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John Verre | August 31, 2011 | no comments

Marketing Industry Dynamics. Why Leap Was Created.

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Most agencies are pretty much the same. They have the same basic capabilities. They all claim to have proprietary tools or processes. They may have different labels for what they do, but the approach and yield is essentially the same at any marketing communications company, large agency or even a small agency.

Parity vs Differentiation

In an industry that exists on branding and selling an image, judging which agencies are truly “special” can be a challenge for clients. Parity always breeds differentiation based on price. It also expedites discussions about profitability in client-agency relationships. The last two decades have seen the gradual commoditization of agencies, fueled by the change in consumers and how they use media. This change has fueled the unbundling of digital, media and creative from many traditional agencies, resulting in large scale fragmentation of agency services. For many clients, it is not unusual for them to have multiple external agency and marketing resources. Traditional agencies struggle to provide industry specific experts for their clients, almost completely driven by accepted industry agency compensation models and the the thin profit margins at these agencies. They simply can not afford the expert services that their clients need.

Return of Client and Agency Investment Drive the Industry Dynamics

Over time, proprietary agency capabilities have given way to parity, allowing new agency business models to evolve. Leap Marketing is an example of this trend to new agency business models. Differentiation by quality and effectiveness of ideas, has given way to price differentiation and specialty providers. When Chief Financial Officers started training their eye on advertising and marketing, they discovered a fairly undisciplined area, with huge amounts of money in one of the largest categories of indirect spend of the company, without the backing of solid data, measurement or ROI. Demanding a better process and transparency was a logical step. The rise of digital agencies and their use of direct performance metrics, started calling for agency compensation to be linked to performance. The change in compensation, from commission to fee, is evolving, into performance-based agency compensation tied to results. Each evolution involves higher risks, reduced fees for agencies and increased stress on providing the expert talent that clients need. Creative, media, marketing and digital agencies have generally failed the challenge to develop effective ROI tools and dashboards to measure the outcome of client investments in their ideas and work product. Today, the pressure on agencies to provide specific industry experts has never been higher, but their compensation and profitability prevents them providing that talent.

The Agency Industry’s Point-of-View

Agencies argue that cutting agency compensation is misguided, ignoring the improved efficiencies in media, production and research. They point out that in recent years compensation has been rolled back, and that significant reductions or hiring specialty agencies is having adverse effects on full service marketing communications agencies. Cutting agency compensation, whether by fee reduction or subdividing services with other lower priced specialty firms, has put limits on the quality of talent the agency hires. It impairs the agency’s ability to invest in expert talent and up-to-date technology to stay competitive. All this, agencies say, can lead to a harmful effect on the quality of service a client receives. In fact, they will argue that pursuing this course weakens not only the agencies, but indirectly their client’s competitiveness in the marketplace as well.

The Leap Strategic Marketing Business Model Leverages These Changes

Leap knows these continued industry pressures have created a brain and talent drain in small to mid-sized agencies around the country. As a result, experts in these agencies have struck out on their own and now specialize in their fields of expertise. Today, there are entrepreneurs in virtually every field and communications discipline that are category specialists. It is these people that Leap Marketing sources for our clients.  These enlightened experts are hungry for business and generating success for their clients. Leap recruits these experts, forms account teams and aligns these experts to clients business needs. Our clients not only save money, but they also vastly improve the quality of the work developed and their results.

To learn more about Leap Marketing contact John Verre @ 262-436-4080. Let us assemble a team of experts to work on your business.