Differentiate or die: Have advertising agencies lost their distinctiveness?

It's been argued that in the past, clients had a clearer idea of what different agencies brought to the table. But amid consolidation, mergers, and the pressure to be a one-stop shop for all in the digital era, can agencies ever get back to becoming more distinct again?

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Differentiate or die: Have advertising agencies lost their distinctiveness?

As the saying goes 'differentiate or die'. Yet, in the agency world it appears to be becoming harder and harder to stand out. One might even goes as far as to say that branding “experts” are now increasingly having a branding problem.

But what's to blame for this sea of sameness? Is it the newfound emergence of mashing agencies together and stripping them of their original differentiating factors? At the current rate it feels like there's a new merger happening every other week.

"Even as we move at light-speed, agencies should always be looking at their positioning and their strengths," says Kelson Ong, business director at We Are Social Singapore. "What is their north star? What do they want clients to remember them for? What do we stand for? Our services and offerings should always be reflective of this."

There's no question that the world is rapidly changing with tech advancing faster than ever before, and consumer attention spans becoming increasingly harder to capture. But is the race to keep up and remain agile in the digital era really at the root of why agencies are becoming more homogenised?

"Digital marketing has nothing to do with why agencies are less differentiated, or find it harder to differentiate themselves," says Lesley John, managing director, Virtue APAC. "One could argue that in an era of increased media segmentation, new technologies and platforms, it should be far easier to specialise and therefore, differentiate."

Instead, John points to the traditional agency business model that relies on scale and increased efficiencies as the only source of growth—combined with ever-increasing downward pressure on fees—as to what’s really driving the increasing lack of differentiation.

"Lower fees coupled with marketers’ desire for the convenience of a 'one-stop shop' has resulted in a desperate race to the bottom, with agencies by and large trying to retain relationships by offering more services at increasingly reduced or packaged rates."

Jack-of-all-trades, master of none?

At the moment, with marketing budgets feeling the pinch, some clients are certainly more likely to consolidate their roster.

"This can tempt agencies to offer 'everything under one roof'," says Ong. "But if they can’t deliver, it will ultimately result in unhappy clients and the possibility that the client will take some or all of their business elsewhere."

Mark Teal, CMO, VCCP Singapore, says this is exactly why it's important to not fall into the trap of becoming a jack-of-all-trades-and-master-of-none.

"Any investment into a new capability should be driven by a long-term strategic vision, and not due to demand-side factors," says Teal. "This is where agency equity can be diluted because it wasn't born out of a long-term vision."

Certainly, over last five to 10 years, there’s been a significant rise in the number of 'full-service' agencies that offer a lot of services, but don't always excel in them.

"I think that while clients initially experimented with this [full-service agencies] for operational efficiencies, they’ve come to realise that the ROI diminishes when the quality of work suffers," says Michael Titshall, CEO APAC, R/GA. "And from conversations I’m having with clients, it looks like we’ve moved beyond the peak of the bell curve. Now, more progressive marketers are looking for flexible agency partnerships, where they can leverage the specialisations of multiple partners as needed."

Margie Reid, CEO at Thinkerbell, says that the days of being a full-service agency are dead. "Yes there’s more opportunities to do more things, but no one can be world class at everything. That's why having an open approach to creativity is vital and working with the right people for the task is important."

Merging towards a sea of sameness

Back in October last year, WPP, the world's biggest ad holding company sent shockwaves through the industry when it merged some of its top creative agencies to create the newly formed VML. It caused quite a stir in the industry, with many claiming that WPP was 'killing off three storied agency brands' in the form of Walter Thompson, Young & Rubicam and Wunderman, with a combined history of 300-plus years. It left some asking why advertising agency brands have lost their unique worth?

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More recently, WPP also announced that it was also merging its PR agencies Hill & Knowlton and BCW, continuing the trend of consolidation. But while it's claimed these mergers will drive efficiencies within the company, does what's lost in the process—the risk of diluting what makes each agency unique—take away from what's gained?

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"Mergers unequivocally blur the lines when agencies get mashed together and more often than not stripped of their original differentiating factors, all in a bid for integration and operational efficiency," says John. "Critically, beyond the challenges this presents to attracting and retaining clients, it also has a massive impact on talent acquisition and retention."

John adds that in an industry that sells itself on culture and creativity, homogenisation and a lack of a distinct identity or point of view provides nothing for talent to be attracted to. "This is a factor that can’t, nor should be ignored, in a highly competitive market for the best and brightest thinkers."

Meanwhile, Matthew Godfrey, EVP head of content APAC, Media.Monks, says that mergers can work, but only if the cultural and strategic integration is done correctly.

"Recently, some major holding companies have brought their major agencies together. When the focus—and eventual rush to integrate—is for cost savings, these entities lose out on the strategic value add," says Godfrey. "It will be interesting to see how that plays out in 2024 and beyond and whether it pays dividends!"

Daniel Willis, founder and CEO of Claxon, believes the agency environment is in a state of flux, balancing the need for specialisation with a push towards broader service offerings.

"This trend towards consolidation isn't new; it's a driving force behind the frequent mergers and acquisitions in the industry," says Willis. "Ideally, a merger can enhance an agency's capabilities, either by deepening its specialities or broadening its services. However, there's a risk of diluting what makes each agency unique. Some agencies claim to offer more services than they can actually provide, leading to a reliance on third parties and a potential drop in quality."

Teal at VCCP believes consolidation is happening because there are a lot of agencies with similar propositions.

"Part of that sea-of-sameness is because all the agencies are competing to build the exact same service model for clients, but not in a strategic way. So, there is a need for a bit of clean-up. Until a new player comes in and completely redefines our business, which would be exciting to see."

Will agencies ever become distinct again?

There’s an argument that clients used to have a clearer idea of what different agencies brought to the table, but not so much anymore. If true, what, if anything, will it take for this to change?

"In the age of templatising, quickly moving talent, generic agency promises and comparison largely focused on costs—it’s no wonder it’s harder to differentiate between agencies," says Tessa Conrad, head of innovation, TBWA\Asia.

Conrad adds that if clients do in fact feel agencies are undifferentiated, there is a need to really talk to those they work with, giving them the opportunity to demonstrate their difference. "What unique stances do they have? Rockstar talent? What’s their culture beyond the basic tenets? Beyond promising capabilities, what does their heart feel like?"

But Reid feels that it’s already pretty clear what different agencies do and their relative strengths and weaknesses. "If an agency can’t stand for something clear in the minds of their clients, then they probably shouldn’t be trusted with that client’s brand."

In the pre-digital days, the specialisms agencies brought to the table were perhaps much easier to understand and therefore execute in.

"That has obviously now changed, significantly, and along with it the way agencies position themselves and the services they offer," says John. "In a bid to capture more of the marketing pie, some claim to be all things to all people, when the reality can be very different. This can drive confusion and uncertainty when it comes to deciding which agencies to partner with."

But while others remain somewhat pessimistic about the future outlook of agencies becoming distinct again, Teal at VCCP remains hopeful of change.

"I think we're in a current phase of consolidation as the major companies are doing a bit of an internal wash-up. And once that settles, we have to work towards becoming more distinct again. By doing so, we are also helping to grow our industry and make it more dynamic again."

Source:

Campaign Asia