Monday, June 30, 2014

Instead Of Cutting Costs, How About We Try To Make More Money?

My Dad is a talented guy.

He speaks several languages, is great at sports, and had a successful career in media sales.

But like many a curmudgeonly older Jewish gentleman, he is rather obsessed with the topic of how to save money. I like to tell him that if he put half as much thought into how to make money as he does into how to save it, he'd net-net be much better off.

But I now realise I've fallen into exactly the same trap myself.

In previous posts about how our industry can survive in the face of intense competition and margin pressures, I've suggested losing Creative Directors, or fusing Art Directors & Copywriters, or Suits & Planners. Basically, all ways to save money.

I've failed to consider how we might instead make more money.

This article, called 'The Demise And Rise Of Our Industry', does just that.

It's written by a guy called John Zeigler, who is the CEO of DDB Asia Pac. Yes, I know he's my boss's boss's boss so you might think I'm sucking up. Well, I can't control what you think. Just read the article. It's excellent.

But if you haven't got time to read it, the essence is this:

Clients are asking us to cut our fees by about 10% a year. We consider ourselves lucky if we settle at -8%. To stay profitable, we have to keep cutting staff. If the same trend carries on, we'll be dead within about five years.

The role of marketing has been degraded. Where once Marketers controlled the four P's, they now control only one P - Promotion. (One of the P's is Product. In a marketing-led company, the Marketers tell the company what products to make. In not many companies do Marketers have that power, nowadays).

Therefore the position of Marketers has been degraded. A study by Adobe, for example, found that 80% of CEOs do not trust marketers, 70% of CEOs believe marketers are disconnected from business results, and 69% of CEOs believe marketers like to stay too much in ‘their creative and social-media bubbles’.

John's conclusion? We need to change our role, dramatically. We need to go much further upstream, and help our clients develop new products and services, and influence how they engage with their staff, and how they take their products to market.

In short, we need to help Marketers show CEO's that we can use our creativity to solve their business problems - not just to create ads.

If we can do that, we'll be adding extra services - useful services that we can charge more money for - and we just might survive.

Good stuff from Mr Z. 

Dad - take note.


Old CD Guy said...

Thanks to a curmudgeonly elderly Jewish father (he called it 'frugal', with that special rolling 'r' from his stubbornly long-lived German accent) I was able to retire at 53. You should be so lucky!

rodhirschwriter said...

Good article, as ever. But I'm reminded of the phrase, 'What goes around, comes around'. In the UK, back in the 1930s and well into the 1950s, agencies regularly worked with their clients on new product development, suggesting both enhancements and whole new products. I wonder if there's any correlation between the arrival of commercial TV and advertising's role as executors of promotional ideas, rather than ideas per se?

Jason Rose said...

Good article.

The challenge, in my view, is creating the remuneration protocols for making this a worthwhile exercise.

Agencies have traditionally been paid to make ads. So, that's what they do.

There is no doubt that agencies could help clients come up with all sorts of revenue-generating concepts.

Agencies employ heaps of creative people who look out across lots of different industries.

They are also not constrained by the oppressive corporate cultures commonly found inside large clients.

If you need to build a break-out room in your office, it's not a great sign that you genuinely foster creativity!

The issue is that there generally aren't the agreements in place for agencies to get paid to come up with the new and clever, non-ad ideas.

It comes back to ad agencies typically only having the idea. Clients have all the power because they have the capital to invest, the IP, the distribution rights etc.

Seriously, if anyone wants to have a chat about a massive revenue-generating idea, under a strict non-disclosure agreement, email me.

Jason Rose.

Ex-Creative / Current Investment Banker.

Anonymous said...

You're trying to get the most risk averse people to bet on a product idea some creatives came up during a piss-up when you can't even convince them to run a good ad instead of a shit one? Good luck with that.