“They make a shed load of money. No one sees them coming. Low cost base. Less churn of good people” – was the longer response.
I recently read a book called Blue Ocean Strategy. In a nutshell the authors look at how you can grow a business by nailing what is called your “Value innovation”. Innovating to increase value to your customers while also innovating within your own business model to reduce costs.
If you can have one proposition that does both. BINGO!!! Change the rules vs. compete within a finite market.
Anyone that has been involved in an online unit within an agency or publishing business will at some point have been “thrown in” as value on a pitch or deal. Crass, but if anything it solves the big issue of “How do we charge for our digital thinking?” or “Are we willing to have the conversation with the client about how we need to charge for our digital work”.
Interactive digital work (I’m not talking digital radio or TV) is labour intensive and can’t be charged on historic execution percentages. If positioned correctly it can be a higher value proposition as well higher margin for the agency. It also provides a counter balance to the commoditisation of print, TV or radio buying (planning traditionally be paid as % of what was bought).
Media agencies have been worried about the commoditisation of the industry for years. It is seen as real threat to their pricing. Finally a non commoditised, higher value, product comes along in online media …… and it’s used to plump up the commoditised side of the business. Something has gone wrong.
So, back to the start. As I read my book, I wondered how the agency world has really innovated with its own value model and there it was …. “Digital and Regional” – 2 sides of the same value coin.
It begs the question – why are the agencies based in central London? Most advertisers aren’t the media owners are, as they need to be near the buyers. But why the agencies? If we started again would we choose central London? In the 80s – when media was probably taking about 4% on the gross spend and people in the industry were driving read Ferraris, it made sense. How many big (offline) accounts are now on sub 1.5%? How many have moved out of central London?
You sense that moving out of town would never be seen as an “innovative” agency move, yet I sense the time is to be honest about what we are and what we do? Treat our high value products correctly and treat the lower value products accordingly and both will flourish.