Michael Farmer: The Opportunity of the Crisis for Advertising Agencies
The advertising industry has been in crisis for 15 years, says Michael Farmer, an expert advertising consultant, author of the renowned book “Madison Av. Manslaughter”, and an executive with more than 30 years of experience in the field. Farmer shared with us very interesting impressions about the current state of the marketing and advertising industry and its intersection with the crisis created by Covid-19.
Farmer says the pandemic only highlights the inefficiency and abysmal failures that plagued marketing and advertising agencies nearly two decades ago. The expert sums up the decline of the advertising market in a simple and easy to understand oxymoron: the volume of work increases by leaps and bounds while the price of it decreases. In these years the agencies have already reduced their staff considerably, transforming their population of employees into a mostly junior one, and counting on a smaller number of workers to take care of the increasing work.
We have customers who are decreasing their investment in advertising, so we are faced with the question we all ask ourselves: How is the market going to manifest itself when the pandemic eventually ends? Farmer emphasized the importance of using this period of crisis to measure the scope of work and promote a dialogue with customers to rethink the workflow to achieve greater added value for brands.
Agencies, like many other business models, have become involved in the modus operandi of cost reduction. On the one hand, we have a large number of senior staff cuts, and on the other hand, there is a great deal of uncertainty about the future. This is a dangerous combination. Farmer says that the way forward is to keep workers with more and better experience, so that they can make the right decisions. Farmer acknowledges that he would cut back on small jobs, such as social media postings, email marketing, to keep positions with strategic content and role.
For Farmer, the problem is that agencies have been so desperate to preserve their income that they simply became passive and were willing to do anything the client asked. The pandemic is the right opportunity to break the mold of this labor matrix.
In the face of the inevitable decrease in the volume of work by clients, it is possible to have an active positioning that allows for a better flow of work in the future. It is necessary to take the time to ask ourselves: How does our work influence the positioning of the brand? This is the starting point to communicate with the client and think if the amount of deliverables is achievable, if they are the most suitable type of deliverables and inform about the time and resource requirements of the campaigns.
The C-Level Exodus
In addition to this conversation, Farmer says that the C-Levels of the agencies have been distanced from the work itself, concerned about getting new clients. It’s time for them to get back to the heart of the matter. Farmer invites them to pay more attention to finance and brand growth, to become operational executives. What’s at stake is business: how the agency makes money, and what are the steps to follow so it can continue to do so. The nature of the work done must be changed.
One of the ways to do this is to unify the systems that measure the volume of work, and the management of it. Unify, at a global level, the data about the clients; insisting that this system is presented by the agency. Unified metrics are a necessity in order to know if the work done is efficient.
How do you know how many employees are needed, if you don’t know how many hours of work the tasks require? If you don’t know how to charge for a job, you don’t know the profitability of a task.
Pricing our work is not a task for the client. The price should be that of a premium product, since our work translates into greater profitability for our client. It is based on a detailed study of the work done where it reaffirms that having a software that helps in the traceability of hours per deliverable, allows you to explain the price of them. Negotiations of this style are usually not difficult since companies also want to know what their money is paying for. Customers don’t want to pay for ideas.
The agency of the future
With respect to independent agencies, the specialist considers that today they have certain advantages over larger agencies, since the latter are under pressure to meet the campaign budget and generate a large amount of income. A smaller agency can develop a much more intimate relationship with clients, and that can generate positive results.
For Farmer the agency of the future is an analytical machine that solves problems, and understands
1) Why the brand is not growing.
2) The perfect ratio between media and deliverables.
3) The equation that measures the volume of work required by the right mix of media
For this to happen, a complete change is needed: hiring people with different profiles to the current ones, investing in software that allows a better time tracking system, and changing the sales pitch completely. It is complex, but it is perfectly possible, and no one is doing it today: it is a perfect opportunity, for anyone who wants to do it.
The pandemic is the right opportunity to break the mold of this labor matrix.
You can see the entire video-podcast here: