Tuesday, October 22, 2013

What Do Ad Agencies Actually Sell?

In our workshop on The Business of Advertising, I usually start by explaining the basic principles of business. Any business. 

You are able to produce something, which you think has some value to someone. It is somehow different from what they can currently buy, and so it has some value. The key issues are - what is the value of the thing, how do you sell it, and can you make a profit by selling it at a price that covers the costs and leaves something over for you?

Image by bplanet

Everyone gets that. 

And then I ask: so, what do Agency's sell?

The usual answers?

  • Time.
  • Ideas.
  • Creativity.
  • Solutions.
  • Ads?

These answers just raise more questions:
  • If you sell time, how is your time different from another agency's time?
  • How do you decide on the price for an idea/creativity/solutions?
  • Is an agency a service business or a product business? 

The correct answer, in my view, is none of these. It was perfectly explained in this blog by The Ignition Consulting Group, called Are you really in the Service Business?
Many agencies lament that they have become “order-takers.”  But why?  Who turned your agency into an order-taker?  You did – not your clients.  You did it by forgetting what it is you’re really selling.  You’re not selling service.  You’re not even selling ads or ideas. You’re selling business results. 
Yes - what agencies sell is the chance for the marketer to realise their marketing objectives. This is the continuum - business strategy, marketing strategy, communication strategy, implementation, results.

Without the agency providing the stimulus materials in the best channels to persuade the target consumer to think, feel or do whatever it is that they want them to think, feel or do, the marketer doesn't get to deliver the results.

Here's more from the article:
The fact is that agencies shouldn’t be regarded as professional service firms, but rather professional knowledge firms.  Clients don’t just hire you for what you do, but rather what you know.
What this change in emphasis does is empowers an Agency's recommendations. They are the ones with the specialist knowledge. Agencies often compare themselves to other 'professional' firms like lawyers. "Those guys are taken seriously, and their recommendations are listened to. Why?" Because their clients assume the lawyer knows more than they do about the law and the application thereof.

If Agencies are simply "servicing" their clients, then where does the specialist knowledge lie? Is the assumption that the Client has the knowledge, and Agencies are simply implementing it?

Research conducted by The Ignition Group underscores this:
Over the many years that Ignition Consulting Group has been conducting surveys of advertising agencies, we have discovered that agencies give themselves the highest ratings in the areas of “Responsive service,” “Listening to clients,” and “Meeting timetables and budgets.”  The lowest-rated areas?  “Developing proactive ideas and delivering marketing leadership to clients.” 
Service is a commodity.  Smart thinking is not.  Clients can get good service anywhere, but proactive marketing leadership is in short supply.  In fact, most surveys that seek to diagnose why clients switch agencies usually produce the same answer: “Because our agency never gave us anything we didn’t ask for.”
I asked delegates in an Account Management workshop to define the role of Account Management. One of the answers was "to keep Clients happy".

Image by Ambro

I would suggest that the happiest a Client is, is when their marketing campaigns deliver better than expected business results. And Agencies can do that only by protecting their expertise so that they get to prove what they can do.

Which is not to "service" clients. It's to delight consumers.

Adtherapy is a training and consulting business which aims to make your bottom line healthier, and your business happier. We specialise in helping Marketers and Agencies get the best out of each other. Read more about what we do here

All images courtesy of freedigitalimages.net


  1. To sell our products or to market our services, we need to choose a perfect creative agency who are expert in using their knowledge to bring our firm top on markets.

  2. The reason for this post is that I read an advertising blog the other day and it was clear to me that the blogger had no clue how agencies make money.
    So I thought -- as a public service -- I'd do a little series on the economics of the ad business. But don't be frightened. I'll make it so simple even an account planner can understand it. Art directors I can't guarantee. ad agencies

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