussing ’What should tomorrow’s agency offer its
’There is a degree of angst among clients that the marketing scene is
rapidly shifting,’ says Hooper. ’They aren’t confident that their
agencies are keeping pace with the way their businesses are
Bright advertising ideas will always be needed. But if agencies don’t
begin to listen in other areas they could soon find themselves
manoeuvred out of the equation. Witness the moves by Boots The Chemist,
whose head of group procurement, Julian Coles, is investigating the
possibility of negotiating group-wide buying deals with Granada that
could involve the retailer booking its TV ads direct. Even the mighty
Procter & Gamble has issued wake-up calls to the ad industry to stop
being blinkered about new media opportunities.
The wave of new independent, creative agencies in the early 90s focused
client attention on an alternative to the unwieldy networked
From the mid-90s we have seen more action on the media side, with the
rise of the media independent, new-media agencies and the function of
media planning taking care of the giddying growth in places in which
your brand can be seen.
All these agencies have appeared because of clients’ eagerness to have
more specialist expertise in creative and media. But many marketers are
now faced with an often unworkable number of agencies. When he was
director of marketing communications for BT’s business division, Dominic
Owens had 15 agencies of various disciplines: ’I could have easily spent
my whole week just meeting people from these agencies,’ he says. ’I
needed an agency just to manage my agencies!’
’As all these agencies were competing for my business, I needed someone
impartial who could help me decide how to split my budget across the
available media,’ explains Owens.
Logistical problems aside, clients also worry that they may have
encouraged too much separation between creative and media.
This, says Michael Wall, partner at Fallon McElligott, can lead to the
creatives working on the theme of a campaign before the media agency has
decided on the best places for the ads to be seen. ’The problem can
arise because media planners and creatives come from different agencies
and have different agendas,’ he adds.
Wall advocates a kind of ’preferred partner’ scheme, whereby creative
agencies tell clients about the media agencies with which they have
David Robey, head of retail at Shell, operated such an arrangement when
he was chief executive of Co-operative Retail Society’s food
’I appointed Duckworth Finn Grubb Waters and Motive because I knew they
worked well together. I treated them both as a full-service agency.’
Some clients feel the answer could be a return to the old full-service
structure of having everything in one agency. ’It would be the ultimate
irony,’ agrees a marketer at an FMCG firm. ’Perhaps this time we could
have the advantages of independent expertise but under one roof.’
Another area of concern for marketers is whether they are getting
impartial advice from their agencies on the mix of media in which they
A TV ad, for example, is a far more cost-effective medium for agencies
to produce than a series of press ads. Although the TV ad will require a
pricey shoot, once it’s done it can be used over and over again. Press
ads, however, are far more labour intensive. And what if the most
effective course for your brand is a concerted public relations
campaign? Is your ad agency going to recommend a sister PR agency down
the street, knowing that this leaves a team of its creatives with their
A raft of new media opportunities opening up, such as the internet and
interactive TV, has prompted both Procter & Gamble and Unilever to
express concern that their agencies are not investing in these areas
because there isn’t money in it for them. Mainstream agencies may have
missed the boat, but the area is suited to the young entrepreneurs who
have leapt in to fill the gap in the market over the past few years.
But ad agencies have started to respond to the criticism. Some,
including Young & Rubicam, have restructured the way their agencies
account for profit. Instead of having separate profit centres for
advertising and direct marketing, these are now pooled. This means that
an account team within the main ad agency is free to recommend to a
client that its sister agency, Wunderman Cato Johnson, produces a direct
marketing campaign, without thinking that the revenue has been ’lost’ to
In theory, the obstacles that may have bred competition between the main
ad agency and the below-the-line division have been removed. However, it
is likely that the competition still exists at a far deeper level.
Ammirati Puris Lintas has operated a similar system since buying
below-the-line outfit KMM in 1995. ’We don’t start with an assumption
that we are going to produce a 30-second TV ad, and I think the lack of
individual profit centres has a part in that,’ says APL chairman William
Dominic Owens felt so strongly about the need for impartial advice that
he set up his own agency: BridgeWorks. He and his partners help
marketers select the right ways to spend their budget. ’Our
relationships with clients are based solely on the advice we give them,’
The payment of agencies is another issue that has divided the
advertising industry and its clients. The traditional commission system,
which involves agencies being paid as a percentage of the media budget,
is seen to be flawed in that it can encourage agencies to inflate the
But the debate has raged for years and an effective replacement has so
far failed to materialise.
The majority of marketers still rely on the commission system, although
some have moved over to a flat fee. But many have instigated
performance-related bonuses for agencies as an additional payment. The
central problem with this is working out the relationship between the
campaign and subsequent sales, which may have been influenced by various
’Setting the performance-related portion of payment can be a frustrating
process,’ admits Andrew Marsden, marketing director of Britvic Soft
’I prefer to pay my agencies with a flat fee. I think it encourages
stronger, long-term relations and reflects the fact that agencies are
selling their employees’ time.’
But for clients faced with internal effectiveness measures on their own
performances, insisting on a sales-driven element of payment allows them
to feel they are controlling their agencies. The next few years are
likely to see an adoption of the flat fee plus performance-related style
But some agencies are resistant to the idea of fees because they feel it
turns them from a ’partner’ into ’just a supplier’. This issue exposes
the identity crisis facing ad agencies in the late 90s; should they
concentrate on selling ideas, or continue to market themselves as
Many clients are getting impatient with having an apparent full-service
relationship which in reality doesn’t deliver ’full’ service. ’I get
annoyed when I say what I want and an agency says ’Yes we can do that’
when actually they don’t have the resources. I wish they’d be more
honest,’ says Marsden.
But agencies act this way because they have realised that many clients
want integrated thinking and so pursue a ’Promise first, think about it
later’ strategy. Clients have consequently been inundated with pitches
from agencies which claim to have attained the Holy Grail of
However, a growing number of clients, although they want their account
team to think up bright ideas across a range of media and disciplines,
would then rather appoint a specialist to execute it.
This gets right to the heart of any conflict between an agency and its
client; agencies on any form of commission make their money on the
creating rather than the thinking.
Shepherd hopes the agencies of the future will bring back what he sees
as the lost art of planning. ’Planners are the people who should be most
in touch with the consumer, most able to advise on the style of ads and
the media. Yet there seem to be far fewer of them these days. This is
where agencies can make the difference.’
Finally, there is the problem of size. For a number of blue-chip
companies, having a global agency works because it mirrors their own
structure, allows them to make substantial savings and co-ordinate their
marketing strategy across the world. But there has been a realisation
over the past few years that the growth of the super agency may be
working against creativity.
Unilever’s chairman Niall FitzGerald raised this in October 1997 when he
addressed the Advertising Association in Dublin. ’There’s undoubtedly a
niggling worry within some of our operating companies that the agencies
that best understand national and regional characteristics - and are
therefore more agile in their ability to fashion ideas from them - are
the smaller, national ones.’
The sentiments had already been acted on four months earlier when
Unilever subsidiary Van den Bergh Foods picked new creative shop Mother
to work on a TV campaign for its Batchelors Supernoodles brand.
WPP, Unilever’s main global ad agency network, has responded to the
Last month Ogilvy & Mather’s North American division announced it was
striking partnership deals with some of the US’s hottest new independent
agencies. This may point the way for others to harness the benefits of a
small agency with the cost savings of a large network.
If the agency of the future is going to be asked to work harder and
smarter, they will demand more from clients. That means better briefs,
clearer communication, and an honest and remunerative relationship
Clients who ask, ’What kind of agency are you?’ should be prepared to
answer the similar question - ’What kind of client are you?’
Mischa Alexander, managing partner, Advertising Brasserie
’And another thing’ says Steve Martin in Planes Trains and Automobiles,
’when you tell a story try to have a point to it, it makes it so much
more rewarding for the listener’.
Most agencies currently fall into this trap. They fail to have a real
point to their story, and invariably hide behind the safety blanket of
offering a service-based relationship. Yet a service-based relationship
is not what most clients value. It is powerful ideas that add value to
’The Great Remuneration Debate’ - commission can no longer be your core
currency if you have a product to sell rather than a service. Like any
other manufacturer you are going to come up with a value for your
product based on a number of factors like raw costs, desired profit
margin and market demand.
’Competition from Consultancies’ - there is no threat from organisations
which aren’t good at developing strong communication ideas. Most
consultancies agree that this is not their core skill. However, there
will be plenty of competition from non-advertising agencies good at
’The Need for Media Neutrality’ - if strong ideas drive your business in
terms of output and income, you have no vested interest in any
particular media. But generating strong ideas requires an understanding
of how the media world works.
The successful agencies of the future are going to be those that
recognise they are not part of a service industry and position
themselves in the business of selling ideas.
Martin Jones, managing director AAR
What will clients expect from agencies in the future? The answer is
As their departments become leaner and as the tenure of their marketing
directors begins to be measured in months rather than years, client
companies will not only look to their agencies to be the torch bearer
for their brands, but also provide them with the tools to help them
compete and ultimately win.
More ideas. Ideas are the reason that the majority of clients appoint
agencies, otherwise they would do it themselves. They will look to their
agency to produce magical ideas which can help transform their brands or
More insights. The understanding of consumers will always remain one of
an agency’s key tools. More sophisticated ways of identifying, targeting
and influencing these consumers will be necessary.
More accountability. As econometric systems become more and more
sophisticated, client companies, and particularly their financial
directors will demand more reassurance that their budgets are being used
to their greatest advantage.
In demanding more, however, marketers will need to give more. Trying to
drive down remuneration levels while still demanding more will only lead
But more needs to be given in other areas. More honesty, more time, more
trust and more understanding.
Martin Sorrell, chief executive officer, WPP
Our business is about providing solutions to clients. Increasingly
advertising agencies, or more appropriately communications services
businesses, will act as a portal for a whole host of talents. We are
really in the talent business.
As far as structure is concerned, in future, agencies will be organised
by clients first, function second and geography third. Not as in the
past, the other way around. Organisational structures will become
horizontal by client and not vertical silos by function.
Creative departments may not like it, but the Holy Grail will be the
quantifiable justification of decision-making. Clients are increasingly
looking for global evaluation systems through which they can analyse
issues in a standardised way. Standardised methodology - not
It will also become critical what total communications budgets should be
and through what channels, and balance of channels, those budgets should
Clients have gone through radical restructuring. Agencies have not. They
have not even experimented with process improvement. We have to behave
like our clients and make sure the technological investments we are
making pay off in terms of increased productivity.
In other words, it will be a challenging future full of opportunities
which, if not dealt with, will turn into threats.
Brian Duffy, managing director, Pretty Polly
I would like agencies to be more focused on the commercial needs of my
business rather than on the needs of their creative departments.
Marketing now is a lot less compartmentalised. Everyone involved in the
process - agencies included - needs to be thinking about how ideas can
be translated into different media. Creativity is just a means to an end
for us marketers - we also have to think about the packaging, point of
sale, public relations and selling to the trade.
My biggest frustration is when a good creative idea is not used
Often this is down to the account people not thinking enough about other
parts of the business, and missing opportunities. For example, the
design of packaging for a new product needs to be finalised months
before launch so that we can sell it into the trade. It would be great
for there to be some similarity between the pack design and the ads, but
advertising is generally created a few weeks before launch. These
creative guys seem to need the pressure of the final deadline to produce
the goods - trying to get copy way in advance never works in
I don’t think I should have to be constantly reminding agency people of
commercial timescales - they should know them.
I still believe in the commission form of payment. I think it works in
terms of motivating the agency - if the campaign works, I’m more likely
to invest more in it and the agency benefits.