02 April 2013

Disintermediation III

“Disintermediation” is a fancy word that means “cutting out the middleman.”  The actual economics definition is “the removal of intermediaries in a supply chain.”  No matter what words you use, it’s a concern for agency leaders – more so in recent years.

Not-So-Secret-Agent Man

Uh, sorry -- which one of my
agencies do you represent?
If you think about it, the very concept of an agency is that of a middleman.  The word “agent” literally means “a person who acts on behalf of another.”  That’s how ad agencies began, as purveyors of media space on behalf of their clients.  Creative development became part of the bargain.  During the 20th Century the business evolved into more of a partnership, the best agencies working hard to move their clients’ businesses forward.

Not far into the 21st Century, however, we’re losing sight of how to move our clients’ businesses forward, and clients are responding. 

Relationships are Too Transactional

Yes, agency-client relationships are shorter.  That’s not news.  Now they’re shallower.  Clients juggle an array of resources at any given time, and not just additional agencies.  They hire content creators, data scientists, startups and even agency people as in-house resources.  Some of this results from a need to connect with consumers in ways that only newer, specialist agencies can deliver.  But there’s a more fundamental reason.

Clients eschew the AOR model because agencies made it easy for them.  Labor-based compensation focused agencies on making the ad, shelf talker or website, distracting from the need to bring business-building ideas.  The relationship got more transactional.  Clients can hire almost anyone to get “fresh thinking”.  Monogamy is dead.  Is there any wonder someone started an agency search consultancy named “Madam”?

Agencies Can Cope In a Couple of Ways

One is to respect reality.  Rather than just walking on eggshells, do the best work you can for existing clients.  Bring them business-building ideas, which is something different and something more than delivering the scope of work.  It builds trust with a client who will think twice about straying from an agency that proves how much it cares about the business.

The other is to approach prospective clients with the same attitude:  How do we solve your business problems?  You’ll start to turn the tide, at least in your corner of the world.

What not to do:  Chase all the services your client is buying from other agencies or suppliers.  If it’s something you’re good at doing, then by all means sell it.  If you think you can develop it as a core competency, keep at it.  Even then, however, it means little if you don’t also bring business-building ideas.  Without those, you’ll be disintermediated.  (According to spell check, I just made up that word.)

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