Paradigm Change

Advertising agencies have operated under the Creative Paradigm since 1959 -- you know how it goes, "we're creative; we win creative awards." This is today a tired refrain, devoid of ideas, that neither distinguishes one agency from another nor generates fee premiums . Fifty-five years after the Creative Revolution began, creativity has become a commodity, and advertising is being paid for at commodity prices. It's time for a paradigm change.

The Creative Revolution substituted entertaining ads for the hard-sell ads pioneered by Rosser Reeves at the Ted Bates agency. Reeves preached that the purpose of advertising was to sell -- that an advertisement or commercial should show off the value of a product, not the cleverness of a copywriter. Reeves' ads were grating and annoying, but they worked. Subsequently, the less grating and more entertaining ads of the Creative Revolution won the day, and the hard sell ads fell by the wayside. An unfortunate side effect was that idea that "the purpose of advertising is to sell" fell by the wayside as well.

What are agency clients looking for today? Improved results. Advertisers have operated under a Shareholder Value Paradigm since 1990. Growing profits and growing share prices are specific objectives. Senior executives are paid astronomical salaries and bonuses to achieve improved results. Procurement departments have been empowered to cut non-value added costs and contribute to profit growth.

Procurement, as we know, has targeted marketing costs and agency fees for their cost reduction efforts. Their clear view is that marketing costs and agency fees are "costs" rather than "investments."

Said another way, the creative refrain "we're creative; we win creative awards" is not a credible statement for value-creation. Instead, it's a bulls-eye for procurement cost-reduction efforts.

What would it take for an agency to be viewed as a strategic partner, aligned with the advertiser's goal to increase shareholder value? What would justify higher fees for agency efforts?

Agencies should look to the strategic management consulting firms for guidance -- to Bain & Company, McKinsey & Company, The Boston Consulting Group and A.T. Kearney -- for guidance on this subject. These firms have all focused their practices and their published ideas on one simple subject: improved results for their clients. Look at their websites if you need further evidence. They fairly brim over with ideas for their clients, like how to use social media, big data, pricing strategies and improved organizations to generate improved results. Not insignificantly, these consulting firms earn 5x billing multiples on the cost of their people, in contrast to the agency average billing multiple of 2.3x the cost of agency people.

Agency websites are sterile deserts of animated design. There is little evidence that agencies spend much time wrestling with the complicated problems of how to improve client brand performance in this most competitive of worlds.

Agencies must begin to prove that their practice rests on a firm intellectual foundation, derived from experience and focused on the goal to help clients improve growth and profitability. Agencies need to move away from the Creative Paradigm and embrace a Results-focused Paradigm.  Their economic survival depends on it.