COVER STORY

April 1999

HOME

BACK

AD AGENCIES FLEXING THEIR MUSCLE   Contd

Today, accounts are won and retained by sheer media savvy, because the client suspects the old adage, 'half of your advertising is a waste of money; the problem is knowing which half', is true. Small, wonder the explosion of specialty media buying outfits. Take Lintas' sophisticated media management resource unit called 'Initiative Media'. Set up in 1994-95, it is, as Managing Director Lilamani Dias-Benson claims, expensive to maintain. But it anticipated the need for more specialized planning and buying techniques long before the competition, and its investment in training people overseas, and specialized software gives it an edge. What makes it different from an in-house media department, is that the Amirati Puris Lintas subsidiary is an 'accredited media-buying unit'. Meaning, it can theoretically operate independently of the rest of the agency, and work for clients not in its stable. Which, of course puts Initiative Media head to head with other agencies; a sticky point when it comes to earning the media commission. But more on that later.

To be fair, most internationally affiliated agencies have, or are in the process of setting up similar media units that their parents operate. Though late off the block, JWT and O&M, who belong to the same parent , WPP, have combined their media muscle internationally, in a business unit called MindShare. It is potentially the largest media buying company in the world. It is the 'big stick' that an agency wields, besides the usual expatriate resident creative directors, and the 'seagulls' that fly out from regional offices, armed with laptops and spreadsheets, often for damage control. With or without seagull intervention, today's media planners provide the value-added component that makes the agency more accountable. It is a niche into which no art shop or free lance consultant can get. In a climate where an agency's performance once hinged on speed --how fast your computers ran, or how many hours it would take to turn out an annual report-- these new skill-sets of accountability are reinventing the ala carte servings on the full-service menu.

Q&E, a full-service ad agency did not need a fancy international affiliation to adopt the 'integrated marketing communications' model. Today's client, says Managing Director, Vijith Kannangara, enjoys more than 'economies of scale'. With the media and creative under one roof, he/she benefits from 'economies of knowledge'. These are available across many services, are often invisible and taken for granted say the agencies. Cutting through the clutter doesn't only make it a media challenge for Masters Advertising. Their strategy is not to join the media planning unit bandwagon that attempts to maximize the available channels of communication, but to hone the message down to a memorable idea. It makes sense, because media savvy alone cannot redeem a bad advertisement. Masilamani, a second generation copywriter, bemoans the 'lackluster' (meaning 'uncreative') advertising that has ensued, with agencies rushing "to answer the communications needs of clients". This demise of creativity in Big Advertising is not a Sri Lankan malady either. (See Angelo's February 1999 column, Dateline America, on "Refugees from Creativity"). Yet like a vicious cycle, it gives the hot shops and one-room consultancies with little more than a computer, a scanner, a modem, the opportunity to fill in the gaps.

SINS OF COMMISSION
The high attention being paid to media has another side effect. In the love triangle between the Client, the Ad Agency and the Media, the media suddenly begins to see the benefit of wooing the client directly, without expecting the ad agency to sanction the courtship. Bear in mind that the advertising business originated as a media brokering relationship --the business of selling advertising column inches to manufacturers, for a commission paid by the publisher. While that is no longer the core business of advertising (creativity and message execution dethroned it about a century ago), the ad industry has a very good case for why the 15% commission structure is still valid. The problem stems from "a misconception as to who pays the commission", says Mel Ads chairman, Mel Assaw. "In most instances the client feels that he pays the commission as an added cost to the media charge. This misconception is further aggravated because most media houses today accept 'net cost' direct from the client", he complains. The implication is that it would be cheaper to buy the space or airtime direct from the media and 'avoid' the commission. Much like the way fishermen offer wholesale prices on lobsters if you pick up the catch off the beach. The problem with this negative discounting model in a servicing sector is that it ignores and undercuts the concept of a 'value added' business. It's hard to imagine the same principle being applied to other businesses --stockbrokers and travel agents, for instance. Are the media to blame? Or are clients just plain tight-fisted?

The ad industry appears to have more respect for their clients' shrinking budgets, than the media's marketing tactic. Most clients realize that there is a price to pay for going direct, not often reflected in the bottom line. "What clients sometimes don't realize", says Phoenix O&M Media Director Uma Rajamanthri, "is that some 'packages' bought direct do not do any good to their brands in terms of effectivity and reach". The bottom line: an agency has bigger clout in negotiating a better deal. Agency folk, more than anyone else ought to know the difference between buying into a preordained 'package' and a getting a smoking deal. Of course the alternative, a performance-based remuneration' may work, says Masilamani, if only because "it removes the focus from spending the client's budget", to providing a more professional service". Kannangara believes it could instill more discipline (in clients) and greater respect (for the agency).

No one begrudges the client being extra meticulous about how his/her money is spent. But it gets ugly when, rather than do their own media buying, or accepting the commission structure, clients take the third option and ask for a kick back. The most spectacular case of how a kick back controversy got an account kicked out involved a high spending milk powder client. The agency head, with a reputation for showing unprofessional clients the door (he once sued a lottery client for pulling out an account based on the agency's refusal to give kick backs), resigned the account because he did not want to be "the one who hits the nail on the coffin of the ad industry". Indeed it's troubling many at the top as they must grapple with needing to invest more money into a business and yet provide a whole range of services at a stripped down costs. Clients only see the advertising budget for the next quarter. The agency, which is always expected to be the eyes and ears in the marketing arena, must look further down the road.

THINKING OUTSIDE THE BRIEF
For all its muscle flexing, there is a whole area of uncovered ground that the gladiators must move in to. When asked whether the full service agency concept was being eroded, the answer was an unanimous, vehement "no". Rather than being threatened by the free lancers and 'hot shops', the agency as we know it has proved --largely by their multinational alliances-- that their integrated services better equips them to handle global brands. UPS, Coca-Cola, McDonald's, IBM, ICI and Nestle are a few of the brands that appear to have an insatiable appetite for the variety of tightly knit creative services. Direct Marketing, Public Relations, Research and Strategic Planning have been added to the menu only in the last decade, but clients already take it for granted. Yet, on the question of how they are anticipating, let alone using, Internet technologies to extend the buffet, many agencies acknowledged the fact that offering Internet services and E-commerce was still a long way off. "The agency that sells this (Web marketing) opportunity and markets it first, will reap tremendous results", says Andrew Samuel. Q&E, like many agencies, admit to having "not being very proactive" in this area. The diffidence is alarming. Most blame it on the low number of Internet users, on the slow and unreliable connections by Internet Service Providers, and not surprisingly, on clients' lack of interest. In a bid to jump-start some interest, Thompson Associates offered an unusual incentive to Clients and staff, organizing workshops and offering to reimburse anyone for usage at a Cyber Cafe --no questions asked about sites visited, either. Except for a Sinhala copywriter who produced a bill for a hundred rupees about six months ago, there have been no takers.

Do clients expect an ad agency to be more internet savvy? "The answer is 'not yet' says Neela Marikkar. "The traditional agency has not got anywhere near the level of Internet sophistication", she observes, convinced that "the industry is on the threshold of it, whether most ad agencies --hers included-- concede that fact or not". As for the 'threshold', the verdict is divided. Minds-Bozell offers Internet services, but none of its clients have been excited. At Masters, the thinking is that it is way too early to even consider Ecommerce, because clients have more urgent issues such as Point of Sale, Direct Mail and Media Buying.

Some of this disinterest stems from the unsettled business of fee-based services and commissionable work like Web design and maintenance of Ecommerce sites that carry a price tag. "Says Lilamani Dias-Benson: "Ad agencies will not, by and large, recommend non-commissionable services because Clients will not pay fees for even services like Direct Marketing and Ecommerce". So the ball is in the clients' court? Not quite, says Vasee Nesiah, Managing Director of Media Solutions, a specialized Web Design and TV production company, who believes it is the agency's responsibility to keep its clients up to speed. "Most of the agencies do not understand the new medium (cyberspace) well enough to offer anything", he concedes. These are niches that creative consultants have moved into. Guy Halpe sees 'Netvertising' as something he can provide, because the 'dinosaurs' do not see it as part of their brief. Interestingly, two agencies define their specialization as being able to offer their clients an integrated communications service (as opposed to a plain vanilla 'creative').

Minds-Bozell now regards its clients as a 'communication partners' offering a "360 vision that keeps abreast with world wide developments". Phoenix maintains that its O&M affiliation's most valuable benefit is in developing a "360 degree marketing communications solutions" that help a client look outside the pond. A few agencies who have been nothing more than 'ambulance and fire brigade' services have learnt the hard way; that it is suicide to have 'client vision' and stick too closely to the brief. Thinking outside the brief. Isn't that what a value added service is all about? Nobody ever earned respect being servile. Which brings us back to the two inter-related problems facing advertising. Some say the issue is respect. Others peg it on remuneration. Most agree that if there is a lot of unfinished business in Ad Land, it is because ad agencies have not had an agenda --and a collective voice. In that sense, they are badly in need of the PR magic they work for their clients. If only they could sign off on the brief.