Agency search consultant sees more "under radar" reviews and less relationship maintenance.
Russel Wohlwerth is a principal at SelectResources International (SRI), a firm specializing in ad agency searches, compensation consulting and marketer-ad agency relationship management. It was recently recognized by ADWEEK as the top agency search firm in the U.S. Wohlwerth has managed high-profile national and international reviews and consulting projects for clients such as Adobe, BMW, DIRECTV, Hewlett-Packard, H&R Block, Microsoft, Sprint, Timberland and Visa. Russel joined SRI with 20 years of major ad agency experience. He started in account management at McCann-Erickson but spent the majority of his agency career in senior management positions at DDB. Russel holds a B.S. degree in journalism from Ohio University.
Wohlwerth will be on the panel “In the new age of integration, is the agency still relevant?” at the iMedia Brand Summit September 12-15 in Park City, Utah.
Many claim that even though the world of advertising is changing every day, it is doing little to adapt to marketplace needs.
On the client side, companies are abandoning the old rules of marketing and developing their own. Dozens of top marketers -- including Nestle, Bank of America and P&G -- are conducting reviews in hopes of consolidating their work with one holding company to achieve efficiencies of scale and significant cost savings in their agency relationships. Others believe that by having multiple agencies, each with a core competency, they will have more effective results.
On the agency side, as media become even more fragmented, the balance of power has shifted from creatives to media buyers. Media planning, not creative development, has taken over as the first step in the campaign process. Some media agencies are competing with creative teams to offer new ideas, such as branded entertainment and product placement. Holding companies have created free-standing buying agencies to obtain the best prices for clients. A whirlwind of consolidation continues to sweep through Madison Avenue -- just six holding companies own 60 percent of the sector's revenues.
Not only are agency services changing, but compensation is changing, too. Companies are beginning to either pay fees based on agency labor costs or on performance measured by quantifiable, measurable indicators. Agencies are left with little to do to defend their previous pricing power. What's more, the upheaval has had a depressing effect on morale -- agency employees are complaining that their companies are weaker and receiving less respect from clients.
What does this mean for the future of the agency-marketer relationship? Who will determine it and guide it? Who has the answers to the industry's problems?
iMediaConnection asked Wohlwerth if he had come up with those answers while serving as the middleman and visiting 350 agencies each year.
iMediaConnection: What changes in the advertising industry have you witnessed in the past five years?
Wohlwerth: I'm seeing numerous major shifts, one being that clients are less experienced in the maintenance and nurturing of their agency relationships. Brand CEOs have become a revolving door, which in turn affects the CMO position, making it a revolving door, too. Clients are asking for testing, and making major decisions based upon the results, which threatens agencies.
iMediaConnection: Has the agency review process changed?
Wohlwerth: Definitely. For consultants like me, we are no longer using the concept of "the one big review" to match clients and agencies. Reviews are broken up into the clients' various needs. They're asking us to find agencies that can work as contractors and to conduct "under the radar" reviews -- evaluations that the press doesn't know about, in which a client maintains its holding company but searches for a more nimble and lean company.
iMediaConnection: How has the rise of integration changed this landscape?
Wohlwerth: The problem with the rise of integration is that too many agencies today claim to offer fully integrated services, but few can deliver on that claim. Integration, in my opinion, comes from a media-neutral approach. Creative agencies historically have been idea-based and driven, but now media has become medium-based. Media firms are hiring creative directors while creative shops are still too fixated on television. Don't get me wrong -- I'm not saying that TV is dead. What I'm saying is that more time needs to be allocated across additional media. Integration won't work if creatives hold onto their conventional thinking. From what I've seen, Deutsch is the example of a qualified integrated shop.
iMediaConnection: What will happen with client/agency dynamics in the near-term?
Wohlwerth: Clients will have a longer list of agency providers. Procurement departments will try to drive prices down while agency costs continue to rise because of technology upgrades, new hires, etc. Employee morale should improve as the economy improves and new business increases. Merger and acquisition activity will certainly continue since there's an excess supply of agencies. Soon, both clients and agencies will realize that this era of "ambush" marketing must end -- consumers don't want to be attacked with advertising messages.