OCTANE

Many of us are totally consumed by our jobs—answering emails, writing marketing and advertising plans, blogging,  making ads, designing websites, sitting in meetings, taking phone calls…

So, most likely, you may have missed these vital news stories in the press about our industry. These are tough economic times, and though cutting-back agency spend is not new, one gets the feeling that this time the clients’ intention is more long term. Perhaps ad agencies need to redefine their value add for clients.

Proctor takes no Gamble.

Procter & Gamble Co. Proctor & Gamble Co. Chairman-CEO Bob McDonald recently said the company will cut costs totaling more than $10 billion over the next five years, including $1 billion in external marketing spending and a reduction of more than 5,700 jobs in non-manufacturing areas including marketing. The 5,700-employee headcount reduction includes more than 4,000 next year in addition to the 1,600 previously announced for the current fiscal year ending June 30. And even as the company cuts jobs, it will continue hiring in high-growth countries such as China.

The marketing savings will come from a combination of having fewer marketing executives and spending more efficiently, including using more lower-cost digital marketing channels to reach consumers one-to-one; and more multi-brand group marketing initiatives such as its program around the 2012 Summer Olympics that spans 30 brands.

The cost-cutting aims to streamline P&G to compete amid slow growth in developed markets and aggressive expansion in developing markets, such as expanding its toothpaste brands, including Oral-B and Crest, to just about every country in the world except Japan, Korea and Pakistan, by 2015.

The cuts don’t just focus on media or agency costs but on all areas of marketing. Marketing costs are the company’s third-biggest spend pool, behind people and materials. To cut costs without sacrificing impact, P&G is using technology to shift spending from more traditional vehicles like TV to digital and mobile advertising and more efficiently target consumers to build one-on-one personal relationships.

Upon reading this news from P&G , one reader commented: “After decades of investing to build some of the world’s most powerful brands, big Bob decides it’s time for him to slash marketing, boost short-term earnings, and stuff his pockets with bonuses for creating quick profits. Then on to his next corporate “turn-around.” He and P&G’s board of directors are the epitome of America’s 1%.”

Despite revenue surge, PepsiCo announces 8,700 job cuts

PepsiCo (PEP) proposed a devastating strategy to its employees by announcing it plans to cut 8,700 jobs, or about 3% of its workforce. This, it says, is to offset higher costs for ingredients and to shift more of its spending on advertising to North America—by $500 million to $600 million in 2012.

It expects the restructuring will save the company $1.5 billion by 2014. That’s on top of $1.5 billion in cost cutting it previously announced.

Pepsi announced the layoffs as it reported better-than-expected fourth-quarter profit, but forecast a decline in adjusted 2012 earnings.

Like most snack and soda makers, Pepsi is facing higher costs for materials it uses to make, package and transport its products, including aluminum. Many companies raised prices last year to offset the higher costs. But consumers are still cautious about spending in the uncertain economy, so some companies are moving on to Plan B: cost cutting.

PepsiCo expects 2012 will be the second year in a row that it will encounter higher-than-average costs for commodities.

CEO Indra Nooyi said although it’s cutting about 3% of its 300,000 worldwide work force, the reduction is spread over 30 countries. The company typically adds 10,000 to 15,000 jobs in any one year.

One analyst questioned whether Pepsi should spend more of its advertising dollars in other countries, including emerging markets like India. While Pepsi’s snack business is stronger than Coke’s, he reasons, PepsiCo has been losing ground to Coke on the soda side as its ramped up its overseas business.

Unilever cuts agency spending to get leaner faster

Unilever, the world’s third largest consumer products company with 180,000 employees worldwide, recently added to the writing on the wall for advertising agencies when it announced that it had cut spending on advertising agencies and production companies. Whilst Unilever boosted marketing spending a modest 2% last year to $8.2 billion,  the agencies and production companies didn’t fare nearly as well from the giant cuts.

The company significantly reduced its production costs and agency fees. Surprisingly, they said this is “money that’s not directly driving the exposure of our brands to the community and consumers.” To make its ad spending stretch farther, they pointed to digital spending rising 15%, much faster than the overall rate.

Unilever achieved some of its savings in “non-productive” costs following a production roster review and consolidation. Currently, Unilever works with hundreds and hundreds of production companies, and thus launched a review in March of 2011, hoping to bring them down to a manageable number and to get efficiencies.

In February of this year, Unilever warned that 2012 would be a difficult year as growth in emerging markets slows and demand in Europe and North America stays flat at best.
The gloomy outlook sent the company’s shares price lower as it was revealed that emerging markets had slowed around 1 per cent over the past year after the group matched 2011 sales growth forecasts. Emerging markets are showing a little bit slower growth than two years ago.

Unilever controls subsidiaries in at least 90 countries. In England, Unilever workers at UK factories were on strike in mid-January, and the company refused to talk to unions about alternatives to its unacceptable and unilateral decision to close the final salary pension scheme. Unilever was founded on positive social principles but has aggressively followed a strategy of job cuts and outsourcing of over 100,000 of its global workforce over the last ten years, removing any semblance of social responsibility over work terms in the production of food and household goods.

Global companies pull the trigger

Global companies from NEC Corp. (6701) to PepsiCo Inc. (PEP) and AstraZeneca Plc (AZN) are chopping jobs more than three times faster than they did in 2011. They are bracing for deeper recession in Europe and a slowdown in China. The announced workforce reductions surged to 94,369 in February 2012, up from 26,561 a year earlier. Employers based in Western Europe accounted for the biggest group of job-cut disclosures, threatening to add to unemployment in the euro area already running at a 13-year high.

Such firings are now running at the quickest pace to start a year since a 2009 peak, when the European and U.S. economies shrank amid the deepest slump since World War II.

Adding to the squeeze on global companies is decelerating growth in China, whose projected 8.5 percent expansion would be the least since 2001 after the government moved to squash inflation and prick a real estate bubble.

CEOs have learned to pull the trigger quickly on cuts to keep profit margins in line with expectations when economic growth cools,

Less than optimistic

According to Publicis CEO Maurice Levy of Publicis Groupe SA (PUB), the third- largest ad agency group, its European clients have scaled back marketing plans because of the recession. While they still see growth this year coming from the London Olympics and the European soccer championships, companies are being more cautious.

In the latest Bellwether report from the London-based Institute of Practitioners in Advertising, U.K. marketing executives say that companies are the most pessimistic they’ve been since the last recession and plan slower growth in ad spending.

British companies ranked their business prospects for the first quarter of this year as the worst in 11 quarters and said their planned increases for ad spending in 2012 are weaker than in any recorded year before 2009, according to a survey of 300 organizations. Digital marketing has become the fastest-growing part of the U.K. advertising industry as companies look for ways to save money, according to the institute’s report.

Chris Williamson, chief economist at financial data company Markit and an author of the Bellwether report said, “There are signs that companies have become increasingly reluctant to invest in traditional media campaigns, instead diverting money towards the Internet and direct marketing. This reluctance reflects lower-than-expected sales and profits in recent months, as well as growing unease about the economic outlook.”

To combat slower growth this year some ad agencies are planning to purchase more digital agencies in emerging markets where growth remains strong.

Should ad agencies brace for slowdown?

Data shows that ad growth eased in 2011 as sectors such as automotive, telecommunications, department stores and food companies pulled back their spending. This was due to lingering concerns about the general economy and health of consumer spending.

“The whole world is nervous—and nervousness usually leads to contraction, both for consumers and advertisers,” said Bob Jeffrey, chief executive of JWT.

Though many economists wish to believe the economy will not fall back into recession, the risks of a double-dip economic contraction have risen.

Analysts say advertising cuts will most likely hurt traditional ad vehicles such as print and direct mail but online ads and TV advertising are expected to be more resilient. Stocks of advertising firms have taken a beating.

Fears about a deeper recession in 2012 are increasing. Despite the economic trends, many ad executives say they are surprised they haven’t already seen widespread ad slashing by corporations.

However, ad executives aren’t taking any chances. Many are keeping a very close watch on expenses so they are prepared for further cut backs by marketers.

“With the numbers I have in hand I should be at least feeling relaxed but I am not,” said Mr. Levy at Publicis. While Mr. Levy hasn’t reinstated a hiring freeze as he did during the last recession he has told his ad and marketing firms to be more “cautious” in hiring.

It is about making “sure we aren’t getting too far ahead of revenue,” said Laura Lang, chief executive of Digitas, a digital-ad firm owned by Publicis. Her agency is keeping closer tabs on expenses such as travel and training dollars.

During the last recession (2007-2009) when U.S. ad spending fell 16%, many global ad agency groups were caught by surprise and had to move quickly to reduce headcount to offset sharp drop-offs in revenue. While wide-scale layoffs aren’t currently in the works, a hiring slowdown seems to be percolating, according to several recruiters. For the ad business, employees, the biggest expense, can represent more than 65% of an agency’s expenses.

Cutting staff is a tough choice to make in today’s environment,  but ad agencies are under extreme pressure to hire new talent as they try to keep up with the ever changing dynamics of a changing landscape.

Ad agencies have no choice really. They must continue to invest in talent.

It’s not wise to cut in a recession

Ad agencies have always argued that in times of recession it’s not wise s to cut spending.

A series of independent reports (compiled by the Financial Times) has demonstrated beyond any reasonable doubt that companies who maintain marketing spend – or even increase it – during recessionary times, perform dramatically better in the mid-to long-term than those who reduce it.

In a way, the logic behind these findings is simply common sense. When everyone around you is cutting their marketing spend and you are maintaining yours…your share of voice becomes relatively high and your brand share has a good chance of being greater when the good times return.

Spending during an economic recession is a brave thing to do. But it has its positive side.A recent McKinsey study identify a group of companies which ‘made strategic decisions that defied conventional logic’. During the recession, these companies maintained investment levels not just in marketing but in all key areas – deal making, R & D, advertising – arguing that tough times required greater effort and offered greater opportunity. Following that logic, many of them, perversely, had spent less in the above areas (relative to the competition) in the more benign market before the slowdown. The McKinsey study demonstrated that a contrarian approach to operating expenses improved the overall commercial performance of companies by no less than 17.4% relative to all industry averages between 1989 and 1992.

Less surprisingly, those market leaders who had maintained spend over the same period were shown to have extended their lead over their immediate challengers: whereas those who had cut back had lost share to their competitive challengers.

Given these facts, one could argue that it is self-evidently more cost-effective to attempt to build share during a downturn, than in economic high times.

Mike Fromowitz

OCTANE

I think many readers of this blog need to see this article edited by Frédéric Filloux (the general manager of the French ePresse consortium). The information here is very important for both marketers and adverting agencies. This comes direct from mondaynote.com and is based on new information from Nielsen’ Global Truth in Advertising survey released this month.

The survey underlines one key finding: For the vast majority of digital users, trust lies first and foremost in recommendations and opinions from their peers. As for the bulk of formats found on web sites or on mobile (such as various flavors of display advertising), they fall to the bottom of the chart. Nielsen’s study, based on 26,000 respondents in 56 countries, was conducted in Q3 2011.

By themselves, these figures provide the perfect explanation for the current state of the advertising industry and, more specifically, for the digital ads segment.

Then, superimposing the ad revenue structure of most news medias companies would show an alarmingly symmetry: these businesses derive most of their revenue, allocate most of their effort to the least trusted ad vectors: display banners of various forms (on web, mobile or social), online video ads, etc.

The survey also provides a grim view of what people trust: they put more of their faith in a branded website (58% positive), a brand sponsorship (47%) ad, or even a product placement in a TV series (40%) than in a display ad on a website or on mobile (33% each)!

Even worse is the general distrust of advertising: on this list of 19 ad vectors, only 5 are are trusted by 50% of the respondents.

Let’s focus on a few items:

Recommendation from people I know: Trusted: 92% Not Trusted: 8%
Consumer opinions posted online: Trusted: 70% Not Trusted: 30%

Problem is: traditional medias don’t own these two segments. Social networks and consumer websites do. It’s a key Facebook’s strength to have people engage in conversations around brands and products. (IMO: a pathetic waste of time). Interestingly enough, the social network environment doesn’t boost the despised banners that much: When served on a social network, banners gain a mere 3 percentage points (at 36%) against a plain website or a mobile context. This must be a matter of concern for Facebook’s revenue stream: its unparalleled ability to pinpoint a target doesn’t raise the level of trust.

Editorial content such as newspaper articles. Trusted: 58%, Not trusted: 42%

Not surprising, but worth a bit more thought. It pertains to the level of trust readers put in the medium of their choice — carbon or bits. As expected, a fair and balanced product review written by a non-corrupted journalist (every word in the sentence counts) will be trusted. That’s what I call the Consumer Reports syndrome. This organization deploys 100+ professionals testers — and no ads beyond the ones for its own paid-for services and extra publications. Among its enviable base of 7 million subscribers, half pay $6.95 a month (or, a much better deal, $30 dollars a year) to access ConsumerReports.org — this is good ARPU compared to other digital medias who only make a few bucks per year and per viewer in advertising revenue.

What does this mean for online outlets?

They should consider beefing up the volume of product reviews, while preserving the reliability of their coverage. This also raises the question of the separation between journalism, advertorial and plain advertising. By no means should a publisher accept blurring the lines: beneficial on the short term but damaging on the long run. Having said this, when I see a growing number of anglo-saxons magazines making big money from high quality advertorials, I tend to believe online medias should consider sections of their websites or applications harboring such content.

But two requirements need to be met: (again) no confusion whatsoever; and editorial standards for what will indeed carry commercial content, but in a well-designed, informative, visually attractive package. One important point to keep in mind: this type of service is typically out of reach for a Facebook, a Google or a Microsoft. But moving in such a direction requires unified thinking between publishers, the sales house (and the ad agencies they are dealing with) and the editorial team. A long way to go.

Ads served in search engine results:  Trusted: 40% Untrusted: 60%

Speaking of Google, here’s another interesting finding in the Nielsen survey: by and large, readers doesn’t trust search ads. To many viewers, text ads popping up on pages, on YouTube video or on emails, are seen as intrusive and irrelevant (to say the least: look at this hilarious site featuring inappropriate ad placements.) Still, search ads account for about 60% of online ad revenues. Why? Essentially because it provides a cheap, convenient, and totally disintermediated way of promoting a product. On this count, Google makes no mystery of its intention to vaporize the advertising middleman thanks to its superior technology.

The digital advertising party is just warming up.

The business will continue its ongoing transformation. Currently, digital accounts for 16% of the global ad spending. It is likely to gain 10 more percentage points over the next five years. Not all markets nor products carry the same potential: According to the Financial Times, Unilever currently spends 35% of its US budget on digital, compared with 25% in Europe and only 4% in India.

For news medias, the opportunity is that brands and agencies are still searching for the right formula. Brands face an incredibly complex challenge as they have to play with many dials at the same time: traditional ads, digital, web, mobile, apps, social, behavioral. And all are tightly intertwined, creating flurries of new metrics: ROI naturally, but also engagement, sentiment, feelings.

Like elsewhere in the digital world, the most successful players will be the genuine tinkerers. Software giant Adobe is said to spent 20% of its digital budget on experimental campaigns. They test, measure, adjust and iterate.

It is up to digital medias to go from passive to active in the quest for the right model.

Their economics depend on it.

MIKE FROMOWITZ

Octane

This year, I have had several requests from several SME companies of all sorts to work for them—literally for free. As an ad agency, we need to charge a fee and earn a profit or we’ll go out of business.

Not sure if it’s because of the economy, but our agency is being approached, more often now than ever before,  by clients who say they can’t afford to pay the usual service fees and would like us to consider some other means of compensation for the agency: “There must be a way we can work together?”

One potential client, a start-up technology business, came through our doors recently with his latest and greatest “opportunity”. The company, he said, has very little capital, has limited resources, and has had very inexperienced people create marketing and web design. “We are trying to raise money and hopefully will do so in the next few months.”

He added some icing to the proposition with: “It is open territory for people with your talent to really fix it. We have no dollars to pay at this time, we’re almost out of cash. Your fees need to be 100% in shares.”

Of course the client knew that asking us to work for shares was a long shot, but he wanted to give it a try.

Promises. Promises. Promises.

My partners and I have gone for a few of these deals in the past because the business ideas looked splendid.  Shares are promised. Options are promised. Some fees are promised too—”when the company is making money”. Or a percentage of sales may be offered—”once the company is selling product”. Even a small percentage ownership in the company may be promised.

Perhaps the opportunities reflect our passion for new ideas and new technologies, and in some ways, how innovative new products can be of help in our society.  Sad to say it, but a good number of these “opportunities” have turned into a big waste of our time and effort.

There is a problem with doing things for free.  Here’s one example:

Guess how long we’ve been trying to work with one of these technology companies? Since July, 2006. That’s 6 years! And I could write a whole list of promises made over that period of time.

And guess how many hours of our time we’ve wasting on this one?  Sorry, we didn’t keep time sheets, but I assume it’s between 5,400 and 5,600 hours, (for all our people involved). That’s about $700,000 worth of time (at $125/ hour—our lowest preferred rate).

It’s a given that most high-tech start-ups are high risk – the mortality rate is astronomical. If you are dealing with start-ups—which can be some of the most exciting businesses to work on—you must understand from the outset that this is about the ad agency taking some risk too.

When it doesn’t work out, you have to simply write it off without too much disappointment. What we’ve learned over time is, if you are going to work with start-up companies,  make sure the payoff matches the risk, and make sure it’s only a small part of your business effort.

The hazards of working without proper fees

Doing things without a proper fee can be hazardous. Some people assume that because you’re not charging a fee for your time, your time isn’t worth anything.

I can’t begin to tally up all the hours we’ve spent doing inane things over and over again, either because the client CEO doesn’t take the time to read things carefully, or because he thought we can just wave our magic wand and spit out great work.  The CEO only sees a few shares going out the door—not fees. Of course, if this was a pure fee assignment, the clock is ticking. And that ticking focuses the mind, and the CEO is less inclined to screw around because time costs money.

No doubt about it—charging a fee both for services you receive and services you render – focuses the mind of both parties.

Recently, I had the following message sent to me by a friend who runs a small ad agency:

“I spent my second day in a row working on my “freebie” projects and have had maybe 45 minutes to do any actual work for paying clients. Somethings wrong here! Still, putting one of these projects to bed today gave me a sense of satisfaction, whereas wrestling with one of my paying clients and doing his third round of corrections made me feel like I’m just spinning my wheels. Which makes me think of a quote I read recently: “Time: the most important non-renewable resource.”—Roger H.

The “small” favours can hurt

The problem with doing work for free—without a proper fee, is that it’s just that: free. Because you’re good at what you do, it’s hard to put less effort into a project, no matter what you’re getting paid. This leaves the burden of recognition for the favour on the receiver and it’s a long shot that they’ll remotely understand the time and effort you’ll be putting into their “small” favours.

As soon as those emails start flying, you take the role of the battered advertiser and they the role of a high roller client that you can’t afford to lose and will do anything to keep happy.

Suddenly, your no-fees project is going through hours and hours of time and actually eating into your work for paying clients!

People don’t respect things that are free

Free advice. Free ideas. Free work. None are valued.

People associate the value of service with the amount of money that is exchanged for it. How else do you think that lawyers can get away with charging $400 to a $1000 an hour? When you or a friend is in need of surgery, do you choose the heart surgeon who charges $200,000 per surgery or the one who works for beer? Some people naturally make the assumption that if it costs an arm and a leg, then it must be worth it.

My partner sums it up well: “In the context of shares instead of cash, it’s not “free”, it’s earning your shares. Truly free work in the hope that it will lead to something better, is the real folly.”

They will expect it forever

Gamblers playing at the craps table look at the past behavior of the dice to, mistakenly, assume that the good luck will continue. Clients will figure if you did work for them once without a proper fee, you’ll do it forever for no fees. There is no reason why they should respect the hundreds of hours you have spent learning and researching the project. There is no reason that they should respect the professionalism you hold. When they come back and you try to get fees, they will meet you with resistance in the form of guilt. “I thought we were friends”.

From the onset, you have to set up the expectation that they are going to pay you a fee. It’s the only way to demand the respect that you deserve. Make sure they understand you are a professional. After all, that is the difference between a professional and an amateur. Professionals get compensated for their skills.
It may give you butterflies, but ask for the money. Do it openly and notoriously. Your clients will take it as a sign of confidence.

Conclusion

At some point, we all swear we’ll never take on another no-fees project again. But I must admit, we still suck at making good on that promise—especially when someone comes to our door with the “next new revolutionary product.”

What horror stories do you have?

Do you have a horror story about a project you didn’t charge a fee for? Or one that promised you shares or fees based on sales?

We want to hear about it!  Leave a comment below with any tips you wish to share with our readers.

Mike Fromowitz

OCTANE

Our daily life increasingly revolves around blog posts, emails, and status updates.

Is this messaging overload? I think so. What do you think? How much of our time are we really wasting on the Internet?

Take a look at these startling numbers below:

In one day, enough information is consumed by internet traffic to fill 168 MILLION DVDs.

294 Billion emails are sent.

2 Million blog posts are written. (That’s enough content to fill 770 years worth of TIME Magazines.

172 Million people visit Facebook. And spend 4,7 Billion minutes a day.

40 Million visit Twitter.

22 Million visit Google+.

17 million visit Pinterest.

532 Million people update their statuses every day.

250 Million Photos are uploaded to Facebook each and every day.

864,000 hours of video are uploaded to YouTube… each and every day!

Internet users spend 14.6 minutes a day on average viewing porn online.

Every day there are 1288 new apps to download and more than 35 million apps have already been downloaded.

iPhone sales outpace the human population: 378,000 iPhones sold per day vs 371,000 babies born

We are in the midst of a creative revolution.

It’s a time of great change and innovation—thanks to the “creative economy” in the digital age.

What do you think?

Here’s a great example of where we are going.

I’m a big fan of the newsletter Brainpickings.com. Recently they posted an article about one of my favourite thinkers, artist and writer Austin Kleon who has written two books called  Newspaper Blackout and Steal Like an Artist.

Kleon is one of the most interesting people on the Internet. His Newspaper Blackout project is essentially a postmodern florilegium (compilations of excerpts from other writings and newspaper articles, where he mashes up selected passages and connects the dots from existing texts to better illustrate a specific topic, doctrine or idea.) Kleon uses a black Sharpie to make art and poetry by editing and altering information on a similar theme from multiple sources and turns them into a single work.

Recently, he was invited to give a talk to students, the backbone for which was a list of 10 things he wished he’d heard as a young creator.

In this excellent talk titled Steal Like an Artist, Kleon makes an articulate and compelling case for combinatorial creativity and the role of remix in the idea economy. Kleon believes it’s our ability to tap into the mental pool of resources — ideas, insights, knowledge, inspiration that we’ve accumulated over the years— enables us to combine them in extraordinary new ways. In order for us to truly create and contribute to the world, we have to be able to connect countless dots, to cross-pollinate ideas from a wealth of disciplines, to combine and recombine these ideas and build new ideas — like LEGOs. The more of these building blocks we have, and the more diverse their shapes and colors, the more interesting our creations will become.

The following illustration by Kleon is a list of 10 things he wished he’d heard as a young creator.

So widely did the talk resonate that Kleon decided to deepen and enrich its message in Steal Like an Artist – an intelligent and articulate manifesto for the era of combinatorial creativity and remix culture that’s at once borrowed and entirely original.

Kleon delineates further the qualities you’ll need to cultivate a creative life – things like kindness, curiosity, “productive procrastination,” “a willingness to look stupid” – demonstrating that “creativity” isn’t some abstract phenomenon bestowed upon the fortunate few but, rather, a deliberate mindset and pragmatic ethos we can architect for ourselves. As he puts it,  “you are a mashup of what you let into your life.”

Immersing yourself in Kleon’s book Steal Like an Artist is as fine an investment in the life of your mind as you can hope to make.

Read it and let us know what you think.

I believe we still need real, “person to person” face time.

I’m finding that most clients today prefer to Email you rather contact you with a personal telephone call.

They seem so darn busy that they prefer to Skype, email and text if they need to pass along information. Is this happening to you?

I believe we still need real, “person to person” face time. After all, we are suppose to be in the people business.

What does this mean?

You are most likely not going to share the most important information in an Email. Over a coffee in a cafe or a quick lunch, the client can let you know far more, even stuff that’s off the record. In person, the client can explain a situation, add more light to a subject, and tell you what he believes or thinks about a strategic direction or campaign idea you’ve presented.

Good business relationships happen when people talk. Talking face to face creates bonds. It’s more natural than being buried behind an email.

When you visit a client at their office, don’t you learn much more? I do.

I think emailing is making us lose our ability to communicate on a personal level?

I could never understand people sending me e-mails when they were just a few offices down the hall. I questioned why they couldn’t have just as easily walked over and told me, face to face, what was on their mind.  Maybe they thought it was more convenient to tell me by e-mail.

I admit, I send e-mails to people who I could just as easily call on the telephone.  Some people spend hours typing e-mails when picking up the phone would get it done in 30 seconds. Besides, not all writers of e-mail make their messages clear, concise and to the point.

It makes me wonder whether this impersonal style of communications through e-mail is making us less able to converse in person—turning us into communication weaklings, lightweights, cowards, or wimps, unable to speak our minds, disagree, be the bearer of bad news, or just talk openly and directly.

Stress expert Professor Carey Cooper at the University of Manchester Institute of Science and Technology, said: “E-Mail is now the biggest way in which staff working in the same company communicate. They think that sending a message means they have got rid of the problem and the responsibility is with someone else”.

Because of e-mail’s anonymity, it’s easy to duck confrontation and deny the other person an immediate reaction. Today, e-mail makes it a whole lot easier to tell people something that is unpleasant. Like, “Don’t come into the office tomorrow. You are terminated.”

There’s an even greater risk of people losing critical personal skills. E-Mail doesn’t allow you the ability to read a person’s body language, or to look them in the eye and tell them “no,”.  Nor does it allow you to state a point or argue in a direct, real-time, give-and-take debate.

Look around you. People aren’t talking, they’re texting on their mobile devices. We are now in a slapdash culture of e-mail, texting, tweeting and other social networking methods. Is this really “communicating”?

E-Mail certainly can be beneficial. But it shouldn’t always replace personal interaction. If it does, there’s a good chance that many of us will fail to be able to communicate on a person to person level.

Imagine the thought.

Mike Fromowitz
OCTANE

In a three-minute video that is now posted all over the web, TBWA\Worldwide Chairman and Global Director of Media Arts, Lee Clow is seen speaking his mind on the present agency compensation system. Advertising agencies, he believes, are woefully underpaid for the value they provide to brands.

Rightly so, he puts the blame squarely on ad agencies for allowing it to happen. “Unfortunately, in our business, we get paid like we’re doing our clients’ laundry. Somehow we’ve managed to commoditize what we do.”

As he sees it, every other creative art form (photographers, filmmakers, directors, musicians, performers etc.) has “managed to figure out how to get paid for the value of what they create. Get paid, get residuals, allowed to own what creative idea they have delivered to the world.”

What strikes home for me more than anything in Lee’s message is his viewpoint about ideas: “Many of the ideas we create for brands could be listed on the balance sheet of our clients as an asset with millions and millions of dollars in value.” For example:  It was TBWA that came up with the Control Wheel device on the iPod (or so the story goes). That’s IP.

It’s no secret that it takes brilliant creative people working in a highly-creative agency to create brilliant ideas. For Apple, that agency was TBWA. One such campaign idea was ‘Think Different’, created when Steve Jobs returned to Apple.  Job’s wanted a spot that reflected his philosophy—a philosophy he thought would reinforce his then struggling company. The breakthrough TV spot ‘1984’—the most famous Apple ad ever, and probably the most famous commercial ever, introduced the Apple Macintosh personal computer for the first time, symbolizing the idea of empowerment, with the Mac as a tool for combating conformity and asserting originality.

These were ideas of the highest caliber. And no doubt TBWA was paid well for their effort—but how much could they have made if their fees were tied to sales? Just imagine.

Most ad agencies don’t consider their ideas as Intellectual Property (IP), and I think, in some cases, they should be doing just that.

I’m not sure what the outcome of the “Agency Thought Leader Compensation Summit” will be or whether it will have any effect at all on the future of agency compensation.

Personally. I’ve always believed that agency compensation should be tied to sales.

The formula we’ve use in my agency Mantra Partners, has been:

1. An agreed upfront fee to cover the agency’s costs of doing business, and
2. We get paid based on sales (derived from the success of our advertising work). This also includes initiating brand building ideas by providing a combination of entrepreneurial counsel and advice on product design and development, technology support, service improvements, distribution, and packaging.

When we have the opportunity to create Intellectual Property that adds value to the client’s bottom line,  we are further compensated based on sales. In some cases—for smaller clients and some technology clients—we have taken a small percentage of their business, becoming a ‘real’ partner.   We have been able do this because one of the principals in our agency is a successful high-tech entrepreneur with software and hardware experience. His abilities provide our high-tech clients with ideas and solutions that go beyond the usual “digital” offerings.

When you consider that the whole idea of what advertising is about—to drive sales and brand awareness—it seems odd to me that most ad agencies aren’t willing to tie their services to sales. They don’t do this because they don’t want to take the risk. In the present model, the client is the one who takes most all the risk. Surely, if agencies want clients to take a risk on creative, shouldn’t they do the same?  And if an agency wants no risk, then fees for service is entirely fair. You just can’t have it both ways.

To get another view on this subject, I spoke with a friend and ex-client of mine who runs a brand across Asia. “It’s all about risk and reward, “ he said. “If you take more risk you should be entitled to more reward. However, I think Lee Clow’s comment about “ideas being worth millions on companies’ balance sheets”, while true, smacks of greed. If agencies want to share in the reward, then they must shoulder some of the risk too. To look at the result of vastly improved sales and attribute it to the value of the advertising campaign and then start whining that they didn’t get paid enough when they took no risk is over the top”.

Under their traditional (and outdated) regime, most agencies continue to give their ideas away for a set fee.  And, if creative ideas are the cornerstone of the advertising and design business, why do agencies insist on charging service fees for account management and other esoteric services rather than charging a fee or royalty-based payment for their ideas?

Agency service fees and media commissions have been our industry’s traditional sources of revenue. But these can become minor forms of remuneration if ad agencies seek higher compensation for their IP.

Perhaps now is the time for ad agencies to stop bitching about how they are underpaid for their services, and create a compensation system with their clients that exploit the success of their advertising ideas and campaigns. Agencies can be remunerated through a licensing of their IP and royalties can be linked to the success of the campaign, or on climbing brand sales. Under such a scheme, clients would not have to pay as much as they do now for dud campaigns.

“We’re supposed to be a creative business,” Mr. Clow says, “but I think we have been probably the least creative industry in the history of the world in terms of figuring out how to get paid.”

No doubt ad agencies have lost their way when it comes to being fairly compensated, and like so many things today, there is no simple answer to help us find our way back. Lee’s comments call attention to this fact and they should motivate us to give this issue the consideration it deserves.

I like this one… In her recent article about Lee Clow’s video, Rupal Parekh of AdAge noted that the going rate for laundry service in New York City is 95 cents per pound for wash and fold, and a 8% gratuity is expected if you want it delivered”.

But wait. There‘s more! There’s a cheaper way to do your laundry in New York.

Their are coin Laundromats that charge only US $2.25 for a small machine and US $4.25 for a medium one. And 25 cents for 6 minutes of drying. Some use “Professional Series Washers” which they claim are the “Best in the World”! And they stay open late. They’re “fast, more efficient and provide the brightest and cleanest wash ever!”

Or so they claim.

Commodity advertising. Commodity laundry services. Much the same I suppose.

Here’s where you can view Lee Clow’s video: http://www.viddler.com/v/13ebb19a

Mike Fromowitz
OCTANE

Recently, John Zeigler, Chairman and Chief Executive of DDB Asia-Pacific, India and Japan, wrote a letter to the editor of Campaign Asia (Inbox, March 2012) which was a response to my blog story “Small agency vs Big Agency” — and the rise of new-generation independent agencies.

Mr Zeigler’s response was not without its merits, though perhaps a bit on the defensive.

No question, big advertising agencies offer several benefits—and great agencies like TBWA, DDB, Ogilvy and BBDO do some awesome work—and there’s no doubt that I am a fan of much of it.

The advertising and marketing world today remains typically focused on the big guys and for good reason. Big name brands have the most to spend, and their dollars are highly coveted by agencies vying for their business.

On the other hand, there are many clients that aren’t multinationals and few have the big budgets like the big brands do to market their companies.

For the big brands, marketing is a bit of a different game. They have social currency. Many of us know the company and what it stands for; just mention a big brand name like Apple, Pepsi, BMW, Coke or Nike and a logo or brand personality pops into your head.

Many small to medium sized companies have very little social currency, and if you mention their name, you likely have to explain what they do. Most big agencies won’t deal with these smaller companies as the ROI isn’t big enough. Until the rise of the digital age, the small company had limited options for advertising due to budgetary restrictions. Now the Internet has opened the flood gates.

“Unfortunately, I believe the future for small agencies is little more than small opportunities, which is a bit of a shame in an increasingly smaller world of connectivity and linkage.” noted Mr. Zeigler in his defense of big agency networks. “Small, boutique agencies can, and always will, bring to the table big, mountainous ideas. However, unless these agencies are ‘connected’ in some shape or form, the challenge to deliver these ideas and experiences across the globe is even bigger.

“Network’s have a breadth and depth of resources that a small agency could never challenge. For a small agency, the future is collaboration and connectivity. And ultimately, making small agencies not so small.”

To the contrary, I think that agencies of all sizes must be collaborative and connected—and this has nothing to do with the “future”. Whether you are an agency born in the 1980’s, 1990’s or 2000’s, you have had to be collaborative and connected to make your business successful—it’s just that some of the tools (technology) have changed and innovation is speeding up.

More and more,  smaller firms are going up against some of the giants in our industry, and even more now consider themselves to be in competition with larger agencies. What’s really made it possible for smaller, independent firms to compete with the big ones, is technology. And with the Internet, it no longer makes a difference where a firm is located.

While Mr. Zeigler’s notion that “Network’s have a breadth and depth of resources that a small agency could never challenge”, owner Chris Kyme of KymeChow in Hong Kong recalls that in his network days, “Just being part of a global network does not necessarily guarantee clients great service and product in every market. Some agencies are great in some countries but weak in others. It’s inconsistent.”

Whether you are a big agency or a small agency, at the end of the day, the difference for any client is really in the people, and the work they produce. Clients want the people that bring the experience, knowledge, insight, creativity and contacts that will make a difference in that organization’s results and bottom line.

I have helped manage and grow local Asian offices of some of the biggest agencies in the world, and one of the world’s smallest — my own — and I can tell you that big is not always better (though it’s certainly the more expensive of the two). Yet, I admire both for what they are.

While smaller agencies might not always be as organized as the larger ones, I think they’re still just as capable as their bigger counterparts when it comes to delivering results because many of them today are collaborative—bringing in the experts they need to complete a project. The secret sauce, as I noted above, is the talented people we hire. That’s how agencies become successful.

Take for example, Droga 5.  After six successful years, Droga 5 is no longer a small agency.  For Chris Kyme,  the founder of his own independent firm,  Droga 5  “is an independent agency, winning awards on solving real problems for big clients and sticking up two fingers to convention”.

Reporting on Droga 5, Atifa Silk, editorial director for Campaign Asia-Pacific, said:  “David Droga (founder of the agency) believes advertising is under duress – too many people compromising to make a dollar and too few staying true to their ideals. No industry has worked harder at being lazy, he says. Droga wants change. He doesn’t believe the network structure works, and is adamant that his agency, for better or worse, will stand up for what it believes.”

As I noted in my blog, it’s easy to understand why many high-ranking creative people are jumping ship out of constricting bureaucracies to open their own small shops. It’s a trend of which we’re going to be seeing a lot more. Several of the ones that I know have left the big-agency world because more and more of their time was spent pitching new business and less on the day-to-day creative work.

I continue to believe there will always be room for both the big and the small agency. The small agency is coming into its own. For the last two decades we’ve seen an increasing number of large marketers shifting, or even eliminating their relationships with big agencies. Marketing is undergoing dynamic changes that are forcing brands to view customer and client relationships through a new lens. Rare is the single agency that can help brand marketers to deliver fully on that promise. Instead, many CMOs are developing a deep roster of agency partners that are nimble, accountable, and possess specific skills that drive results.

In his letter to the editor, Mr. Zeigler notes the benefits of taking business to a big agency network.

Big ad agencies are great. In their own little way. So I won’t repeat the benefits he chose to mention.

I would, however, like to note the benefits of taking business to a small agency:

1. Small agencies are small and nimble enough to respond rapidly to the needs of a marketer whose business operates on Internet time, and happily break a few of the “rules” along the way to advance a brand’s interests.
2. Politics in small agencies is often minimal, so there can be more energy and focus on the client’s interests.
3. Big clients who give small projects to small agencies quite often are adrenaline boosts to their creative people, allowing them to spread their wings and fly with something that has national brand name recognition.
4. As it is with technology companies, large agencies move more slowly. Small agencies don’t have layers of client approval with which large agencies typically have to contend.
5. Small agencies have less to lose when they offer edgy thinking. Great advertising most often happens when you take risks.
6. Small agencies don’t have to answer to fickle stockholders. And the heads of most holding companies have never created an ad in their lives.

If I could offer some advice to small agencies it would be this: Don’t be defensive when trying to explain to clients why you can do the same things with fewer resources. Take the offensive, and explain why smaller is better for this client’s particular needs. Don’t disparage the competition; simply point out your superiority.

A final point: you may notice that some of the most satisfied and happy people in the ad game today have chosen to work in small agencies, and many, for less pay.

Why is this?

I think Steve Jobs summed it up well when he said: “Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful… that’s what matters to me.”

Mike Fromowitz

OCTANE

British-born David Ogilvy was one of our greatest ad men. In 1962, Time magazine called him “the most sought-after wizard in today’s advertising industry.” During his illustrious career he expanded the bounds of both creativity and morality.

In 1948, he started his Manhattan-based ad agency Ogilvy & Mather—the agency we all know—that has been responsible for some of the world’s most iconic ad campaigns. For those new to the advertising world, his 1963 book Confessions of an Advertising Man, remains the best-selling book that is still to this day considered essential reading for all who enter the industry.

In 1989, The Ogilvy Group was bought by WPP Group, a British parent company, for US$864 million in a hostile takeover. During the takeover procedures, Sir Martin Sorrell, the founder of WPP, who already lead a similar successful takeover of J. Walter Thompson, was described by Ogilvy as an “odious little jerk”, and he promised to never work again.

David Ogilvy was later named the company’s non-executive chairman, and eventually, he became a fan of Mr. Sorrell. A letter of apology from Ogilvy adorns Sorrell’s office, which is said to be the only apology David Ogilvy ever offered in any form during his adult life. Only a year after his derogatory comments about Sorrell, he was quoted as saying, ‘When he tried to take over our company, I would liked to have killed him. But it was not legal. I wish I had known him 40 years ago. I like him enormously now.’

Ask people in the business “Which individuals – alive or dead – made you consider pursuing a career in advertising?” and David Ogilvy tops the list. Even in today’s world of digital marketing and social media, one can still learn invaluable information from David Ogilvy’s writings and musings.

David Ogilvy was a great believer in taking the time to think and research a subject. ‘I prefer the discipline of knowledge to the chaos of ignorance.’ he once quipped. He also said: “The more informative your advertising, the more persuasive it will be.”

Given how modern technology is evolving us and changing the way we live, think and feel, we now spend much of our time clicking buttons and staring at screens, rather than taking the time to do some deep thinking. We’re virtually always connected to our gadgets, which are either giving us an alert or tantalizing us with something new. The minute we finish inputting one thing, we’re inputting the next. The question is, are we taking enough time time to “think” before we “do”?

Big ideas take time, yet many of us seem to be taking far less time these days to think anymore, to ponder, to mull, to integrate or to consider. Perhaps that’s why I am seeing so much advertising that is me-too, commodity stuff. With all the new digital gizmos and gadgets we certainly have the technology, but we’re failing to take the time to think. Do we not need to rethink our work expectations to make the most of our time and our talents?

This fascinating letter below, written by Ogilvy in 1955 to a Mr. Ray Calt, offers some insight into David Ogilvy’s methodology. Perhaps his words will inspire to consider how valuable thinking time is and how important it is to learn as much about your subject as you can before jumping to make an ad.
April 19, 1955

Dear Mr. Calt:

On March 22nd you wrote to me asking for some notes on my work habits as a copywriter. They are appalling, as you are about to see:

1. I have never written an advertisement in the office. Too many interruptions. I do all my writing at home.

2. I spend a long time studying the precedents. I look at every advertisement which has appeared for competing products during the past 20 years.

3. I am helpless without research material—and the more “motivational” the better.

4. I write out a definition of the problem and a statement of the purpose which I wish the campaign to achieve. Then I go no further until the statement and its principles have been accepted by the client.

5. Before actually writing the copy, I write down every conceivable fact and selling idea. Then I get them organized and relate them to research and the copy platform.

6. Then I write the headline. As a matter of fact I try to write 20 alternative headlines for every advertisement. And I never select the final headline without asking the opinion of other people in the agency. In some cases I seek the help of the research department and get them to do a split-run on a battery of headlines.

7. At this point I can no longer postpone the actual copy. So I go home and sit down at my desk. I find myself entirely without ideas. I get bad-tempered. If my wife comes into the room I growl at her. (This has gotten worse since I gave up smoking.)

8. I am terrified of producing a lousy advertisement. This causes me to throw away the first 20 attempts.

9. If all else fails, I drink half a bottle of rum and play a Handel oratorio on the gramophone. This generally produces an uncontrollable gush of copy.

10. The next morning I get up early and edit the gush.

11. Then I take the train to New York and my secretary types a draft. (I cannot type, which is very inconvenient.)

12. I am a lousy copywriter, but I am a good editor. So I go to work editing my own draft. After four or five editings, it looks good enough to show to the client. If the client changes the copy, I get angry—because I took a lot of trouble writing it, and what I wrote I wrote on purpose.

Altogether it is a slow and laborious business. I understand that some copywriters have much greater facility.

Yours sincerely,

D.O.

Let me leave you with one more gem from David Ogilvy.

‘I once asked Sir Hugh Rigby, surgeon to King George V, “What makes a great surgeon?” Sir Hugh replied, “There isn’t much to choose between surgeons in manual dexterity. What distinguishes the great surgeon is that he knows more than other surgeons.” It is the same with advertising agents. The good ones know more.’
(Source: The Unpublished David Ogilvy: A Selection of His Writings from the Files of His Partners

MIKE FROMOWITZ

Octane

Campaign Asia has been conducting a poll which asks the question “Will we see more business pitches in 2012?”

By far, the answer is Yes, more pitches than 2011.

Ad agencies continue to pitch and do speculative work to grow their businesses, some just to keep the lights on. Given the pressures on agency new business directors to generate revenue, what’s a new business person to do?

We like to raise the age-old question: To pitch or not to pitch?

Perhaps it is time for the industry at large to do something dramatic and take a firm stand on the issue. I only know but one agency that declined pitches when clients required to see creative work up front—that’s BBH when they first entered the Asian market. They insisted that clients buy into a strategy first. They had my utmost respect. Now I’m told that there methodology “varies from country to country and pitch to pitch”.

Understandable, I suppose, given what Chris Kyme of KymeChow in Hong Kong has to say about pitching. “Deciding not to pitch, can also go wrong if not handled properly. “Sorry, we don’t pitch” can come across as arrogant, which doesn’t work well in Asia.”

Very often we forget that conceiving a big idea for a brand and living with it long enough to believe in the idea takes time. In most pitch instances, What appears to be the case in most pitches, is that execution appears to be ahead of strategy since it’s what decides the conversation. People are throwing strategy to the wind.

Life a pitch for advertising agencies

I think it was Singapore’s advertising guru Rod Pullen who said it first: “Life is a pitch.” He’s right, in more ways than one. When it comes to pitching for new business with full guns blazing, the cost to agencies is high both financially and professionally. We are our own worst enemy.

Across Asia, advertisers are asking for and getting, market and competitive analyses, positioning statements, media and advertising strategies, media budget recommendations, as well as complete creative campaigns, all for free.

So why do ad agencies put up with it? Surely common business sense dictates the practice should stop. It’s not good for the potential client, the agency, or for the agency’s existing clients. You would never consider asking a prospective surgeon for a free probe into your heart or your brain, or a lawyer or an accountant for free counsel. We all know there would be a bill to pay. Yet agencies are willing participants.

“We bent over backwards to win a pitch”, said Chris Kyme reflecting on his previous experiences in a big 4As agency, “including revising creative work before being assigned, to promising the earth in terms of servicing. And that told the clients that, once the relationship commenced, they could treat us how they wanted as we were desperate for their business.  It sent the wrong message and nearly always went wrong from there”.

I wonder, if every agency demanded to be paid to pitch or to produce spec creative, would it become the industry norm? Of course, that assumes that there are no (and never will be) agencies out there who are desperate for work.

On the surface, the idea of pitching looks good.

‘Spec’ presentations help the client assess how the agency can perform within its specific business arena. But consider these other negatives. Often, the agency that is handed the business is the agency that spent the most time and money on a free presentation. Or the agency which is most desperate for the business.

Every hour that goes into these presentations is one hour removed from doing the work for present clients who pay the agency’s salaries and overheads. And just how fair is that?

Chasing an account that you hope could change your whole business may cost you your present one. To undermine existing client relationships further, remember the cost of the presentation has to be met from somewhere. Most often, it gets charged as a new business expense, which increases the agency’s overhead. And who pays for the agency’s overheads? The existing clients of course.

While most agencies pitch and do spec work for free, five year-old hot-shop Droga5 now only pitches new business if they get paid. Reason? They know they win 60-70% of the time when they are paid, versus only 20% (the average for other strong agencies) when they’re not.

Droga5 is more selective and only pitches if they believe they have a greater than 50% chance of winning. But how much do you charge a client for pitching?  I believe you should charge just enough to make the client take you seriously. I also believe that clients should expect to pay at least a nominal fee for spec creative.  After all,  if you give away your agency’s product, you’re saying it has no value, and what does that say to your creative team?

Admittedly, the agency which elects to join the free product sweepstakes may, once in a while, win the big one, but the relationship has begun under a cloud. In effect, the agency has deliberately chosen to begin an important and hopefully long-term relationship by surrendering its bargaining power.

Are agencies giving away their intellectual property for free?

How on earth can ad agencies expect to attain the level of respect that other service professionals regularly garner if we persist in both giving our product away and expecting our existing clients to pick up the tab?

Sure, the Internet is here and new creative opportunities abound because of it. But it’s also caused some problems for the ad agency. Given what can be done at breakneck speed on the computer, many clients expect everything faster and cheaper. I continue to hear ad agency executives complain that they aren’t given enough time to produce great work:  “Deadlines are crazy, the budgets are insufficient and the briefs from clients are not worth the paper they are printed on”.

Some clients might be less than honorable and have been known to steal your thinking (from pitch work),” added Mr. Kyme. “But it’s a small world and word gets around. I prefer the pitch process to happen via discussion and relationship building. But it’s up to each agency. When you’re running a big shop, and it’s Cathay, who would say “no” to that huge account? You’d go flat out!”

Perhaps if ad agencies spent less time chasing the elusive prize account, and realize the potential in current client business, they’d produce better work for them. I continue to believe that judging an agency on the work it has done for other clients is a more accurate measure of the agency’s potential. For certain, clients would place more value on an industry that valued itself enough, not to give away its intellectual property for free.

In their effort to maintain excellent relationships, most advertisers in Asia believe it is important to evaluate their agencies regularly, and to make efforts to repair problems before resorting to parting company.

Choosing the “right” ad agency: The process

Sometimes client-agency relationships do come to an end. Clients may be faced with a requirement for a new agency, an additional agency, or a different type of agency. When rifts in the relationship appears and simply cannot be healed, clients will call competitive pitches.

However, pitches sometimes do require a huge amount of time and money to be invested,  and quite often, these are misapplied to the pitch process by both client and agency. If the process is faulty, it can lead to unproductive solutions that have to be undone at further expense and disruption to the brand.

I remember a client in Singapore once telling me, “Choosing an ad agency is like looking for a wife in a bar.  Often times, the agency that makes the best presentation is not the best long-term partner. The values that first attract you may not be the ones last. And what you see may not be what you get”.

To produce a win/win for all parties and make the pitch process a successful and sensible one, the following outlines several key principles which should be followed.

1. Before the pitch process begins try to make the relationship work before resorting to a pitch. Make it a priority to deal fairly with the incumbent agency, and if at all possible, avoid full creative pitch, which can be costly and time-consuming for both parties.

2. Be realistic. The client should consider what the company’s presence will mean on the agency’s client roster and what it will mean to the agency. Will the company be the smallest account in the shop? The largest? Neither is ideal. Is this agency staffed to handle the account? More important, are they really committed to doing great work on the business?

3. To start the pitch process, the client should form a multidiscipline decision-making team. The team should make it very clear to the pitching agencies as to the communications objectives, the agency’s specific role, scope and budget, and to the established firm and realistic timetable.

4. When it comes to briefing and selecting the agencies, the client should write a clear, concise and well thought out brief. Most importantly, the client must ensure that the criteria for evaluation/decision-making at each stage of the process is clear and agreed by all parties in advance, to take an agency from its consideration list, to its long list, and to its short list.

5. In managing the pitch process, both client and agency need to be open about the issue of pitch fees and expenses and both need to respect the established rules of the pitch. Of key importance, as noted by Chris Kyme, is “chemistry”. The client should hold several meetings to get to know the agencies.

6. Know what it will be like to work with the ad agency day-to-day. Many agencies have a new business team whose sole purpose is to get into and win competitive pitches. Once the account is in the door, they have no involvement in the day-to-day running of the account. They just move on to the next courtship leaving the client in the hands of  ‘junior’ members of the agency.  It is recommended that you ask who will manage the account day-to-day.

7. If an advertisers work isn’t as good as it could be, they should not expect a simple change of ad agencies to solve it. It takes teamwork to create bad advertising. When a relationship with an ad agency fails, it is a time for reflection. If the problem is the work and your organization changed the work, it shares responsibility with the people who created it. If the problem is in day-to-day working relationships, try to assess whether your company’s people have contributed to it. It is key for the advertiser to determine who can say ‘yes’ and who can say ‘no’, and reduce the number of people in the decision chain accordingly. Above all, the client should try to make the ad agency relationship collaborative and keep the number of team members small.

I’m not a believer in premarital creative.

8. If the ad agency can solve a client’s problems after just a few hours contemplation, it’s probably just luck. Or it’s not really a strong, strategic solution. Most likely it’s just charmingly seductive flashy stuff. Advertising that looks good but is based on an imperfect understanding of the market is destructive. To understand a marketing problem some research may be required to gain an in-depth understanding of the marketplace. From that comes a positioning statement, and from that, on-target advertising.

9. Making the decision on which agency is best for the advertiser, is not an easy process. The client needs to be formal when it comes to scoring and evaluating the pitches. It is also recommended that clients conduct pro forma contract discussions to manage expectations, and avoid embarrassment after the pitches. And most importantly, clients should offer the losing agencies a debrief.

10. After the pitching takes place, the advertiser should manage all the pitches with sensitivity, and treat documents with respect and absolute confidentiality. Remember to be scrupulous on issues of intellectual property and manage the transition and hand-over process with care.

The big question is this:

Will you look forward to talking with the selected agency every day? Hopefully,  If you follow the guidelines noted above, hopefully you will avoid the many pitfalls of ad agency selection.

Mike Fromowitz
OCTANE

People love to say they hate advertising.  I think we’ve earned this bad reputation by not caring enough about what our messages say and how they can effect the choices people make in their lives. I believe that advertising has a responsibility to be more informative, more relevant, more reliable, more honest.

Our industry has unique access to shape our culture – and now, more than ever, do corporations and individuals who can harness the power of advertising and media.
And yet, whenever I enter into a discussion on the subject of using advertising as a mechanism for social good, it often brings up some skepticism. Should corporations simply maximize profits and let the invisible hand do its wonders, or do they have some obligation to be good corporate citizens as well?

The power that advertising holds, and its potential, is largely misunderstood. Few advertisers and their ad agencies recognize the power they hold in the shaping of public opinion and in restricting some options and enabling others.

Cause marketing can create and effect positive change

Social media has accelerated advertisers’ access to community feedback and to what people think, feel and do. The Internet has helped us enter into an exciting time when the power of individual voices can create and effect positive real change.

If more companies considered “Cause Marketing” as a strategy, and if we attempted to achieve positive messages while still selling products,  marketers and their ad agencies could be taking huge steps toward contributing to a better world.

A recent research report conducted by JWTIntelligence/EthosJWT stated:  “More corporations are starting to shift their business models, integrating social issues into their core strategies. The aim is to create shared value, a concept that reflects the growing belief that generating a profit and achieving social progress are not mutually exclusive goals.”

One of the most interesting developments in the area of social good is the rise of ‘shared value’. “By putting social issues at the center of their strategy, brands can benefit their business, their customers and society in general,” says Tony Pigott, global director of EthosJWT. “By reconsidering products and target demographics, forging partnerships with local groups and improving productivity in the value chain, companies can become a force for positive change while enhancing their long-term competitiveness.”

Findings from the survey included the following:

• Consumers believe corporations should do more good: 9 in 10 respondents felt that “Companies need to do more good, not just less bad.”

• Brands have a responsibility toward local communities: 84% of adults across three major markets agreed with the statement: “Brands and large corporations have a responsibility to improve the local communities in which they do business.”

The power of an “integrated” cause marketing campaign.

When Chipotle Mexican Grill, the fast-food marketer that operates 1.230 restaurants throughout the US, Canada and England, began thinking about ways to promote their brand, they decided it was important for the company to promote improvements to the country’s food supply, and to create an awareness for the need to make change to unsettling farm practices.

They created “Back To The Start”, an upbeat animated commercial, with puppets to show a family farmer switching first to factory farming, then back to the sustainable approach of turning animals out to pasture. After showing the film first online and then in movie theaters, the company decided to turn it into its first national commercial.

The film was released on the Chipotle Web site’s YouTube page last August, and has been viewed more than 4.4 million times. It was also shown on nearly 10,000 theater screens last fall. “Back to the Start” was also rated one of the top 10 advertisements in Internet buzz in 2011.

Chipotle at the Grammy Awards

The two-minute ad was given a major boost when it appeared on the Grammy Awards telecast. Twitter lit up with praise for the message, with one commenter on YouTube even saying the bit made her cry.  And viewers were urged to download, via iTunes, the song that accompanies it — a Willie Nelson rendition of “The Scientist” by Coldplay—that has been downloaded about 25,000 times so far.  60 cents from each 99-cent download has gone to Chipotle’s foundation.

The proceeds from the downloads are to go to the Chipotle Cultivate Foundation. Chipotle’s founder, Steve Ells, started the foundation last year to encourage sustainable farming methods and family farming. A major selling point for the fast-food chain, whose 1,230 outlets brought in nearly $2.3 billion in sales last year, has been the fresh and sustainably grown ingredients, including pork and beef, in its burritos and tacos.

Chipotle, which does not employ an advertising agency, devised its marketing approach based on its own research, which it said showed that 75 percent of its 800,000 daily customers came for the taste, value and convenience of its food. Those are positive reasons, but expected for any food franchise that wants to be successful.

So to get customers more passionately involved, the company decided it “needed to have a general, higher-level message and to tell the story in a more approachable way,” said Mark Crumpacker, Chipotle’s chief marketing officer. “And we wanted to make the message interesting and entertaining,” he added.

Chipotle believed it had the right message already in its emphasis on more natural food. The company had shifted to more naturally grown produce and to beef, pork and chicken produced without antibiotics. It then set a goal of trying to make its customers more aware of sustainable ways to farm.

The commercial, directed by Johnny Kelly of London-based Nexus Productions, can be viewed here:

http://www.youtube.com/watch?v=aMfSGt6rHos

A behind the scenes Video of the Back to Chipotle also created an eight-minute behind the Scenes Video that shows the intricate model-making and set-creating efforts by Mr. Kelly’s team during the year it took them to complete the film. Among those he hired was Gary Cureton, an animator who had worked on Wallace & Gromit, the British animated film series.

You can view the Behind the Scenes video here:

http://www.youtube.com/watch?v=AFlbGwAW7rw

Over the last two years, the Denver-based company has donated more than $2 million to groups like Jamie Oliver’s Food Revolution and the Nature Conservancy. At the end of last year, the foundation presented its first major award, of $250,000, to Farm Aid, which was founded by Mr. Nelson and other well-known singers to promote family farms.

Here’s another spot for Chipotle:

http://www.youtube.com/watch?v=AhG8gnEAKks

I applaud Chipotle and all those behind this wonderful campaign. May it live a long life.

Should you be considering cause marketing?

Chipotle is a great example of “cause marketing”. Cause marketing, when done well, has huge potential. A business gains favorable public relations, improved customer relations, increased sales and additional marketing opportunities. Consumers get to buy something they need or want, while contributing to a “greater good” at the same time.

Before a business engages in a cause marketing campaign, they should be aware of a few pitfalls. First, the cause must resonate with the target audience and align with the organization’s brand and business. Second, while consumers prefer to support a social or charitable cause, they necessarily won’t pay more to participate. And finally, a campaign must provide real benefit to a cause. The charitable benefit cannot be too small, nor can the campaign turn into a carnival-like promotion. It must stay true to its core value of providing a social benefit.

Cause marketing is not just for big brand marketers. There is a huge opportunity for small businesses to gain market share, increase sales and build customer loyalty. A word of caution: stay true to the business’s core values and take sufficient time to build relationships and campaigns that key stakeholders can embrace.

There’s a moral to this Blog post

For those who do not yet believe in cause marketing, consider this: the story of the Two Wolves.

TWO WOLVES

One evening an old Cherokee (a Native American) told his grandson about a battle that goes on inside people.

He said, “My son, the battle is between two wolves inside us all. One is Evil –  It is anger, envy, jealousy, sorrow, regret, greed,  arrogance, self-pity, guilt, resentment, inferiority, lies, false  pride, superiority, and ego.

“The other is Good – It is joy, peace, love, hope, serenity,  humility, kindness, benevolence, empathy, generosity, truth,  compassion and faith.”

The  grandson thought about it for a minute and then asked his grandfather: “Which wolf wins?”

The old Cherokee replied, “The one you feed.”

Mike Fromowitz

OCTANE