Marketers deconstruct agency operating models; done with 'constant line grabbing’, complex communications management, cost duplication and lack of unity
Frustration and confusion are recurring themes for marketers in the first wave of media, creative and digital agency reviews coming to light for 2020. The new breed of agency model, say the architects like Clemenger-CHEP, M&C Saatchi-Bohemia, Publicis Groupe, CX Lavender and The Hallway, is about cost-out, simplifying operations, connected thinking across data, tech, customer experience and media and proving the impact of strategy. More changes are coming.
It wouldn’t be a start to the year, let alone a decade, without once again questioning the future of the agency model. However, in 2020 some agencies may have already begun to break the mould, making concrete steps towards unifying creativity, media and new operational efficiencies.
A new twist on the consolidated agency model has emerged in recent months, partly evident in the overhaul by Samsung which saw Clemenger Group win the bulk of the brand’s creative, media and digital duties, led by CHE Proximity. There are rumbles in market that a raft of other brands are looking for different agency structures and capabilities along similar lines.
This sort of conversation is not new; WPP’s “Horizontality” under former CEO Sir Martin Sorrell and Publicis Groupe's Power of One each talk of a more cohesive and efficient means of brands dealing with agencies.
The numerous bespoke units created within agency holding groups around a major client – for example Dentsu’s Woolies@DAN and GroupM’s structure with Westpac – are still on the road. But, as with any insular structure - whether external, in house or hybrid - there is a risk of becoming stale.
Marketers may feel frustrated, but they are far from faultless, operating within inefficient, often competing and bureaucratic structures and silos. They’re plagued by a lack of cost efficiency, primarily through duplication in areas like account management and heavy resourcing to manage multiple lines of communication.
The argument has also been made that these models, which have been designed and manufactured at a global level, aren’t reflective of how it best suits the nuances of the Australian market.
Moreover, for all their theoretical synergies, Australian budgets and resource don’t always match the global model.
“Importantly [clients] don’t want a bespoke agency. [Those shops] turn into ghettos quickly and deliver very average long-term thinking. Instead they want an agency brand that has a strong culture, diversity of clients, depth of capability and strong body of work.”
What’s spurring on the change?
Clemenger Group CEO Chris Howatson, who would not talk directly about Samsung's strategy, says most Australian clients are growing revenues through price rises rather than top line customer growth, which is motivating efficiency initiatives and leading to “general agency consolidation”.
Against that backdrop, he thinks CHE Proximity's approach stands alone.
“It is different to the WPP Horizontality and Publicis One models in that clients are looking not for a stitched together holding company solution, but a single agency model,” Howatson suggests.
“Importantly they don’t want a bespoke agency,” as those shops “turn into ghettos quickly and deliver very average long-term thinking. Instead they want an agency brand that has a strong culture, diversity of clients, depth of capability and strong body of work.”
Howatson says the underlying drivers for these models are motivated by four criteria:
- Cost saving: Reduction in overlap. Savings in agency multiplier due to scale. Stronger application of performance based remuneration because the agency has full influence
- Depth of capability: Proven experience in connected thinking, bringing together data, tech, CX and media
- Impact of thinking: If saliency is the fastest way to grow brand power, clients want evidence of big strategic/creative thinking that grows brands
- Operating simplification: One agency can help clients operate more efficiently, which can support their requirements for reduced internal headcount.
“This is definitely the future of working, especially in a market the size of Australia,” argues Howatson. “The challenge will be who can deliver it. There are only a few agencies who truly can. With network incumbency limiting the free development of media into creative agencies and creative into media agencies, this will slow the development of the market to this model.”
Frustration over cohesion
Sophie Price, head of integrated strategy at M&C Saatchi and Bohemia, agrees there are gains to be made from further convergence.
“It’s important for clients to have that brand consistency across every touchpoint in the customer journey,” she told Mi3. “By having that mapped out in one model instead of through siloed disciplines, it will continue to be valuable, especially as the money generated through these efficiencies is redeployed into working media.”
Working across both M&C Saatchi and Bohemia, Price is leading the development of several integrated models. She says there’s has been a steady increase of interest from clients looking to tap into both creative and media, with customer centric marketing at the core.
Price says clients are tired of juggling multiple lines of communication, constant “line grabbing” by agencies and a lack of unification.
“Clients are increasingly frustrated by a lack of consistency and a failure of all touchpoints to work together. So, in theory, having a consolidated model should really allow the partnership to sing,” she says.
“Agility is also another factor a number of clients have noted as of key value. They need their agencies to move faster than those legacy approaches. It's as simple as being able to pick up the phone to one person who can then enact change more quickly.”
“It’s important for clients to have that brand consistency across every touchpoint in the customer journey. By having that mapped out in one model instead of through siloed disciplines, it will continue to be valuable, especially as the money generated through these efficiencies is redeployed into working media.”
Some marketers believe the transition to a single operating model makes sense for agencies too, given sustained pressure around transparency.
One marketer currently involved in a review process says the limitations on media agencies to drive revenue out of non-disclosed sources will only continue, given government probes.
“The ACCC inquiry and the response from the government on digital, will only further pressure the way agencies operate, particularly those still stuck with legacy models,” she says.
“We know there is going to be a deeper inquiry into the provision of digital media and the supply chain in that space. So those two aspects will almost force media agencies to look at models like this, to figure out how they get closer to their creative teams in other agencies, or how they start to bring media back into creative agencies.”
Holding group impact
Holding groups are acutely aware of the shifting sands. Most are already attempting to streamline structures, unite capabilities and draw the lines of communication closer together.
Publicis Groupe ANZ CEO Mike Rebelo in November outlined the need for a “connective tissue” across the diverse group to allow key brands such as Saatchi, Leo's or Zenith to combine with Digitas or Performics to enable “end-to-end marketing transformation capability”.
A single profit line for the group, suggested Rebelo, is fundamental to build new ways of working. But it is perhaps telling that Rebelo sees digital business transformation unit, Sapient, as the star in the group, not the media, creative or digital comms agencies.
Prior to his sharp exit at the end of 2019, ex-Dentsu ANZ boss Henry Tajer had also begun to pivot the holding group’s focus, convinced that the business could compete with consultancies.
The strategy involved linking units including Isobar, WiTH Collective and Merkle to develop a digital transformation capability underpinned by the ability to also provide content development and cloud-based martech delivery.
"When Dentsu acquired Merkle, that was a huge step forward to really having proper data, technology and analytics capabilities being brought into our organisation,” Tajer said at the time. “What came with that is business solutions capability, business architecture capabilities, which is really where we are competing with the consulting firms.”
Indie shops like CX Lavender are forging ahead with a model that embeds staff within a client’s team. Chairman Will Lavender told Mi3 that most of his staff already operate inside client businesses and are delivering beyond creative - and in some cases, even beyond marketing.
"We've completely unbundled our service and then really redistributed talent into the client's environment," he said. "The trend we're seeing is that clients, certainly our major clients, actually want to create a new dynamic as well. So it's not about servicing a need into a marketing department, it's actually putting people into different environments."
Creative is “critical” in connecting with customers, says The Hallway founder and CEO, Jules Hall. But so is media - and the firm recently became a full service agency for one crucial aspect: data.
“Getting that data upfront to inform strategy and ideas, having real time visibility of how people are responding to the creative, optimising it and linking that back through so we’ve got the evidence to demonstrate the efficacy of what we’re creating,” says Hall.
“Clients have called out for creative and media to work closely together since George Patterson’s was around. This will never change and shouldn’t change. Agencies should be 100% aligned and focused on coming together and ensuring there are no hidden agendas, politics or land grabbing.”
Not all are sold
Ikon communications managing partner, James Sawyer, says there is no rule book. No one size fits all when it comes to full-service models and what is right for one client versus another. Models must be adaptable to move with the market, he suggests, and give clients “an advantage in any way possible.”
“Any way we can help clients iron out complexity, duplication, improve speed to market - and just get better work into market - will become the new model. The clients that can look at new ways of working will succeed,” he says.
“Clients have called out for creative and media to work closely together since George Patterson’s was around. This will never change and shouldn’t change. Agencies should be 100 per cent aligned and focused on coming together and ensuring there are no hidden agendas, politics or land grabbing,” adds Sawyer.
That nirvana is not always within reach, Sawyer admits, but he suggests those creating friction or jostling for position will ultimately lose.
“The agencies that can’t deliver [collectively] will expedite clients into looking for other solutions,” he says, but thinks any 'new paradigm' will rely on the same core qualities.
“Any intent to change the model has to be built around getting better thinking, better work, different brains and skill sets to solve clients problems.”
“I think Accenture have already been different for a number of years. Because they’ve been getting closer to the customer through technology, content and commerce. They have been doing that for a long time. That is where the market is shifting towards and they are already playing there."
What makes Accenture any different?
“I think Accenture have already been different for a number of years,” suggests Accenture Interactive ANZ lead and The Monkeys co-founder Mark Green told Mi3 in December, “because they’ve been getting closer to the customer through technology, content and commerce. They have been doing that for a long time. That is where the market is shifting towards and they are already playing there. They had already started to build in a closer degree of creative culture and that journey predates the Monkeys acquisition, Karmarama and Droga5.
“So they were heading down that path already and have already dealt with some of the cultural challenges in and around that. So, I think they’re much further down the path than what everybody gives them credit for. That has not just been a three or four-year journey. Accenture Interactive is around 10 years old. This journey has been happening for a long time.”
Green cites the recent global Huggies win for Kimberly-Clark by way of example. Led by Droga5, Accenture took the business from WPP. After awarding the account, Kimberley-Clark chief growth officer Alison Lewis stated that “technology without creativity or ideas doesn’t really work.” Lewis also implied that Accenture would not have won the business without Droga5 on board.
“We worked on that in APAC,” says Green. “So I think you’ll start to see a lot more collaboration across the globe. The strategy is the same no matter if we are in Australia, the UK, Ireland, wherever.”
The Huggies account, for brand, advertising and data-driven marketing, is arguably a classic piece of holding company business. Green agrees it is a strong signal of where Accenture Interactive intends to play, but suggests clients want more than the advertising-type services of old.
“It’s actually a consulting piece of business and an advertising piece of business. It’s proving out our model and it’s a differentiated answer – which is what Kimberley-Clark have received, sought and bought.”