In an analysis of the advertising business, John Fanning writes on why the death of the agency has been greatly exaggerated
It is now nearly 50 years since an ad appeared in the Sunday Times proclaiming that the advertising agency as we knew it was dead, that a new model was needed and that two men named Saatchi, intended to change things. The gist of the answer was that account executives were a waste of space, muddying the purity of the relationship between client and creative.
The ad worked a treat, as ads often do. The fledgling agency won clients. Yet, within a short space of time, lo and behold, account executives were introduced. Variations of the Saatchi launch ad have appeared with increasing frequency ever since, couched in increasingly apocalyptic language. Google the line ‘Are ad agencies dead?’ and millions of hits come up.
Most of the entries continue to predict the demise of the ad agency and many are written by upstarts all too anxious to tell us about their start-ups. The fact is that ad agencies are alive and kicking but are finding it hard to maintain healthy margins. Under the current time-based billing model, agencies ‘per unit of income’ is down by 40 per cent over the last 20 years.
Michael Farmer has written the most comprehensive account of the problems facing adland in his aptly-titled book, Madison Avenue Manslaughter. Farmer says agency income peaked in the early 1990’s and has been dropping since. There is no one reason for the problem. Pressures began building up in the 1970’s and 80’s, over which agencies had little control.
Most commentators agree that from the end of the Second World War up to the mid-1970s represented a golden age for advertising, but it is no coincidence that it was also a great time for Western economies. Things came to a halt in 1973 when the Arab oil producers imposed an embargo on countries that had supported Israel in the Yom Kippur war against Egypt.
The resulting economic disruption paved the way for a more aggressive era of free market fundamentalism, which came to be known as neo-liberalism and was accompanied by accelerated globalisation. Before considering how these geo-political developments impacted on the advertising business, it is worth considering two features of the golden age.
New dawn: Bill Bernbach’s work for Volkswagen changed how advertising agencies did business in Matt Weiner’s Mad Men. DDB’s revolutionary series for VW broke the back of the one-dimensional, formulaic campaigns and ushered in a new era which espoused the creation of sophisticated, witty, self-referential and, even at times, self-deprecatory ads.
The first is the so-called ‘creative revolution’ which emerged in New York in the Fifties. In 1959, copywriter Bill Bernbach formed a new agency, Doyle Dane Bernbach (DDB), whose daring ‘Think Small’ campaign transformed adland. Out went the mechanical, formulaic ads that had characterised the Mad Men era and in came a more sophisticated, witty, self-referential, at times self-deprecating tone which inspired admen and women worldwide.
Bernbach’s philosophy was clear: “We who engage in advertising can have an effect on the society in which we operate; we can vulgarise that society, we can brutalise it or we can lift it to a new level”. His influence over the business was unquestionably immense, but Farmer believes that it sowed the seeds of problems which would come to haunt us in the 1990’s.
The second critical development occurred in 1960’s Britain, another creative and ‘swingin’ era. As The Beatles’ songs repeatedly topped the charts, the power of the agency in relation to clients reached an unprecedented level. The top agency in London was J Walter Thompson (JWT), which had a sizeable marketing department hired by clients to shape strategies.
It was able to employ considerable intellectual firepower, including eminent marketing and market research practitioners like John Treasure, Tom Corlett, Judie Lannon, Timothy Joyce and Stephen King. These people challenged many of the marketing orthodoxies of the time. Joyce’s seminal 1967 paper What Do We Know About How Advertising Works is still relevant today and King was the main intellectual force behind the development of account planning. As a result, JWT deservedly earned the sobriquet ‘the university of advertising’.
I’ll come back to these two features of the golden age of advertising but first we need to understand why the business feels so threatened today. Farmer’s book represents the most comprehensive account of the problems. He believes agencies are caught in a vicious circle of multiple dimensions: on the one hand, clients, aided by procurement specialists are increasing pressure on agencies by demanding more work for less money, while, at the same time, client marketing departments are losing influence within their businesses, resulting in more and more junior marketers taking charge of the advertising agency relationship.
Begs to differ: Michael Farmer says agency income peaked in the early 1990’s and has been dropping since. Pressures began building up in the 1970’s and 80’s, over issues which agencies had little control. But Fanning says Farmer is wrong in suggesting there is no evidence to prove creativity impacts positively on brand share and profitability.
These junior execs lack the confidence and experience to decide on creative proposals, resulting in more mainstream work being chosen as the safer option. The result is lower margins at a time when there is more pressure on bosses of agencies, most of which are owned by a small network of global conglomerates, and who must make increased returns to head office to maintain owners like Sir Martin Sorrell’s €80 million annual pay check.
Farmer believes the agency response has been weak, including a failure to document, measure or track their workloads. It puts them on a path to self-destruction unless they tackle three critical problems: the workload, mission and accountability challenges. Farmer regards the workload issue as hugely important and returns to it repeatedly throughout the book.
He uses the concept of ‘scope of work’ (SOW) to argue that agencies should change from the current charging model where clients “first establish agency fees and thus dictate agency headcounts without first establishing the quantity and type of work to be done” to “joint development of relevant SOW”. Farmer argues that the auditing of time sheets is wasteful and could be scrapped if the contract were to focus on paying for specified outcomes.
Finally, he recommends creating a ‘ScopeMetric Unit’ (SMU), where all likely creative work for the next year is calculated according to the expected degree of creativity required; that is low, average or high complexity and an appropriate fee calculated for the year. It sounds plausible enough in theory but it might prove tricky to implement in ‘the real world’.
Farmer’s second challenge relates to the agency world’s continuing commitment to the principles of the ‘creative revolution’ as exemplified by Bernbach. Blaming his “heavy legacy” he states: “agencies retain a perverse but understandable pride in the unmanaged culture that is associated with ‘being creative’, adding, we’re well beyond the time when pure creativity could deliver dramatic changes in brand results. I disagree.
Farmer is trying too hard to adopt the macho-mechanistic, “if it can’t be measured it doesn’t matter” culture of the management consultant. He is also wrong; there is ample evidence from detailed analysis of the IPA effectiveness awards in the UK and the Adfx awards in Ireland that creativity positively correlates with increased brand share and profitability.
Strategically motivated: Core Media’s Marketing Multiplied report provides “compelling evidence” on what is needed by both creatives and scientists in adland to get the most out of marketing communications. The study says every euro invested in advertising typically delivers gross sales of €8.26 and a net return on investment of €5.44. Pictured is Alan Cox, chief executive, Core Media and Patrick Coveney, chief executive, Greencore.
IPA/Adfx results directly contradict Farmer’s sweeping assertion, delivered without any back-up evidence, that creative work does not deliver the same kind of dramatic brand results that it did 50 years ago. As for Farmer’s third challenge; accountability. In this instance, agency culture has long been at fault in ignoring the necessity of developing more robust measures of advertising effectiveness. But IAPI’s dogged determination to make the Irish advertising industry aware of the need to take advertising effectiveness more seriously is paying off. Adfx is 21 this year, there are over 150 case studies available and extensive training courses are offered to agency staff to help with the onerous task of preparing cases.
Farmer only alludes to two recent developments threatening agencies’ authority; big data and social media. Big data sounds like the answer to an advertiser’s prayer; the ability to deliver an individually tailored message at a precise time with no waste. But no matter how much data we have it will not provide the most compelling marketing communications strategy.
In his prize-winning entry in Admap’s 2015 essay competition, Ben Essen said that “while big data could drive incremental evolution it will hinder true transformation and revolution”. He also said that data is not as objective as is often assumed; in order to collect the data in the first place, a human must be involved, thus creating the possibility of bias from the word go.
There is little doubt that target markets can be addressed more accurately, but there is a danger of reducing marketing communications to an unacceptable level of creepiness. Google CEO Eric Schmidt more or less acknowledged this recently when, in a remarkably frank statement he revealed; “the ideal is to get right up to the creepy line and not to cross it”.
For a time, social media also threatened the agencies role in ensuring the long-term development of brands through creative executive campaigns because of the tendency to appropriate an ever larger share of budgets for short term promotions. However, as the reach of the new channels began to match that of traditional media, this threat has receded but social media’s ability to drive short-term sales creates a fatal attraction for the brand manager only planning to be around in the short-term waiting for the next career move.
Marc Pritchard, global brand officer at P&G, one of the world’s top advertisers, recently warned that while Facebook allows for granular targeting, P&G often wants to reach for broader audiences to promote products with frequent usage and short purchase cycles. Pritchard went on to make the point that the strategy of delivering promotional messages to people with precise needs at a precise time is obviously attractive but also can damage the long term health of the brand: “P&G brands have to be top of mind all the time”.
Professor Bryan Sharp’s methodical analysis of the Bass Ehrenberg consumer purchase panel data has shown the futility of the short-term promotional approach arguing that marketers should concentrate on pursuing scale and salience. But as Ian Leslie has noted, although no one has been able to refute Sharp’s work, they have been only too willing to ignore it. Professor Mark Ritson also echoes these sentiments in saying: “Marketing seems to be devolving into a tactical pursuit devoid of strategic thinking… the apparent disconnect between executional forces and strategic intent has serious consequences… brands need completely coherent strategies to inspire and guide effective marketing across all channels including social and digital – or brand equity will be diluted over time.”
Farmer’s book concentrates on the problems facing Madison Avenue but although Irish agencies are faced with the same issues they also have to cope with the extra one of being so close to a much bigger market with no language barriers and few cultural hurdles to prevent advertising accounts being handled there. This problem is compounded by the fact that the marketing communications business in London is well organised and universally admired.
When British Prime Minister Theresa May proudly refers to the success of their ‘creative sector’ she is conscious of the fact that advertising is in the thick of it. When Ireland’s Taoiseach Enda Kenny extolls the success of our ‘creative sector’ advertising and marketing communications are not on his radar. The financial crash in 2008 and the subsequent prolonged recession provided an excuse for a number of high profile international brand owners to transfer their advertising accounts to agencies based in London.
The results rarely justify the hassle. In spite of London’s reputation as a centre of creative excellence, they invariably make a hames of it when producing work for the Irish market. However, it is not all one-way traffic. In the past, Irish agencies have never been able to capitalise on our enviable international reputation for creativity – but this is changing.
In recent years, Irish agencies have been winning more international business and the proportion of advertising ‘exports’ has never been higher. The digital revolution has been a help here and there is no earthly reason why Ireland cannot become a centre of advertising excellence in the future. So what should advertising agencies do?
Home grown greats: Orchard Thieves stole the show at Adfx 2016, winning the grand prix. With work by Rothco/Starcom, the cider scored a 6.6 per cent value share within eight months. Heineken sold two million pints and three million bottles and cans, doubling targets and reducing the payback period by two years. More recently, Boys and Girls won praise for its Aldi ads (pictured), adopting a tongue-in-cheek approach to typical Irish habits.
Apart from investigation, the export possibilities agencies need to consider the issues raised in Farmer’s book; loss of revenue, due to lack of professional management of agency workloads, combined with a fear of confronting advertisers with the stark facts of the situation and secondly a loss of influence at senior levels of client organisations.
The analysis suggests that the immediate task required to prevent further erosion of already precarious margins is to introduce some of Farmer’s recommendations for a more professional fee structure that compensates for the work actually done. There will never be a fair way to price creativity but there are fairer ways than the current arrangement.
The goal will only be achieved by having frank discussions with clients and would be greatly helped by more rigorous statistical back-up demonstrating the effectiveness of previous work.
Achieving this objective will be difficult but not nearly as difficult as regaining a position of authority among senior client management.
In the case of some clients, agencies need to contribute to helping marketing departments gain a position of authority among senior management and, ideally, boardroom access along with finance and human resources. For that we will need a more long-term approach. I can’t pretend to have the answer but would like to suggest three possible components:
1) Plus ca change: plus ca meme chose: we do and must continue to acknowledge the first part of this line but we have been very slow to point out that the second part is equally valid. By not emphasising enough the fact that the fundamentals remain the same and that we have already built up a formidable amount of knowledge and experience of how marketing communications works, we leave the ground open to chancers of all types.
Start-ups to global management consultancies claim that because it is a whole new world they can adapt more easily because they are innocent of pre-digital hang-ups. We need to take our lead from the ‘University of Advertising’ visionaries and explain how much we know about how marketing communications works and how human nature remains as unpredictable and essentially messy as it always was. We must follow the example of our current visionaries.
BBH founder John Hegarty reminded us recently that successful brands must become part of the cultural landscape admired not just by those who buy them. Keith Reinhart urges us to draw attention to the distinction between creating a buzz and creating a brand, between a once-off stunt and an enduring idea, between an algorithm and an insight into human nature, between mere contact and true connection and of the gulf between big data and a big idea.
We must become more familiar with the two sources of accumulated wisdom we have amassed over the last half century; the analysis of buying data set up by Andrew Ehrenberg in London in the 1960’s and the case histories showing advertising effectiveness dating from the 1980’s. Ehrenberg’s work is analysed by Prof Sharp whose recent books make it clear that successful brands are built by long term marketing communications strategies targeting mass markets and that price promotions and other short-term strategies are self-defeating.
Best in class: John Fanning and Aoife Marron, Red C Research, at the Marketing Society’s Future Council. He called on young marketers to use Adfx award-winning case studies to gain knowledge on great campaigns. “But because we’re so obsessed with the latest new thing, we forget about the knowledge we’ve built up. That’s a huge mistake,” he insisted.
We need to have these findings at our fingertips – available to be liberally inserted in pitches, presentations and everyday conversations with advertisers. The recent seminal publication of Marketing Multiplied by Core Media and the AAI should also be required reading. As well as the many up-to-date summaries of Irish and British advertising case histories, there is a useful and pragmatic overview of advertising’s contribution to the Irish economy.
2) Understanding the consumer: It remains the essential core competency of the advertising agency. The rise and rise of even better data helps to quantify and explain what is happening in society but the most important insights are still the result of an intuitive feel for what is in store. Seamus Heaney makes the point; “Strange how things in the offing, once they’re sensed/Convert to things foreknown”. The best agency people always had a facility for sensing ‘things in the offing’ before data can convert them into ‘things foreknown’.
In the 1930’s and 40’s, agency bosses in the US used to take turns at the checkout in their local grocery stores observing shopping behaviour intently in the search for ‘things in the offing’. It is unlikely that the same facility would be agreed today by Mr Tesco or Mrs Dunne, but thankfully we can now call on alternative sources of inspiration.
A recent book on brand management by three academics from the Copenhagen Business School provides some ideas about possible sources; “The historian’s understanding of ideology, a sociologist’s charting of societal contradictions, a literary critic’s expedition into popular culture and the sensitivity and empathetic antennae of the novelist”. 
It is also worth adding philosophers to the list. Some of the most interesting books on branding and marketing communications in the last decade have drawn heavily on the work of philosophers to interpret the fluctuating currents of 21st century society. In this context, it is interesting to note that in an effort to try and make sense of the political upheaval following the recent US Presidential election, liberal elite New Yorkers pushed philosopher Hannah Arendt and novelist George Orwell into the best-seller lists.
We need to familiarise ourselves with some of the thinking of these disciplines and explore opportunities to share them with senior management in client organisations. One of the most depressing conclusions from Farmer’s book is the feeling that contact between top client management and top agency management has almost ceased to exist.
If agencies are to thrive in future, they must regain the trust and confidence of senior management. The big management consultancies are waiting in the wings, flashing their mechanistic six-steps-to-guaranteed-consumer-understanding models and for the moment they have the capacity to refresh parts of the boardroom our discipline does not reach.
It will not be easy to regain the lost ground but we have no option but to try and do so because otherwise the advertising industry will never solve its financial problems as it is forced into a position of dealing only with procurement officers and brand managers.
3) Blowing the heart wide open: The second core competency of the advertising agency is the unique capacity to lift the heart of a whole society with original creative ideas which have the power to transform the fortunes of businesses. There have been numerous examples in the history of Irish advertising, from Arrow’s use of Beethoven’s Fifth Symphony for the 1960’s Army Recruitment campaign which revolutionised our perception of our armed forces.
The 1980’s ‘Going Home’ campaign, created by Peter Owens for the ESB, had a resonance in a country where emigration has been a constant factor for over 200 years. Some campaigns have embedded new catch-phrases into our society long after the ads themselves had run their course – like Arks’ “Sally O’Brien and the way she might look at you” for Harp Lager.
Kerrygold spread the ‘Who’s taking the horse to France?’ query coined by Irish International and my alma mater, McConnells, rolled out Bord na Mona’s evocative ‘Marino Waltz’, which charmed and cheered the nation during the dark economic times of the late 80’s. Guinness’s ‘Anticipation’, with Joe McKinney dancing around a pint, was a source of endless, poorly executed parodies in the 1990’s. Boys and Girls sent up accurate depictions of the idiosyncrasies of Irish life with Aldi’s ‘As Irish as…’ series, while Catherine Donnelly’s ‘Train Set’ for Barry’s Tea still brings a tear to radio listeners’ eyes every Christmas.
Once again, Seamus Heaney provides the most succinct description of what great ideas are capable of in his much-loved poem Postscript where he invites us to “make the time to drive out west/into County Clare along the Flaggy Shore” to experience the full blast of West of Ireland weather coming sideways at the car; “And catch the heart off guard and blow it open.” Adland has been blowing Irish hearts wide open over the last 100 years.
John Fanning lectures on branding and marketing communications at the UCD Michael Smurfit Graduate School of Business and chairs Bord Bia’s Brand Forum
Glossary: 1 Farmer, M Madison Avenue Manslaughter. LID Publishing 2015; 2 https://blog.hubspot.com/agency/bill-bernbach-quotes retrieved 19-2-2017; 3 Farmer. M (2015) ibid; 4 Joyce, T What Do We Know About How Advertising Works, Esomar seminar on advertising research 1967; 5 Binet,L & Field,P. Marketing in the Era of Accountability. IPA (London) and WARC 2007; 6 Hand, K & McGrath, J. A Line in the Sand and Fanning, J, I Must Be Talking to My Friends, TAM Ireland and IAPI 2014; 7 J Essen, B Embrace the Outliers. Admap June 2015; 8 Naughton, J New Media Technologies. Observer Newspaper, 8-1-2017; 9 WARC Daily Newsletter, 13-10-2016; 10 Sharp, B. How Brands Grow; 11 Leslie, I Have the Mad Men Lost the Plot. Financial Times Weekend 7/8-11-2015; 12 Quoted in Taylor, D. Rebooting Brand Strategy for the Digital Age, Market Leader Q1 2017; 13 Hegarty, J. Why Has Advertising Lost its Voice. Financial Times 3-1-2017; 14 Reinhart, K. The Future of Advertising. Admap February 2015; 15 Johns, C, Power, J, Cox A. Marketing Multiplied. Core Media and AAI, 2017. 16 Heaney, S. Seeing Things. Faber and Faber, 1991 p108; 17 Heding, T, Knudtzen C, F and Bjerre, M. Brand Management: Research Theory and Practice. Routledge 2009; 18 Heaney, S. The Spirit Level. Faber and Faber 1996, p70.
 Farmer, M. Madison Avenue Manslaughter. LID Publishing 2015
2 https://blog.hubspot.com/agency/bill-bernbach-quotes retrieved 19-2-2017
3 Farmer, M (2015) Ibid.
 Joyce, T. What do we Know about how Advertising Works. ESOMAR Seminar on Advertising Research 1967.
 Binet, L. & Field, P. Marketing in the Era of Accountability. IPA (London) and WARC 2007
 Hand, K & McGrath, J A Line in the Sand and Fanning, J I Must be Talking to My Friends. TAM Ireland and IAPI 2014
 Essen, B. Embrace the Outliers. Admap June 2015
 Naughton, J New Media Technologies. Observer Newspaper. 8-1-2017
 WARC Daily Newsletter. 13-10-2016
 Sharp, B. How Brands Grow.
 Leslie, I. Have the Mad Men Lost the Plot. Financial Times Weekend 7/8-11-2015
 Quoted in Taylor, D. Rebooting Brand Strategy for the Digital Age. Market Leader Q1 2017
 Hegarty, J. Why Has Advertising Lost its Voice. Financial Times 3-1-2017
 Reinhart, K. The Future of Advertising. Admap February 2015.
 Johns, C, Power, J, Cox, A. marketing Multiplied. Core Media and AAI. 2017
 Heaney, S. Seeing Things. Faber and Faber. 1991 p108
 Heding, T. Knudtzen, C, F and Bjerre, M. Brand Management: Research, Theory and Practice. Routledge 2009.
 Heaney, S. The Spirit Level. Faber and Faber 1996. p70.