Favro forFast Growth
From YouTube to Netflix and Snapchat to VR, the media we consume has fundamentally and irreversibly transformed in very recent years. But while consumers are enjoying a new golden age of entertainment, marketing and advertising professionals are faced with a new set of challenges.
Supported by a multitude of new and evolving distribution channels, the modern media landscape is more technically demanding than ever — and those demands will only increase in the years to come. The emphasis on compatibility, optimization and execution is driving specialized domain expertise and resulting in a more fragmented creative industry. As agencies of all sizes try to adapt, they are also seeing more competition from consulting firms encroaching on the digital space and dealing with new thinking from clients.
As the digital media landscape has exploded with a broad range of new channels, formats and consumer habits, technical demands on agencies have increased. Now, agencies must craft strategies that leverage every relevant channel and execute creative that is technically suitable, trackable and desirable for each channel’s audience.
Imagine walking into a BMW dealership on a snowy winter day. A brand-new Alpine White X5 is glimmering in the showroom, but you want to see what it would look like in the other color options. Using a VR headset, you can see the X5 in Mediterranean Blue, Glacier Silver, and Chestnut Brown. You prefer Glacier Silver, so you make your selection and get inside the car. As you sit in the driver’s seat, you check out different leather colors and dashboard options and make your customizations. Now it’s time to drive.
You take it out on California’s Pacific Coast Highway and play around with engine and transmission options before selecting the twin-turbo V8 engine and manual transmission. Since you and your family like to drive into the mountains for ski trips in the winter, you also test out the X5’s handling on snowy, downhill and uphill roads along Highway 82 en route to Aspen. Because you’re not actually on the road, you can make riskier turns and even slam on the brakes to simulate emergency situations.
The experience for you, the customer, is seamless, intuitive and highly informative as you make a big-ticket purchase decision. The BMW sales person loves how the new technology reduces consideration time while increasing close rates thanks to higher levels of engagement and personalization.
A More Treacherous Road
A better customer and sales experience would not have been possible without a convergence of technical expertise behind the scenes. This project would have required user experience and interaction specialists, graphic designers, animators, digital copywriters, and myriad developers — all with virtual reality expertise. Whether one agency handled the entire project or it was the product of multiple shops working in partnership, the project’s success relied on the collaboration of many technical experts.
In the new media landscape of today, technically demanding projects like these are becoming the norm. As agencies seek more talent to execute and support their creative campaigns and products, they are also having to manage their work and talents in ways that might not be familiar.
Agencies are entrenching themselves within domains of expertise as they desperately build out the technical talent they need to remain relevant and produce real results for clients. There are a number of titles that you’ll find in today’s creative agencies that have never existed before: UI/ UX designers, front- and back-end developers, 3D animators, and information architects — just to name a few.
As a result, the marketing and advertising industry is becoming more fragmented. This reality poses unique problems for big agencies, boutiques, agency partnerships and new players in the industry.
Big agencies, whether through acquisition or organization, are segmenting into families of agencies with unique capabilities. Their challenge is to quickly access the right resources to properly serve clients.
Boutique agencies are investing in the talent necessary to support specific service verticals, rather than spending money on talent across areas of technical expertise. These boutiques are experts in their domain, but they also want to apply their specialized skills to larger cross-channel strategies.
New players, most notably consulting firms, are also entering the digital arena. They tend to have strategic expertise, existing client relationships to enter the market, and deep technical resources. However, they also must navigate the same complex digital and marketing landscape as their more experienced competition.
Agency partnerships are forming to unlock value across agencies’ complementary service offerings. But they still must efficiently leverage the capabilities of member agencies while achieving mutually beneficial results.
A Node to Networks
As each of these agency types are honing their domain expertise, many clients are bringing strategy in-house. This allows internal marketing and strategy leaders to pick and choose their agency partners, effectively serving as the node to a client-focused agency network.
Consider Marci, the (fictional) chief marketing officer of a cyber security firm. After speaking with her customers and conducting some competitor research, Marci identifies an opportunity to develop a first-of-its-kind mobile app designed specifically for CIOs at large enterprises. For the past five years, she has enjoyed working with a marketing agency that specializes in search engine optimization and search advertising, but that agency’s expertise does not extend to app development.
Rather than miss a big opportunity to engage with her target audience via mobile, Marci begins to build new relationships with boutique digital agencies and also discusses digital services with her company’s consulting firm. Marci eventually finds the right partner in a small digital shop to create her firm’s branded app.
Early in the project, Marci engages her consulting firm to provide more detailed market research to the designers and developers. As the app nears its launch date, she works with her long-term marketing partner to build optimized landing pages and an integrated search advertising campaign to promote the new app. For all future marketing initiatives, Marci will enjoy a sandbox environment in which she can quickly access the resources necessary to execute each project as she helps her company meet its larger business goals.
In-house, in Control
Instead of worrying about how agencies are handling the big-picture strategy of their businesses, in-house marketers like Marci are taking advantage of the fragmented industry to source trusted partners, set the strategic vision, and extract more value from domain experts as they see each initiative through to a successful execution. Indeed, the fragmentation of the marketing and advertising industry is shifting control back to the clients, who operate the levers of their own creative command center.
The traditional retainer model is losing its relevance as a result of fragmentation, the volatility of agency work, and the changing nature of client relationships. For certain ongoing services, the retainer model might still make sense. But clients that want to launch digital campaigns and customer-focused marketing products are not seeing the value in sending out regular monthly checks to their creative partners for intermittent work.
When a retainer can work
The retainer model will still be effective for many clients and their agencies. Marketing departments that treat their agencies like extensions of their own internal teams can enjoy immense value in retainers. They can call or email their agency with on-demand requests, access their expert opinion, leverage their third-party data, and brainstorm new ideas.
The key is collaboration; it’s no longer a throw-it-over-the-wall scenario. When in-house marketers see their creative agency working alongside them in the trenches, that monthly payment can feel like a bargain.
When a retainer can fall short
As more marketers seek instant access to specific talent for set periods of time, the retainer model begins to break down. It just doesn’t make fiscal sense to keep paying agencies when their services aren’t needed. Internal managers are taking advantage of the creative industry’s segmentation-by-specialization trend by acting as a strategic control room to apply each agency’s strengths to the project at hand. With this approach, a pay-per-project model makes more sense than a retainer, as the internal marketer relies more on smaller initiatives that serve a larger strategy.
The evolution of the client-agency relationships does not mean that agencies working on a project can neglect to collaborate with and earn the long-term trust of their clients. Likewise, agencies on retainer can — and should — wow their clients by delivering spectacular work thanks to their specific domain expertise. Relationship-building and impactful creative executions will always be crucial to an agency’s success, no matter the engagement model.
But clients no longer have just one agency relationship. They have a portfolio of partners that can span across areas of technical and domain expertise. Businesses and their marketing departments are taking a more strategic approach to procurement, and the goal is to see value in every vendor engagement.
Agencies must adapt to this new environment. New challenges are emerging from all sides: greater technical complexity, increased competition, and a new client paradigm.
Every agency will be expected to collaborate with clients as they help them foster strong ongoing relationships with their customers. Success will demand the know-how to execute, the strong industry and client relationships to propagate new business, and the ability to remain flexible and effective in the face of change.
In this new industry landscape, survival is not enough. The agile creative agency that can manage the uncertainty and shifting expectations of the moment will thrive in this rapidly evolving marketing and advertising industry.
At Favro, we are seeing first-hand how agencies are adapting their organizations to capitalize on the realities of this new environment.
What changes are you seeing? If you’d like to share your perspective, email us at email@example.com. We’d love to hear about how your agency is navigating new challenges and capitalizing on emerging opportunities. And if you’d like to see how more visual and flow-based collaboration can improve your agency’s agility, we would be happy to show you some practical use cases.
Favro Co-founder and CEO