Can Your Ad Agency Survive The Two Revolutions?

Recently, I read THE INNOVATOR’S DILEMMA by Clayton Christensen of the Harvard Business School. Many analysts consider it THE book to read on disruptive change in the business world. One point that Christensen makes clearly and often is that well established firms generally fail when their industry is confronted with new markets and technologies. The logical extension of this is that this cannot bode well for the smaller and mid-sized players in the advertising industry if his thesis is correct.

Christensen is not brutal in his comments. He does not say that managers of struggling firms are lazy, corrupt or intellectually limited. The point he makes is “there is something about the way decisions get made in successful organizations that sows the seeds of eventual failure.” People are very wedded to the axiom that, “if the machine ain’t broke, don’t fit it.” Well, that is fine for normal times but, in a revolution, it no longer works.

My take is that in an era as we have now in communications a leadership team at an agency has to be able to spot paradigm shifts and adapt to them quickly. What concerns me is that all but a few agencies below the major advertising holding companies are equipped to do it or have the financial resources to buy companies and people who can.

What are the two shifts? To me, it is not simply the erosion of TV as an ad medium that many people point to as THE key issue. Rather it is the twin paradigm shifts taking place--the emergence of Big Data and the emerging (sic) middle class in emerging markets.

We discussed Big Data at some length in an earlier post “The New World of Ad Agency Mergers” (Media Realism, 10/28/13).  The major holding companies have set up exchanges that can purchase on line impressions at a depth and cost that cannot be replicated by smaller shops. The second shift is what is going on in emerging markets. Every marketer in recent years nods vigorously when the abbreviation BRIC is mentioned and can proudly list Brazil, Russia, India and China as the countries making up the term.  Yet, the BRIC companies are not where the real action is these days. Less obvious choices such as Indonesia, Malaysia, and Vietnam in Asia, much of Latin America outside of Brazil and selected countries in Eastern Europe are showing stellar growth. As their middle classes grow, the need for advertising is soaring. The giants are ready to take advantage of this trend but the mid-sized and smaller shops generally have to watch it from afar.

In the United States, package goods companies increasingly are putting more money in to promotion and many advertisers are beefing up Public Relations and Interactive and Internet Marketing. Again, this puts the non-giants in an awkward position. They may be able to do solid Public Relations for smaller clients but they will increasingly be outgunned when it comes to Internet Marketing.

So, clearly there is a revolution going on in advertising both with the advent of Big Data and the shift away from North America, Western Europe and Japan in terms of dynamic advertising billing and simply economic growth.

When I try to talk or e-mail people about this, they often claim that they have the right people and will be fine no matter what happens. While this is a bloodless revolution, who survives and prospers in revolutions? Almost always, if you look at history, it is people who are wired differently than most of us. And, they do not always take the traditional straight path that to success. Both Bill Gates and Steve Jobs were college dropouts--no MBA’s for them. Billionaire investor George Soros claims that his father’s wise decision to leave Nazi-occupied Budapest steeled him for his later life. They abandoned an upper middle class lifestyle for a new life on a new continent. People who succeed in upheaval just see things differently than most people in existing successful companies. They are smart and focused and think outside the box as they have little or no vested interest in the status quo. Look at all the 20 somethings in Silicon Valley. They may be irreverent but they embrace the change and often make it more rapid. Virtually all started as outsiders.

One fellow wrote to me recently and said that he has a young digital designer who could be a young Steve Jobs incarnate. My answer was that if that were true the young genius would be bored at his shop and quit. He laughed but told me that my point was very well made.

So, as you hire going forward, look for the unusual. Perhaps she is a stat freak who sees things that you do not in consumer data. Or, perhaps she can link data from different sources together into a coherent strategy in a way the rest of your team has never considered.  Maybe he is a better forecaster than your researchers as he has no baggage from the past to muddle his thinking.

If you have a team that has been together for a while it is probably a good idea to get some new injections in to your agency gene pool. The crazy or two that you bring on board may not be so crazy and could lengthen your corporate life.

If you would like to contact Don Cole directly, you may contact him at doncolemedia@gmail.com

Message to Marketers--Listen!

People often ask me to look back over my long career and tell them what the single most important quality is for one to become a good or even great marketer. I always smile and answer immediately. To me, it is so very simple--you need sharp listening skills.

Spending much of my career at ad agencies, it always stunned me how often my colleagues dismissed our clients as morons. One fellow told me that we knew what was best for them and we simply had to lead them. At times, I must admit, after an awful client session or new business pitch, I joined in the chorus of people laughing at clients or prospects. Day to day, however, it was a different story for me.

Some years back, a very large client was often the butt of cruel jokes by many of my associates. At one session on a Thursday afternoon, he asked for an analysis that had everyone rolling their eyes. I asked him an innocuous question or two and the agency’s management representative later thanked me for not laughing in his face. The next day, I told the young account executive on the business that he had not mentioned the client’s inquiry in his call report. The twenty something fellow replied, “Mr. X is an idiot. We do not have to respond to his stupid ideas.” I told him that there was a meeting with the same client on Monday and his boss would be there as well. His response was a shrug and he left my office.

That afternoon, I made a few calls to some media executives in New York. On Sunday, I camped out in my office and put together a simple power-point that shot down the client’s idea but eased the pain by stressing (truthfully) that his idea was a few years ahead of its time.

On Monday, the meeting progressed fairly well. Then, near the end, Mr. X’s boss said,“I gave Tom (not his real name) a media idea last week. Could I have a report on that now?”  The account team froze with the classic “deer in the headlights” look. I jumped up, said, “of course”, and fired up the power-point. I dissected the big man’s idea as tactfully as I could and he shook his head in agreement.

As we were leaving, Mr. X asked to see me in his office. I was prepared for the worst. Instead, he thanked me profusely. “I cannot tell you how much I appreciate what you did today. Your company does good work but you are the only one over there who listens to me.” His comment remains the most meaningful professional compliment that I have ever received. A few weeks later we were fired. Mr. X and I stayed in touch and I considered him a friend until his death.

I did not do anything special--what I did was my job in a service organization. My colleagues thought that they were smarter than Mr. X. Perhaps they were; perhaps not. To me, Mr. X was a decent guy who was helping in a big way to pay my childrens college tuitions.  He was important to me.

The first rule of listening is to be be present and ACTIVELY listening when you clients or customers want to talk. I was always stunned when Chief Marketing Officers would say  that they rarely visited their stores or talked to their customers. They occasionally watched a tape of a focus group or read an executive summary of a research report. The best marketers are involved. They talk to a fair sample of customers at every touch point in the relationship--when someone sees the advertising, buys their product, uses it, and perhaps most importantly, when something goes wrong.

Sam Walton to his dying day was out in his stores talking to his blue collar customers and listening to them. There he was, an early billionaire, but he knew who his customers were, respected them, and responded to their needs. Indra Nooyi, the CEO of Pepsi, often spends her weekends in supermarkets talking with shoppers and sales clerks. She tries very hard to stay in touch with her base of snack food junkies.

Sadly, given the lack of vocabulary in America today, there are over 20,000 sites with the suffix “sucks.com”. The clever marketers do not let the angry comments gather dust. They make a spirited attempt to link people to their proprietary customer service sites. This lets people vent but also they can gather some valuable information. If someone bothers to write to a site, they are angry and may have good reasons. If you can turn some of these people around, you can do your brand a big favor.

Sharp marketers make it easier to reach their company with good and bad feed-back and suggestions. Also, and very importantly, when they respond they make certain that there is a caring human being at the other end. By building a dialogue, they can understand their customers needs much better.

Today, everyone preaches that you do not talk to customers. You need to engage them and create a relationship. Well, too many marketers are committing the error that
 dooms many relationships and even marriages. They simply do not listen.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Growing U.S. Poverty and Advertising

I do not watch a great deal of television. However, I do watch CNBC and Bloomberg Business every morning plus I read the business press quite aggressively. Invariably, one hears or reads comments these days from commentators or columnists saying “the United States is now sustaining moderate economic growth.” Is it true? Perhaps. The one word you almost never hear from anyone these days is poverty.

Last fall, I watched the televised debates for many Senatorial and House races, and, of course, the presidency. Only Congressman Paul Ryan brought up the issue of poverty in his debate with Vice President Joe Biden. No one else mentioned it anywhere and I am, by some measures, a political junkie. Had it happened, I would have seen and heard it.

You rarely see it in newspapers or TV reports either. I would forecast confidently that less than 1% of today’s news coverage is devoted to the subject of poverty.

Yet, it is an epidemic that shows little indication of receding even though we are allegedly several years out of The Great Recession of 2008-2009. I have put together a number of factoids from various sources that I would like to share with you:

--52 million Americans are on food stamps. Most of you who read this blog lead fairly comfortable lives with jobs in media, advertising, or communications. Do you even know someone personally who is on food stamps?

--Some 1.2 million public school students are homeless. This is a national disgrace.  Again, do you know anyone who is homeless?

--The U.S. Census Bureau states that one out of six Americans is living in poverty. This level is back where it was when Lyndon Johnson began his administration’s “War on Poverty” in the mid-60s. Define the poverty line? It is currently pegged at $23,492 for a family of four.

--Half of all American children before they reach 18 will live in a household where food stamps are used at some point.

--Some demographers say that 150 million Americans can now be described as “poor” or “low income.”

--The number of working poor is soaring. One out of four part time workers is living below the poverty line according to an Associated Press survey. And, 25% of American workers have jobs that pay less than $10 an hour.

--As I write, the Dow Jones Industrial Average keeps chugging along and flirting with record highs almost daily but median household income in the U.S. has declined for five consecutive years.

--Food pantries and soup kitchens now serve some 37 million people per year. Many use these charitable groups to supplement their food stamp allowance. Charities are bracing for an avalanche of demand if the federal government cuts the food stamp payments.

--The median salary in the U.S. for a full time worker is $34,000.

I tell you all this not to attack the major political parties or to offer some simplistic solution to this mess. Rather, I pose a question to all marketers that you need to consider--have you adjusted your product mix, pricing, and advertising messages to reflect the new reality of significant poverty in America?

Why are the Dollar stores doing so well in terms of growth relative to the giants such as Wal-Mart and Target? It seems clear to me that many people are failing out of the middle class despite the apparent economic recovery and go to the Dollar stores out of necessity.

Also, the government tells us that the unemployment rate is drifting down to a current 7.1%. Analysts admit that this is helped by many discouraged workers dropping out of the workforce and are thus removed from the unemployment calculation. Others talk of underemployment and say that authentic unemployment could be double the published figure.

There is another group that no one talks about. Some five to six years ago, hundreds of thousands of people lost jobs paying $100-130k. They were far too young to retire and eventually virtually all of them found new jobs. Talk to them and you find that many took jobs at $60-80k per year. They had no choice. A few have told me to my face that they will never again earn what they did in 2008. So, the government lists them as employed and demographers label them as middle class but they have underdone a huge adjustment in lifestyle and their hopes and dreams have been shattered.

If you look at the commercials and print ads today, they are still largely messages aimed at those of us living the good life. It is not for the top 1-2% that gets all the press but many of the messages do reflect the lifestyle of the top 10%. Perhaps the ad community needs to rethink things a bit. How does one craft a message for a mainstream product when the society appears to be downwardly mobile?

The business news smothers us with coverage of the Twitter Initial Public Offering and when Apple launches a new phone and we see crowds lined up to buy it, we are lulled in to not seeing what is really going on in our country. Things are going just fine for most of us in advertising and marketing.  Much of the rest of the country is struggling and we do not even see it.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com