Read part one here.
Out with the old, in with the new?
They say if it’s not broke, don’t fix it – but is the traditional model broken?
Johnston thinks so, saying “the existing structures and agency-client relationships are fundamentally broken and in the middle of change and disruptions”.
He says they make for finger- pointing relationships where one party takes the blame: the brief wasn’t good enough, the work took too long, the printing wasn’t right, or the agency was too focussed on awards, etc.
The finger-pointing is only exaggerated by the arms-length way of working Johnston says the traditional relationship encourages.
“If you look at agency websites or media shop websites, for the last 20 years everyone’s talked about partnerships but it is an arms-length professional services company, like a lawyer or an accountant. Every time they pick the phone up, the clock’s running.”
And when the phone calls aren’t clocking up bills, and budget for production left no money to be made for the agency, the agency is the one that loses.
Johnston says agencies can be left waiting to recoup costs from media commission, but a month after the campaign launches the client moves to another agency and the incumbent is left high and dry.
“You have invested time and money in the client and the relationship and front end production to recoup in the long term. Under the traditional model, there was no guarantee of recouping that front end investment.”
He says there’s a similar risk, although to a lesser extent, with the retainer model.
“Agencies would suck it up in certain months when clients are throwing lots at them in the interests of a long-term partnership. They’d write-off lots of money and time and then the marketing manager would change and again, the agency is left high and dry.”
And it’s not just the agency that could lose out under the old model, as Johnston adds there’s little responsibility on the agency side for the actual result — because the agency gets paid even if the campaign flops.
Because traditional models don’t align agency and client risk in any shape or form, IP partnerships equal the risk for both parties.
“The fundamental truth is it’s not actually a partnership until you’ve got some risk,” Johnston says.
He explains when you move to an IP structure, you fundamentally align everyone’s incentives. It’s like the agency steps into its client’s shoes. I think the biggest benefit is a shift in mindset. All of a sudden you are a genuine partner at the table.”
There’s no longer an incentive to keep the clock running in an IP partnership, and agency people start to spend the money as if it’s their own.
The agency reduces inputs where possible and increases efficiencies and for Sugar & Partners, Johnston says this has had a healthy impact on the agency’s structure.
It’s broken down its departments to create a project-oriented methodology — a step ahead of other agencies he says that are sitting there with massive departments, scratching their heads over what to do with them.
As well as the change in structure, Johnston has also observed a new delight in the outcome from his team because they mean so much more.
Compared to awards, that he says are flawed because they drive errant behaviours, the outcomes from IP partnerships are results-driven.
“When you shift to a genuine IP partnership, you have agency people delighting over a bump in unique users to a website or a conversion rate uplift or a successful new initiative or campaign – there is an absolute connection to the outcomes and a focus on that.”
However, he does acknowledge awards have a positive impact for the creative talent being rewarded.
And looking at the partnerships from the client-side, he sees a positive change in how agencies are perceived.
Rather than them being a professional services firm, like the “bloody accountant, or lawyer that is there to strip budget”, agencies are considered part of the team and get to see deeper into the business they are working on.
While it may be daunting for a client to open itself up for the agency to dive deep in to find where the business problems and opportunities lie, Johnston says they shouldn’t be scared.
He says through that relationship, agencies get an empathy towards how the client operates through an understanding of the product development, distribution and other business matters.
On top of this, agencies are uniquely placed to complement clients as they bring their own skills to the table.
“We come through this career in communications and we have a whole bunch of skills that many clients don’t have.”
However, industry virtuoso Peter Cullinane points out those skills don’t make agency staff good business people in their own right.
He explains while agency staff work to operate within a budget, they generally aren’t privy to the decisions surrounding how that budget was set in relation to the rest of the business.
Going one step further
Cullinane knows first-hand because he’s taken the idea of walking in clients’ shoes one step further by leaving ad land to create his own brands.
The ex-Saatchi & Saatchi Worldwide chief operating officer, STW director and Assignment Group co-founder is also a founding shareholder of Antipodes water and founder of Lewis Road Creamery.
It was in 2003, when Cullinane made his first foray into a venture of his own, after he and some friends found themselves being served French water in a New Zealand restaurant. Their confusion set about a goal to produce the world’s best water from the world’s purest country.
It was an ambitious goal, and one that he says gave him a glimmer of what it takes to put a factory together and build a market.
Today, the mineral water is served in restaurants around the world and is the most awarded mineral water at the Berkeley Springs International Water Tasting and Awards since it first entered in 2006.
With a water brand under his belt, Cullinane’s next venture, Lewis Road Creamery, saw him move into the dairy market with his own butter.
The brand has since expanded into a variety of products, with every addition sparking great excitement from fans.
It’s no surprise the brand is good at generating hype because when speaking about what he’s built with Lewis Road Creamery, Cullinane describes it — albeit admittedly inaccurately — as “an ad agency that makes things”.
“The culture here, and the core skills are the ones that were learn from time spent in advertising and working with clients.
“[Those skills] are spotting a product opportunity and market and connecting with that market in a way that is unique and stands alone.”
Lewis Road Creamery does about 90 percent of its communications work itself, Cullinane says, but there are partners—for instance, a PR agency—to support it.
No doubt those partner agencies provide an outsider’s perspective, but when Cullinane is asked if there’s any concern over being too close to the brand when working on the communications, he says no.
“I think when you spend your own money doing stuff, you are very aware of what you would do and the consequences.”
If anything, he says the downside of an agency taking care of a brands’ communications is it is always one step removed from the consumer.
“You are not at the coalface of it. I think consumers want to feel they are communicating with real people who are at the coalface of what they are doing.”
And with a plethora of media allowing for more and more communication between brands and consumers, he only sees the need to speak directly to one another increasing.
Dusting off those bottom drawer ideas
But that’s not to say agency’s role as communicators will become redundant. In fact, he sees an exciting future for them and their staff.
“Certain people are attracted to advertising,” he says, calling them bright people who are comfortable breaking the rules.
“They are creative and find new ways to think about things,” and because of that, they hold all the potential of starting something for themselves.
He sees a hybrid model as the forward for agencies in the future, where they can create their own brands and put those learnings back into clients.
“Because you live it, you become far more receptive to what clients go through. That translates to the ability to give good advice to clients.
“That’s my sense of where the advertising industry is heading.”
And for those on the other side, who are on the lookout for an agency to get involved and build the brand, Wondermins’ Berman says you need an entrepreneurial-minded agency that is willing to break the rules.
“When you find one, make sure you do your bit, you have to think and act like a genuine partner. Understand and value their skills and investment – and care about leaving something on the table for them in the event of good, great or exceptional performance.”