All You Need To Know About the Advertising Business

What are we talking about in this article?

We had the pleasure of talking with Felipe Pelzel, managing director of WILD FI, one of Latin America’s most recognized independent agencies. Their motto is “transform in disruption”, a phrase characteristic of the age of diversity we’re currently living in. Felipe talked to us about how his business model transitioned from providing services to being partners with their clients. He also spoke to us about how important it is for agencies to uncover their clients’ real needs as a way of adding greater value.

Project Profitability

Challenges facing the creative industry

Agencies across the creative sector face the enormous challenge of achieving profit in a market where clients increasingly expect more for less. According to Pelzel, effectiveness and efficiency have to be a priority for agencies. Creating an environment that fosters talent has influenced this pressing need to adapt, which in turn leads to financial growth.

Clients who want results, but don’t know how to measure them, is another issue facing agencies these days. These clients fully understand the value of advertising, but don’t know how to measure its success. This is where agencies can use tangible results to demonstrate how their work directly contributes to a brand’s profitability. 

Pelzel is convinced many agencies will go back to their previous business models whereby there’s no separation of creative and technical talent. He puts this down to the marked tendency of unifying all their data into one, core team. “You really have to monitor a team’s time, almost like being a task clock. This helps agencies create more value for their clients”. Tracking time means you can measure how your team worked on each project and which part of production added the most value for your client. It’s like seeing the “good and bad” of your team’s operation.

“You really have to monitor a team’s time, almost like being a task clock. This will help agencies create more value for their clients”. 

An advert should be more than just “cool”

Another challenge facing many agencies is the apparent misunderstanding of their role. Advertising is much more than just TV spots, it’s a key part of a client’s profitability. Agencies need to structure their teams around the needs of their clients to overcome this challenge and move away from being just a producer of deliverables. 

Pelzel believes agencies should be transparent with their clients about how time is spent, and above all, how to optimize these hours. We all know clients are often unclear on what they want to achieve (and avoid briefs altogether) and this is a sign of inefficiency on their end. And so, agencies need to re-educate their clients so they understand more about what they do and how. 

Resource Management

Culture eats strategy for breakfast

Then there’s the creative area which has a completely different problem: What’s going on with the ideas? Pelzel warns about the arduous task agencies should be tackling: allowing enough time for deliverables and respecting a creative’s hours. “Culture eats strategy for breakfast”. If there’s no clear goal, agencies will never manage to put in place tools and strategies that complement their talents’ way of working. This is why it’s essential to recognize what task needs to be completed and at what stage, which teams need to be involved in which part, and how the tasks should be delegated within a team.

The creative industry these days tends to respond to data-driven analytical intelligence, whereby any information that slips through the net is just like losing money. And this loss of revenue directly means agencies can’t pay their talent what they deserve. Pelzel knows how important talent retention is, which is why he set up a system, through value creation, that pays his talent in shares. “As the company grows financially, we all grow financially”

“Profit margins in the industry range around 10%, and the first step in increasing this figure is to pinpoint where inefficiencies lie”

WILD FI seeks investment as a way of being one step ahead of the competition, which helps them stand out from the crowd when competing for business. Profit margins in the industry range around 10%, and the first step in increasing this figure is to pinpoint where inefficiencies lie. Improving these inefficiencies allows you to create value that backs up your claims about the work you do. And this means you can negotiate higher fees with your clients and start building momentum. 

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