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Commentary & Analysis

The Future of the Ad Agency

By Frank J.

By WhatTheyThink Staff
Published: August 23, 2004

By Frank J. Romano Media planning can encompass the entire medium or marketing platform that makes contact with a consumer, including below-the-line marketing services August 23, 2004 -- Most ad agencies are no longer just ad agencies. They are planning or executing integrated marketing campaigns for most of their clients. They are blending advertising with other marketing disciplines--promotions, direct response, sponsorships, event marketing, and even PR. Agencies are reinventing themselves for the changing demands of the marketplace. They are seeking to create a different relationship with their clients in which they become full marketing partners instead of handling only advertising. Consumer eyeballs have moved beyond traditional media. Media agencies may then play on a much bigger playing field than the "Big 6" media: TV, magazines, newspapers, radio, Internet, and outdoor. Media planning can encompass the entire medium or marketing platform that makes contact with a consumer, including below-the-line marketing services, such as in-store promotions, direct response, package design, and even public relations. Ad Age tallied domestic revenue from advertising and media for 457 U.S. agencies. Their agency ventures outside the U.S. took advantage of the dollar to push the agencies' revenue from worldwide advertising and media operations to $20.54 billion, up 4.9 percent. Media agencies' share of the $10.66 billion "pot" registered $1.51 billion in 2003, up 5.4 percent, tracking closely with media spending growth. Intense pressure by marketers to slash agency fees have cut agency profit margins. Lines between direct response and general advertising are blurring as clients push agencies toward accountability. Of the top 20 agencies in 1980, 17 are now part of the four major holding companies. Of the other three, one is still independent and the other two have disappeared. Five holding companies control 74.1 percent of the world advertising services market. Interactive agencies advanced 20.6 percent to $554.1 million; that amount excluded interactive operations of publicly traded holding companies, which don't break out interactive results. Agencies have turned to marketing services to boost margins, because those operations typically carry a higher markup than traditional agency work. Apart from advertising, there are now at least a dozen separate and distinct disciplines that can be used to achieve a marketing objective. Clients are no longer looking to the agency as an extension of their own marketing function. They are not looking to agencies for advice on product position and marketing strategy, but for clever advertising. They are talking to other consultants about strategy and brand positioning. Lines between direct response and general advertising are blurring as clients push agencies toward accountability. Buying media units are creating more holistic programs, and account planners are becoming media strategists. Most of the major U.S. media agencies have created new planning approaches--consumer context planning as it is called--and are working to spread the practice to traditional media planning departments. If print is going to be a part of this new media world order, it must define its role and communicate its benefits more clearly. Print must not be left behind.

 

 

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