Is your agency stuck in the mushy middle?

The crux of a company’s business strategy is to find, own and continuously refine their competitive advantage over others operating within the same category. For continued success, this advantage has to be real and sustainable over long periods of time. Michael Porter, a Harvard professor and renowned strategy guru, identifies three broad categories of competitive advantage a company can select from; he calls them ‘generic strategies’ because they can be applied to products or services across all categories and companies of all sizes. They are: cost leadership, differentiation and market focus; he further classifies focus into cost focus and differentiation focus.

Cost leadership and differentiation strategies are obvious; the focus strategy needs a bit of explaining to be properly understood. It is about targeting a narrow customer base; one or few market segments instead of all of them. A differentiation focus strategy would mean targeting a small group of customers with differentiated products to meet their unique needs. A cost focus strategy requires competing on price in order to target a narrow market that would not normally buy mainstream brands because their needs are basic and they are unwilling to pay for features or higher quality they don’t need. A company that follows this strategy does not necessarily charge the lowest prices in the category. Instead, they charge lower prices relative to others competing within the same target market.

A company must choose one of the three (or four, if we consider focus as having two sub-categories) strategies or risk wasting precious resources; marketing communications agencies are no exception. If they want to succeed, they too need to adopt one of these strategies. Whether or not they are operating in Pakistan, are actually doing this and if so, deliberately or by accident, is a subject that needs scrutiny. Let’s begin by examining some of them.

IAL produces good creative work for their clients, but what sets them apart from their peer agencies is the ‘responsiveness and promptness’ of their service. If you are a client and you want your work to be delivered the next day, IAL is one agency that will not refuse. Their people may have to put in extra effort, but they will make sure that they deliver not only on time, but with two or three different options. We can safely say that IAL seems to be following a differentiation strategy, based on agility or operational excellence. IAL are affiliated with Saatchi & Saatchi Worldwide and a pillar of their vision is ‘Impossible is Nothing’. This added to the fact that one of IAL’s biggest clients (with whom they have been dealing for decades) is P&G, known for being a tough and demanding client globally. IAL adopted practices that were necessary to keep P&G satisfied with their performance and these practices were gradually weaved into the fabric of the agency’s culture. Eventually, these practices (for example, efficient resource and time management, working late hours etc.) were applied to other client projects, forming a basis for the agency’s competitive advantage. P&G’s other agencies in Pakistan did create teams who were kept on their toes, but they never internalised similar practices on the scale IAL did.

Ogilvy’s competitive edge advantage globally is ‘360 degree brand stewardship’. However, in Pakistan this is not supported in the market as Ogilvy do not yet operate some of their communication disciplines such as PR, CRM, digital, activation etc. on full scale. Yet, in terms of their revenue, they are perhaps the largest agency in Pakistan. What explains this success? Firstly, they have an impressive list of clients, mostly network accounts that include British American Tobacco, Bank Alfalah, Coca-Cola, EBM, Monsanto, Nestlé and Shan Foods. They are perhaps the only network agency in Pakistan that provide their clients not only learnings from across the globe, but access to their cross-border offices in India for their creative work. So they are also perhaps the 'only truly network agency' that also import creative ideas for their clients.

An agency where the work stands out in our cluttered environment would be Adcom. They are credited with creating some of Pakistan's most notable mega-scale, well-executed and entertaining TVCs for Alkaram, Telenor Talkshawk, Tapal and Tarang. Therefore, Adcom differentiate themselves by being an agency that produces clutter-breaking/ entertaining advertising.

The D’Hamidi Partnership seem to have an edge in designing visual brand identities. Their noteworthy work includes that for Engro, Faysal Bank, Hubco, Hum News, PIA, Shaheen Air and Zong 4G.

There are opportunities for specialisation in many arenas; for example, healthcare, packaging, shopper marketing, agricultural marketing, marketing to the young, to women, to rural consumers. This would allow agencies to develop capabilities that their competitors cannot match as well as service a narrow client base where they can charge a premium for their offerings. There are hardly any boutique agencies known for their outstanding creative work – so that is another opportunity.

Argus Advertising seem to be pursuing a differentiation focus strategy by specialising in servicing government clients who prefer business partners with a particular temperament such as an ability to deal with slower work processes, hierarchical decision-making and delayed payments. Their clients include Askari Bank, Bank of Punjab, Institute of Business Administration, National Bank of Pakistan, PSO and State Life Corporation.

Manhill Advertising and Maxell Advertising specialise in the construction sector and seem to be following a cost-focus strategy; the construction sector allows for very low remuneration as well as delayed payments (that are hard to recover). In fact, an advertising agency has to be really good at recovering money to be able to work for construction sector clients.

Given that there are no barriers to entry in marketing and communications, many players have entered the profession, especially small-sized digital agencies, which are fiercely competing for a smaller share of the pie, each one offering to charge a lower price to win or keep an account; so they could be said to be following cost leadership strategy.

Most other agencies are stuck in the middle, in that they do not own a clear competitive advantage. They are trying to be cost leaders as well as differentiating their creative offer. They don’t choose to pick and service a narrow customer base. However, such an approach leads to nowhere. Instead of being ‘everything to everyone’, a practice that will make them stand for nothing, they should try to identify uncontested spaces in one of the ‘cost leadership’, ‘differentiation’, ‘differentiation focus’ or ‘cost focus’ strategy areas.

There are opportunities for specialisation in many arenas; for example, healthcare, packaging, shopper marketing, agricultural marketing, marketing to the young, to women, to rural consumers. This would then allow them to develop capabilities that their competitors cannot match as well as service a narrow client base where they can charge a premium for their offerings. There are hardly any boutique agencies known for their outstanding creative work – so that is another opportunity. Following the cost-focus approach provides many untapped opportunities including specialising in low-cost digital marketing solutions for local brands. This may require revisiting the business model, eliminating overlapping layers and unnecessary functions and cutting overheads.

Overall, the situation in the marketing communications sector is mixed. The agencies which have developed a competitive advantage, whether by design or accidently, are doing well. Those stuck in the middle (the ‘mushy middle’) are struggling to survive, particularly in the current difficult times. A word of advice: find your competitive advantage.

Khalid Naseem is Head of Strategy, Firebolt63. khalid.naseem@firebolt63.com