PepsiCo and Harley Davidson Explain Needed Disruptions in Agency Models

agency models must change
Agency Models Must Change To Fit Client Needs

AdAge just published a very interesting article featuring comments from PepsiCo exec, Brad Jakeman, at the annual “Masters of Marketing” conference, in which he criticized agencies for not disrupting their models in more than 25 years.

Although his comments have caused quite a stir in the agency space, I find them to be consistent with everything I’ve been hearing from clients over the past five years or so.

The full article is very much worth a read, but here is a brief summary:

CLIENTS WANT MULTIPLE AGENCIES VERSUS AORs 

The days of the AOR and $50,000-$100,000 monthly retainers are long gone as clients want to work with a variety of agencies to get different thinking.

“The agency model that I grew up with largely has not changed today. Yet agency CEOs are sitting there watching retainers disappear … they are looking at clients being way more promiscuous with their agencies than they ever have.”

SOME CLIENTS PREFER BOUTIQUES

This is something I’ve definitely heard from clients, especially as holding companies have gobbled up competing agencies, making it more difficult for brands to find agencies without competitive conflicts. I run a boutique agency and I’ve personally had clients refuse recommendations to larger agencies for larger scopes of work because they prefer boutiques who they say, “have fewer client conflicts and tend to work smarter and have more flexibility than the big players.”

At the conference, Harley Davidson’s Chief Marketing Officer, Mark-Hans Richer echoed the same sentiment by pointing out that the motorcycle marketer works with a lot of shops and takes a “boutique” approach.

“We have not had a lead agency in about five years. Clients must take more responsibility for creativity. It’s not the kind of thing that you should offshore.”

CLIENTS WANT AGENCIES TO PAY ATTENTION TO NON-MILLENNIALS

He went on to say the industry’s love affair with millennials shows that agencies are ignoring the highly lucrative aging market.

“Youth does not own cool. Youth does not own growth. Youth does not own innovation or disruption. Old people are a growth market, too.”

CLIENTS WANT TO SEE MORE DIVERSITY ON TEAMS

Jakeman from PepsiCo also said that diversity in agencies is lacking.

“I am sick and tired as a client of sitting in agency meetings with a whole bunch of white straight males talking to me about how we are going to sell our brands that are bought 85% by women. Innovation and disruption does not come from homogeneous groups of people.”

Now, it should be noted that he is speaking about the advertising industry. And, we all know that PR is still largely driven by women. So, the gender issue he describes doesn’t necessarily fit PR – although most managing directors are still male. That said, I’ve certainly been in meetings before where everyone at the table is caucasian, but we are targeting African-Americans or Hispanics, so the lack of diversity seems to apply in PR as well.

CLIENTS WANT MORE MODERN MEANS OF MEASUREMENT

“We still talk about share of voice, which, is a television metric. Big consumer packaged good companies still measure marketing spending as a percentage of net revenue. That assumes that paid media is the only way to build brands. But that is wrong because content generated by others on a brand’s behalf, for instance, doesn’t cost us a cent.”

This last observation really struck home with me. Jakeman is tired of seeing digital marketing siloed from all other tactics. I couldn’t agree more. Digital should be baked in to everything PR pros and marketers do because it is THE single most effective means for connecting with customers and driving calls to action.

CLIENTS SAY DIGITAL IS CRITICAL AND SHOULD NOT BE SEPARATED FROM MARKETING

“Digital marketing the most ridiculous term I’ve ever heard. There is no such thing as digital marketing. There is marketing — most of which happens to be digital. Marketers should create digital cultures, not digital departments. We ‘ghettoize’ digital as though it’s the life raft tethered to the big ocean liner. And we have to move on from that.

So, has your agency fully adapted to these changes? Has your agency disrupted the old model in favor of diversity in people, thinking, approach, tactics and measurement? Has your agency infused the digital space in everything it does? If not, that may just be the reason for dwindling returns and reduced retainers.

Let me know what you think!

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