Thursday, February 23, 2012

The Dinosaur Agency & the Ice Age

There has been much said about how specialization and splitting up into micro-agencies is causing the demise of the traditional agency.  Sure, that’s part of it.  But the underlying problem is deeper.  The heydays of the agencies were when companies were selling products.  The Agencies came into their own in the 1900s when, for the first time, mass production and improved distribution systems allowed mass, standardized products to be sold on a vast scale.  So the main task of an agency was to build awareness for those products, and communicate their virtues.  They had to build a brand or “trust factor” in the firms producing these goods as consumers were no longer buying direct from the manufacturer but from a distributor. (For example if you buy milk from a milkman you trust him, if you buy a carton of milk from a shop you have to trust the brand on the carton.)

Today the supply chain evolution continues and most products now
 a. have a service component built into them eg cars
 b. rely on a content ecosystem eg computers, phones, most smart devices
 c. are customized/customizable eg shoes, T-shirts, mugs, apartments
d. offer after-sales service eg cars, water purifiers, airconditioners
e. are tending towards an economic order quantity (EOQ) of one eg banking services, music downloads, videos

What matters to buyers is the total customer experience, not just the brand or the product attributes.  Yet, most agencies don’t talk customer experience. 

They don’t talk about supply chains, CRM systems, customer contact centers, returns policies, recall alerts, crisis communications.  They continue to pride themselves on beautiful campaigns that enrapture people.  And distance themselves from customer interactions.

For example, like many others I love the new Airtel HFZ campaign - but speak to users and they will complain about poor service, long hold time, call dropping etc.  So while you like the ad you may not actually buy the service because there is the vast ecosystem of your peers telling you another side of the story.  Much like how Vodafone’s (Hutch) doggie created the image of warm friendly customer service which again wasn’t necessarily reflected in true life.  On the other hand I didn’t quite like the second Indigo airlines ad.  But because the overall customer experience continues to be good I will continue to choose this airline.

Firms that want good advertising but also want a good customer touch program tend to use multiple firms. One for regular advertising, and others like Sapient Nitro for the digital experience piece.  Causing yet more revenue leakage for ad agencies already bleeding from the separation of media buying and the consequent loss of the 15% commission.

There are a few firms that do talk the language of customer experience design - Ideo, Frog Design and Wieden & Kennedy  to name a few (and I am not endorsing these).  And which do it under one roof.  These and others like them which are customer-centric are ideally situated to emerge unscathed from the Ice Age.  Many have a design arm which currently doesn’t do advertising but that’s an easy piece to add on to their other capabilities - and then they can really change the agency landscape.
After an MBA I wanted to do advertising so much that I turned down my campus placement and took the agency job at half the salary.  I learned so much in my 3 years there that it was a solid investment.  But in those days (1995-98) - under one roof - I got exposure to all the channels  that were then prevalent, whereas today, an AE would have to go to multiple firms and even outside the firm to learn about all the ways in which customers interact with brands.  Unless this changes, the Big Agency as we know it will continue to freeze.

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