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Storyboard | Are advertising agencies getting ‘vendor-zoned’?

Ad executives weigh in on the changing dynamic of agency-client relationships.

October 19, 2021 / 12:32 PM IST
Agency insiders say that among the factors ailing legacy ad agencies today is the fact that many independent writers and small shops make creatives, including TVCs, for about a third of what the agency would charge. Many startups also don't see the upsides of long-term brand-thinking.

Agency insiders say that among the factors ailing legacy ad agencies today is the fact that many independent writers and small shops make creatives, including TVCs, for about a third of what the agency would charge. Many startups also don't see the upsides of long-term brand-thinking.

‘Friendzone’ is described as the state of being friends with someone when you would prefer a romantic relationship with them. Now, it seems, something similar is playing out in the relationships between clients and agencies.

Legacy advertising agencies are increasingly in danger of becoming ‘vendor-zoned’ by clients and independent writers, content creators and smaller creative outfits. In such cases, clients bring in specialists and the ad agencies are assigned coordination and execution-related duties, significantly altering and diminishing client-agency relationships.

Advertising executives that Storyboard spoke to said that this trend is becoming stronger by the day.

Famous adman Howard Gossage once said, "Nobody reads advertising. People read what interests them, and sometimes it's an ad." Gossage died over half a century ago, but his words are perhaps more relevant today than ever before. Make things people want to watch, talk about and share.

A popular independent writer who has worked with several big brands tells Storyboard, on the condition of anonymity, that mainline creative agencies haven’t transformed themselves. "They still haven’t moved on from the world of TVCs," he says, adding that it’s "the age of content" be it for the big or small screen. "This needs a certain style and tone. Big creative shops haven’t cracked it yet.” That is, cracked content that will garner visible likes, shares, and comments, and enter the trending charts.

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The elephant in the room

In truth, agencies getting dangerously close to the vendor-zone is a result of many things. Issues that have been a long time in the making which have put legacy agencies in a challenging spot. Brands’ increasing dependence on digital is the final nail in the coffin, says ad veteran Meenakshi Menon, who is an entrepreneur and founder, Spatial Access. According to her, media agencies were more embracing of tech than creative agencies. The problem arose when creative agencies did not have the willingness to claim upsides while depressing their fixed fees.

“It became a win-win for clients. From lower fees to even lower fees. This is why they (agencies) started to look for revenue in other places. Unrealistic margins on film production. Huge kickbacks on events. Unreasonable commissions on celebrities. All of these back-to-the-wall tactics backfired and the creative agency ended up frittering away their relevance because their creative product was slipping,” she adds.

According to several agency insiders that Storyboard spoke to, many independent writers and small shops take one-third of what an agency from a network company charges. One can make a commercial, from scripting and production to post-production, in as little as Rs 20 lakhs, said the chief of a Mumbai-based content company.

But not all content builds brands  

Naresh Gupta, co-founder and chief strategy officer of Bang In The Middle, believes this practice is prominent in certain categories of brands including startups as they chase a different business metric. He points out that the traditional agency model kicks in when the brand wants to do deep strategic thinking.

“New-age companies are chasing numbers which most agencies won’t get because agency resources are not trained in that. They are trained in creative consumer impact and driving behaviour,” Gupta says.

In a recent case, a unicorn startup had a bespoke team of writers work on its wildly popular campaign with a mainline legacy agency. Branding experts and ad executives, however, were a divided house, with many questioning what it does for the brand?

Gupta says, “Most startups don’t think that they need long-term brand thinking and they are looking at short-term conversation-driven thinking. They don’t carry campaigns for a long period. In my opinion, this is not sustainable because businesses are not built like that but that's how it is.”

The talent conundrum

The creative community in advertising thinks there is a talent-deficit even on the brand’s side. Advertising old-hand and former co-founder of marketing communication agency The Social Street, Pratap Bose, is of the opinion that the quality of clients (in terms of stature), especially at the brand manager and new CMO level, is drastically falling.

“They come with little experience, don’t understand the whole gamut of communication, and see us as vendors. They don’t have that historical reference. Gone are the days of good and long partnerships. When I was at Ogilvy, Vodafone, Cadbury, Unilever, and Asian Paints client relationships were 20 years or more and that continues to the day, but those are few and far between,” he notes.

On the other hand, Tarun Singh Chauhan, partner, TSC Consulting, thinks the agency side of the business needs to do a better job of retaining "experienced" talent. Here’s why: “Today, there is a lack of quality discussions with clients from the agency side of the world. Gone are the days where the agency met the top management to strategize marketing plans.”

Chauhan equates the Indian ad industry to a BPO setup. “This is happening because clients are paying agencies not for the value they are providing but for the number of people on the account.”

A counter view

Executives from mainline network companies feel that despite the business challenges, agencies continue to create work that is a signifier of exemplary-partnership that builds tremendous value for clients.

Suraja Kishore, CEO, BBDO India, shares the example of the agency’s partnership with Sharat Verma, chief marketing officer and VP, Fabric Care, P&G India, and his team. BBDO India, the brainchild behind Airel’s #ShareTheLoad campaign, started working on the account in 2015. Since then the brand and the agency have not only fetched several accolades for the campaign but have also created a social movement of sorts. Kishore says the relationship is based on “shared radical belief”.

He further tells Storyboard that the rise of boutique agencies and independent writers is one of the best things to have happened to the industry. “Emergence of the multi-media landscape provides infinite opportunities to connect with consumers, therefore we need more people who are passionate about building value for brands and business through ideas and imagination,” he adds.

The silver lining

To a certain degree, the Covid-19 pandemic has helped bring agencies and clients closer.

Kapil Arora, co-chairman and CEO, 82.5 Communications, an Ogilvy Group company, points out that the last two years have brought about a sort of cathartic effect to even the most transactional agency-client relationships.

“Conversations have gone back to being about business, not just about the brand or next brief. Depth and partnership are both sought and delivered. Indeed, in these lockdown trenches, partnerships have only gotten stronger,” Arora adds.

In fact, in the current times of high unpredictability, clients are looking for deep partnerships and greater support from partner agencies to find new ways to connect with consumers, says Rohit Ohri, chairman and CEO, FCB Group India. He adds, “A lot of clients lean on agencies’ global network for knowledge, understanding global markets, and how consumers are behaving,” which goes a long way in cementing healthy relationships that help grow brands and businesses. FCB Group has over decade-long partnerships with clients such as ITC, Nerolac, Amul, and Zodiac.

Never waste a crisis, they say. And the pandemic seems to have helped put the spotlight back on the value of solid partnerships for some agencies.

But will it keep agencies away from the vendor-zone in the future?
Saumya Tewari is Assistant Editor of Storyboard. Storyboard is Network18's flagship platform focussed on the advertising & marketing community and a leading source of news and analyses on the business of brands.
Priyanka Nair is Assistant Editor of Storyboard. Storyboard is Network18's flagship platform focussed on the advertising & marketing community and a leading source of news and analyses on the business of brands

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