Paul Yole: Is Advertising in crisis?

In the recent September issue of Campaign Brief WA, Paul Yole argued that unless there is radical change, the future looks uncertain for agencies and clients. A former agency director and strategic planner, Yole looked at the state of the industry and suggested a way to fix it.

There is a book every client CMO and agency head should read. It’s called Madison Avenue Manslaughter: An inside view of fee-cutting clients, profit-hungry owners and declining ad agencies. The author is Michael Farmer, formerly of Boston Consulting Group and Bain & Company. Farmer is now Chairman of Trinity P3 USA, and you can read more from him at trinityp3.com.

Farmer’s research shows that, since 1992, the average price for creative agency deliverables has declined by 70% in today’s dollars.

It’s beyond problematic. Driven by procurement, agencies now work much longer hours for much less money. As a former agency owner and director myself, I can vouch for that. Agencies have responded by cutting staff and ‘juniorising’, thus reducing their service capability.

According to Farmer, “Since 1992, creative output per head has more than doubled. Creatives are seriously stretched. Furthermore, relationship duration has decreased to 2-4 years, down significantly from the long-term relationships of the past, and searches/pitches have become commonplace. Overall, it is hard not to conclude that the pricing and profit pressures on creative agencies have led to a deterioration in their capabilities.  But not all of the price declines had to happen.”

Agencies, Farmer concludes, “have either been inattentive to their workload problems or too wedded to the concept of being great service providers and will do whatever their clients require.”

The problems for agencies don’t stop there. They are producing fewer real long-term brand-building campaigns and now, consultancy firms are eating their lunch. While agencies deal with middle level marketing staff, management consultants are talking to the C-Suite.

Compounding all of this, I think creativity has lost its way. We saw this in the south of France this June.

As always, there was some great work on show at the 2017 Cannes Lions, but there were also far too many worthy, on-trend entries that seemed to serve no real business purpose. And far too much work that seemed to use technology for technology’s sake, with no real creative idea of substance behind it.

Cannes represented a microcosm of an industry suffering an identity crisis. Publicis Groupe announced they are pulling out of award shows entirely for a year, and Sir Martin Sorrell questioned whether the Festival has lost its focus on the celebration of creativity.

(This from an accountant who has a deep understanding of the value of great creative work in building brands and strengthening client relationships.)

Instead of adopting a defensive stance and distancing themselves from the tech world, creative agencies need to embrace change and collaborate better. I don’t entirely agree with Farmer when he says, “creativity is no longer delivering improved brand performance or increasing shareholder value.” It definitely is, although maybe not as often as it should.

And I think he is just plain wrong when he says, “The theory that brand success is driven by “creativity” has been invalidated by history and experience.”

In fact, the reverse is true. Studies by the IPA, McKinsey and WARC all demonstrate clearly the link between creativity and effectiveness. In fact, over 18 years, creatively awarded campaigns have delivered 11 times the ROI than the norm.

But I think some agencies are lacking an understanding of how their innate creativity can build better brand performance for their clients. It’s not just about ads; they need to find a way to apply their creative problem-solving skills to a broader range of services and client business issues.

For their part, agencies need to prove their worth to an increasingly sceptical audience. Clients, on the other hand, need to invest in creativity in a more meaningful way. They need to value their agencies’ creativity more, but not just philosophically. Quite frankly, they need to pay better.

Ultimately, agencies and clients will only achieve greater long-term brand growth if they jointly commit to the relentless pursuit of effective creativity, built upon better use of data, actionable insights and rigorous evaluation.

Remuneration, rewards and processes all need to change to support this new paradigm. It won’t be easy, but until clients and agencies sit down together for a serious talk, they will continue to lurch from one problem to another with no great end in sight.