YOUR COUNTY.
YOUR BUSINESS JOURNAL.

















Published October 2006

Where is the ‘ad’
in advertising?

In a July gathering of leaders of Seattle’s largest advertising firms there was general consensus that spending by advertisers is up. But few local ad agency leaders are breathing easy. It is not business as usual.

At a June meeting of WorldWide Partners, a group of independent advertising agencies from around the world, it was reported that business is expanding generally. But most of the agencies are experiencing shifts in the media mix, necessitating change in the services most agencies are offering. This has put pressure on agency profit margins.

In both cases, there is less “ad” in advertising. The shift of budgets from traditional media to more targeted forms of communications is accelerating. Clients seem to be less enthusiastic about mass media overall. And this creates unease in an industry that is built around traditional media.

As all forms of advertising service firms broaden their offerings to cover new media, the traditional lines of distinction between ad agencies, graphic design, online, direct marketing and PR firms are blurring. It is not unusual for design firms to offer “brand” consulting, ad agencies to offer direct marketing, PR firms to design ads. All now claim expertise in digital services.

At a time when advertisers need better counsel than ever on how to spend their dollars across a wide range of media, they face a confusing choice of services that don’t always get to the heart of the marketing challenge.

Recent Yankelovich research suggests that consumers are increasingly tired of being marketed to and are looking for new levels of authenticity and openness by the corporations they do business with. Aided by digital tools that allow them to compare products and services instantly, consumers are now in control of the information that leads to their purchase decisions. And this has broad implications for the advertising industry.

A thought-provoking white paper, “Fueling the Purchase Process” by Chris Peterson of Chautauqua Communications, illustrates just how complex the new paradigm is for the advertising and communications industry:

“Consumers are empowered today to form purchase decisions using resources completely outside the control of the marketing organization. Consumers can now see straight through any spin of marketing communications because they can turn to like-minded colleagues in a matter of seconds to get the real story. For marketers, it means the markets have a baloney detector — and it’s almost instantaneous. As a result, output of marketing organizations is becoming less relevant and is in danger of becoming obsolete.”

Peterson suggests that three principles are in play that must be on the minds of marketers today as they make their strategies for winning in the marketplace: consumers bypass or delete marketing messages; consumers figure out from other people what to buy and where; consumers are creating their own media. Combined, this means trouble for advertisers who don’t re-craft their marketing plans to account for these phenomena.

Yet the advertising industry is still structured in ways that discourage strategies that can win in this new environment. Over the past two decades, both advertisers and their marketing agencies have broken into a number of discrete specialties that have left the industry with not enough generalists. Yet success in today’s world requires the ability to see across all media and to weave plans that are unique to each situation using just the right media ingredients. And these plans will include strategies to deal with social media networks.

There is a great opportunity in this environment for agencies to reinvent themselves and to re-establish the strategic leadership role that they once occupied in American business.

To do so, the industry must first develop new compensation methods. What sense do media commissions make when advertisers are looking for counsel on ways to harness the new media mix, both paid and unpaid, more effectively? Commissions encourage too much emphasis on paid media.

Agencies also must broaden their concept of “planning.” Mass-media thinking has dominated how account planning has been conducted. We are moving into an age of micro-targeting and consumer empowerment that changes the nature of the planning function. Needed are people who carefully track the constant movement of markets.

I recently was introduced to BUZZLOGIC, a company that tracks brands across a broad cross-section of social marketing networks. In the new world, daily intelligence is needed to stay on top of a market.

Most of all, a new concept of organization is needed, both with advertisers and their agencies. Greater fluidity in organizations will be required to custom assemble teams from across disciplines to tackle marketing challenges. Marketing plans will require, above all, more emphasis on strategy that factors in all possible channels for reaching objectives. At the tactical level, specialties will still exist, but much more cooperation between departments will be required to compete effectively in this new marketplace.

If you would like a copy of “Fueling the Purchase Decision” by Peterson, send e-mail to bill@hydrogenadvertising.com.

Bill Fritsch is president and founder of Hydrogen, an award-winning, Seattle-based advertising agency. Clients include Aegis Living, The Everett Clinic, Precor, Northwest Orchards, Schnitzer Northwest and Microsoft Exchange Hosted Services, among others. Reach Fritsch at 206-389-9500 or by e-mail to bill@hydrogenadvertising.com.

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© 2006 The Daily Herald Co., Everett, WA