the transformation after the downturn

Awhile back, I discussed the value of process management at agencies from the perspective of cost-efficiency. I wrote “Agencies have to take on the job of complex program management and serve as a new type of business consultant in return for the client’s commitment of money. In my years directing critical business projects for various industry verticals, I’ve seen waves of innovation affect the industries at different times. Now is the time, and the opportunity, for ad  agencies to adapt, or suffer.”

Now, let’s look at the ways agencies can use program management as a source of revenue, and value-added for the clients. With advertising growing slowly or shrinking during the current recession, most agency executives are focused on getting through these difficult times, managing shareholder expectations, cutting costs, and often, headcount. None of this is pleasant. But all recessions end. Agencies that want to prosper in the years ahead need to get in front of the wave of change coming to agency-client relations. That is where the transformation of the agency process comes in as a new source of revenue.

Clients are cutting costs now across their marketing portfolio. More than just ad budgets are suffering. Clients’ in-house marketing costs are being cut, too. Firms are looking for ways to move some marketing functions out of their organizations permanently, the way they’ve outsourced other business processes as a result of past recessions (IT, HR, and the like.)

This can be an opportunity for the ad agency to step in and take on the work. But you’ll have to show that you can do it more effectively and at less cost than it has been done by in-house staff. The agency should be prepared to present a management plan that shows an understanding of the business need, goals, definition of success, and milestones that measure successful execution step by step. Good consulting firms do this as a routine part of their business. Just as they make money at it, so can agencies by adding it to the roster of services offered.

In addition, client firms are already challenging the old agency revenue model based on a percentage of total spend. Since so much of the current downturn is about getting costs down after years of excess, the old business model will remain under pressure. Successful agencies must adapt. The ability to manage complete, complex marketing programs that involve numerous outside parties, for the benefit of your clients, is a way to do so. It will add value to your client relationship if you transform the ad agency into the marketing consultant of choice. A new fee structure should be used for these services. If agencies don’t, new types of service providers will show up to do so. This sort of change occurs during every business cycle.

For many agencies, a critical problem is where to find the right people to take on this new, process-driven work. You’ll probably find the most qualified people in your own digital units. That is where IT meets creativity. If it is being done right, people are there who know project management and can branch out across the agency for your clients. If you don’t have the people already, look outside to the smaller digital shops that do this already. They (alright, we) are chomping at the bit for this opportunity.

The transformation of the old agency-client relationship is inevitable. Seize the opportunity to add value in new ways, or someone else will.

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