We constantly hear about how the grass is not as green as it used to be for the advertising industry. How profit margins have dwindled and how the profession has lost its charm. Advertising practitioners often hark back to the golden era of advertising in Pakistan. Things were simpler then with a single TV channel, a few newspapers and a familiar radio channel. Ad men were the charmed and sought-after artisans who would come up with beautiful jingles and clever slogans, a service so loved by the marketers of the time. A happy time indeed.
Things have changed. Consumers have access to hundreds of channels and other options such as Netflix, internet radio, social media and mobile news services. Media consumption behaviour patterns have changed as have the fortunes of traditional advertising agencies. Revenue streams from media buying have dried up, thanks to the emergence of specialised media buying houses. Creative fees are under pressure as freelancers and production houses offer services very similar to those that were once the sole domain of established advertising agencies.
Dinosaurs and advertising
Dinosaurs were large and ferocious creatures that ruled the world of yore. They were the cold-blooded kings (and queens) of their time. They were gifted with strength and size, but less gifted in intelligence and adaptability. Smaller mammals began to emerge during the age of the dinosaurs; they were smarter and more adaptable. Then came a catastrophic event that brought the age of dinosaurs to an end, an event the smaller mammals survived as a result of their superior adaptability. As a parallel, the advertising agencies of yore used to be large and ferocious. Then came a catastrophic event known as globalisation, which turned into the mother of all change. It is this phenomenon that caused many leading brands to eschew locally-made advertisements in favour of regional advertisements. Globalisation and the resulting competitiveness have pushed traditional advertising agencies down the path of dwindling profit margins. This increasingly fluid market provided room for smaller, nimbler agencies and non-agency outfits (freelancers and production houses) to compete with traditional agencies for their creative product and with unprecedented success.
Any brand that fails to differentiate becomes a commodity. Commodities cannot hold brand value as they can easily be substituted. The issue is that differentiation is a moving target. What was highly differentiated in the past is generic today. Agencies that churn out formulaic advertising are headed towards rapid commoditisation.
Evolution is about adapting to change. Some things have been changing for the worse including the devaluation of our currency, rising inflation, regional instability and decreasing tolerance. All realities. Other things have been changing for the better including a growing economy and hence, a growing advertising industry. So we end up with an increasingly complex environment for advertising agencies. An environment which presents numerous threats for agencies stuck in the old ways, but opportunities as well for agencies willing to embrace change. Traditional revenue streams have become strained. Other revenue streams such as consulting, digital marketing and rural marketing have seen rapid growth. Agencies that carry large overheads (large offices and top-heavy workforces) are under pressure. Leaner, meaner outfits have seen unprecedented profitability. Differentiation is the lifeblood of ad agencies and brands. Any brand that fails to differentiate becomes a commodity. Commodities cannot hold brand value as they can easily be substituted. The issue is that differentiation is a moving target. What was highly differentiated in the past is generic today. Agencies that churn out formulaic advertising are headed towards rapid commoditisation. I have written about the phenomenon of formulaic advertising before; senseless jingles, emotional melodrama, slapstick and other generic advertising approaches. We must remember that the process of commoditisation is accelerated by globalisation. It is no longer good enough to rest on the glory of the past; agencies that differentiate are the ones that will find a future ahead of them.
Although I don’t have a crystal ball, there are a number of things I am certain of.
1 The agency of the future will be strategic
Clients face intensifying competition in most categories; they need to achieve results, which is not always the same as running a big media campaign. Clients seek strategic partners who can adopt a media-agnostic approach to drive their media strategies. Being strategic is about understanding client needs and then moving forward with a media-agnostic approach. Agencies have started working on models that mandate a high level of accountability for results and this trend is set to strengthen. Being strong on strategy is a key differentiator as clients increasingly look for fewer, rather than more, strategic partners in achieving their objectives. Big TVC campaigns are not the solution to every marketing problem. That is not how B2B marketing works. Being ahead of the curve on strategic thinking is the edge clients require from their agencies.
2 The agency of the future will be about subject matter expertise
Brands and businesses seek out subject matter experts to guide them on a variety of topics such as behaviour change, digital, media, research, CRM and experiential marketing. The solution lies in nurturing a team of subject matter experts who work together to solve complex marketing problems. This is the architecture of strong, future-facing agencies. The alternative would be multiple agencies working for single brands, a less desirable solution for clients.
3 The future is about insight and knowledge
He (or she) who has knowledge has power. It is impossible to be strategic without consumer insights. Clients expect agencies to be increasingly sophisticated in gaining insights and knowledge. They expect their agencies to be well-versed in the analysis of big data and in new ways of gathering insights on behaviour change journeys.
4 The agency of the future will be technology savvy
This is no longer a nice-to-have; it is a mandatory requirement. Technology needs to be integrated into the agency offering. Technology has changed consumer media consumption habits and behaviours. Clients expect their agencies to guide them through the process of adopting new technologies rather than being behind the curve.
The future is still being defined. Prey or predator, it’s your choice.
Afzal Hussain is GM, M&C Saatchi World Services Pakistan.