Big agencies’ inability to quickly change their legacy structures has eroded their value to clients.
“We are too passive,” said Nick Brien, CEO of Dentsu Aegis Network in North America, on stage at the 4A’s Decisions 2020 conference in Washington, DC on Monday. “We are slow to change. We’re too incremental. We have legacy structures with legacy mentalities, behaviors, relationships and P&Ls.”
So brands see media agencies as purveyors of cheap media rather than strategic partners. And agencies still compete on price, perpetuating a race to the bottom that puts pressure on margins and commoditizes their services.
“Any time we decouple a conversation about media from the channels where that media lives, we’re commoditizing media,” said Jodi Robinson, president at Digitas North America. “Clients keep asking media agencies about cheap media instead of elevating the conversation to the value we create.”
Also, media agencies still struggle with trust issues stemming from the ANA’s 2016 transparency report. Many challenges agencies face today, like the rise in marketers taking work in-house, stem from that breakdown in trust.
“The single most important thing the industry has to get back is trust,” said Mat Baxter, CEO of Initiative. “All of these things are getting taken away from us because that trust is not there.”
But legacy operating structures disincentivize collaboration, which handicaps agencies as clients seek agility and integration.
“The commercial model of our business does feel out of date,” said Tim Castree, CEO of GroupM North America. “As we are aligned today, we are disincentivized from creating efficiencies in the core business.”
Call to arms
There’s an ongoing refrain around agency transformation. Agencies need to be strategic advisors to brands. They need to collaborate with media owners rather than treat them as vendors.
But they also need to learn to say no to pitches with unrealistic terms.“If you don't say no, then how low is the floor?” Brien said.
Agency transformations are ongoing, but so far, they’ve had a positive impact on some client relationships. GlaxoSmithKline’s in-house media team, for example, has been working to draw agencies in as partners, “as opposed to someone we’re leveraging to get better rates,” said Scott Grenz, global head of media at GSK.
Other clients recognize their role in devaluing agency work.
“We’ve allowed it to become static and inertia has set in,” said Christina Meringolo, VP of consumer engagement at Bayer. “This is a pivotal moment for agencies to become much more agile in how they’re servicing clients.”
But regardless of where they are in their transformation journey, agency leaders agree: the time for talk is over.
“Stop telling me what you’re doing,” Brien said. “Show me the outcome.”