Advertising & Practical Thinking

The advertising profession is cold and cruel. The power of practical thinking is a perfect antidote.

Thursday, August 31, 2006

The Media
(The Sky is Falling... Part Six)

Nothing has changed the world faster than the Internet. The world wide web, at least as we know it, is only over ten years old. Yet, it has changed the media landscape forever. The computer is the second screen in our lives. It will not "kill" the first screen television, not during our lifetime. When television started gaining popularity in the early fifties, it was predicted that radio would die. When FM broadcast started, AM radio was buried prematurely. Satellite radio will be the continuum for the medium.

Little Chicken, "No, the sky is not falling."

And now, there is the "third screen" -- the screen on the mobile phone. This will become the most important screen of them all, in the very near future.

The biggest change technology has brought is in the consumer.

  • VCRs were the precursor to all changes in media consumption patterns. The consumer could see her favorite program when she wanted to see it. And, the remote control allowed her to "zap" the commercials.
  • TiVo for all the furor created is just an advanced VCR.
  • The Internet is different. It has empowered the consumer. He is on one-to-one communications. He is also on the receiving end of many-to-one communications. He chooses what to do, when to do. From catching up on the latest scores to to shopping for books. Or just sending someone flowers or renting a movie. All at his fingertips.

The Internet because of the Amazons of the world also spawned another industry, Customer Relationship Management. More important than the industry itself is the impact it had on the consumer.

  • Even though it was an electronically sent note, she received a personalized "thank you" note from Red Envelope. They even told her when her package would arrive.
  • After her first three purchases from, they recommended books that she may like, now referred to as behavioral marketing.
  • He started reading blogs that were of interest to him. He could voice his opinion with the author -- something he never did by writing a letter to the editor of his local newspaper.
  • She could shop the best price for an airline ticket to visit her favorite Aunt Thelma; get coupons from; and, monitor her stock portfolio at 4:00 AM.
  • He could watch the Live8 concert on AOL, all the acts and all the songs.
  • They could IM their son at the dorms at State U, and send pictures of his dog without going to the corner drug store to process the photos.
  • She could pay her bills without paying for postage.
  • He was finally in control. He is a consumer. He is King!
  • And the marketers loved them.

Some marketers/agencies started using the new media very well in 2004. Crest, as an example, used their web site to ask consumers to select their next toothpaste flavor. Staples with its "Invention Quest" sought product ideas from there consumers. While these concepts are not original (Crayola started involving the consumer with the "name the next color" promotion using traditional media in 1993) it is how the medium is used that makes it important and relevant. More so, is the involvement of the consumer.

The Internet has also been responsible for the creation of blogs and podcasting. Anyone can be a publisher with blogs (we are) and be a broadcaster with podcasting.

The Internet is being used effectively to create customer evangelists. Brands such as Starbucks, Whole Foods Market, eBay, Google, Fantasy Football, iPod, and youtube owe part of their success to "buzz marketing" and "viral marketing."

"The Third Screen" or the mobile phone (we in the US like to say, the cell) will become a major marketing player. Over 10 billion text messages per month, in the US alone, is just the tip of the iceberg. Many major brands, including McDonald's and Budweiser use this medium (or should we say "vehicle"). Soon, consumers will be able to point their mobile at a product's barcode and information about the product will show up on the third screen. The mobile will also be a wallet. Point it at a vending machine, punch in the numbers, and out comes your can of Pepsi. It is the one medium that is with the consumer all the time -- the most personal medium of all times.

It has even created its own language: "BRB," "TTYL," "HCIT," "LOL," and "G2G" are all part of the lexicon.

New technologies are making it harder than ever before for marketers, especially at the local level, to reach their potential consumers with their messages. It is unfortunate that the number of people reached by an advertiser will decline but the cost of the advertising will rise. Compounding this problem will be the fact that many consumers have become immune to the traditional language of advertising.

"The medium is the message," said Marshall McLuhan in the late sixties. How appropriate! Today, we could say, "the future of media, is the future of advertising."

Or, we could be more emphatic and say, "Media drives the business, and not the creative." "Sacrilege! Burn him!" shouts the Executive Creative Director of the Agency.

We will take it one step further: "The consumer's involvement with the media drives the business."

The Advertising Agencies
(The Sky is Falling... Part Five)

When the first advertising agency holding companies were formed, they created silos. They unbundled the media departments to create media-buying giants, and they created monster silos. Then the holding companies thought they needed smaller giants for smaller and non-global accounts and created mini-monster buying agencies.

Then these holding companies went on a buying spree. They bought promotion agencies, direct agencies, brand consultancies, and PR firms in every corner of the globe. In 2002 alone, Omnicom bought 108 companies! Many of them have since gone out of business because of problems with the Internet business.

Unfortunately for them, what they bought was also different cultures, different expectations, different P&L motives, and competing/clashing groups. Disaster would not be too far off. It took them over two years to realize the mess they had created.

  • Resources were not shared, resulting in either lack of information/knowledge or duplication of efforts and costs. The left hand seldom knew what the right hand was doing.
  • Media planning became an island. Some of the media agencies started looking at communications platforms for their clients (and this practice is growing at an alarming rate) competing with their siblings.
  • Some clients started expressing misgivings about dealing with so many relationships and the total lack of communications between these "silos."
  • As an example, McDonald's at times finds it impossible to deal with Leo Burnett and ARC (or DDB and Tribal) on specific projects. In addition to failure within the entities, they are most displeased with the very high rates charged for duplication of efforts.
  • The biggest complaint from such marketers is the lack of a joint strategy between creative and media.

In 2005, Omnicom and DDB undertook a project to see how best they could integrate various entities (DDB DDB Tribal, OMD and others) for five of their global clients, including McDonald's and Home Depot. The new agency model is expected to be ready in early 2007. Will it be too late for someone?

"The Age of Disruption" has also created a flat world. Above-the-line is merging into below-the-line and vice versa. Soon the line will not exist. There are at least two major problems this creates for traditional agencies. What comes first, the creative or the media? Traditionally, creatives in the major agencies like to work on television commercials. Their "reel" is what they cherish the most along with all the awards they can garner. In our opinion, the traditional below-the-line agency will have the edge over a the traditional above-the-line in the future.

Another complaint often voiced today by advertisers is the lack of experience in the advertising world their agency day-to-day contact person brings to the relationship. They would like to see more knowledge and experience brought to the table. Will they pay for it? Many say, "yes" if it is the right person.

Marketers are also exerting pressure to reduce agency compensation, resulting in a rapid decline of several "think" departments in many agency networks. This is something agencies have to address in the very near future.

Agencies are also becoming averse to developing proactive recommendations, before they are requested, as they cannot justify the investment of time (dollars) on such activities. Meanwhile, another agency, that wants this marketer as a client is more than willing to make this investment -- at least till they acquire this piece of new business. A vicious circle!

The Marketers
(The Sky is Falling... Part Four)

  • Bigger has become better, at least when it comes to flexing muscles to gain a price advantage. The Wal-Marts and the P&Gs of the world dictate consumption patterns and pricing strategies. To become stronger and maintain profit levels, they have only one goal: cut costs.
  • Global economies and new technologies have played a major role in helping them cut costs measurably, especially the cost of raw materials and production costs.
  • The pressure to further cut costs has necessitated seeking lower costs at all levels, including marketing.
  • The effect this has on the advertising industry is a major contributor leading to the current state of advertising agencies and the services they provide.
  • Marketers have always believed that advertising agencies are over compensated. The move to abolish the 15% commission system (and mark-ups on production and other costs) started in the early seventies, signaling the start of national agencies becoming less than full-service agencies. "Above-the-line" and "below-the line" agencies were born.
  • Today, marketers want a return on investment (ROI) on all marketing and advertising expenditures. The Association of National Advertisers (ANA) task force is looking at various metrics for standardizing media effectiveness, the latest being "engagement." While this may be a good idea, it is being applied to the wrong discipline. Everyone is groping.
  • Nearly 200 brands are introduced everyday. Many of them die instantaneously. Others a more painful death. Over the years, many global brands have died due to myriad reasons. Some have been replaced, while others have no place in today's market.
  • Marketers expect their new brands to become instant winners. And, advertising agencies are expected to deliver this goal.

Contrary to beliefs, the concept of branding and branding strategies is a relatively new science. Marketing and advertising textbooks in the late sixties and early seventies had just a few pages devoted to this subject matter that has become today's imperative. Today, there are hundreds of books on this subject.

Over the last ten years, a new industry has spawned: Brand and Branding Consultants. Prior to that they were essentially graphic design studios developing visual identities for brands. Today, they provide many services including consumer and brand research, competitive analysis, market segmentation, market trends, supply chain analysis, and new product development. The best of these companies are certainly a threat to advertising agencies. However, as of now, they have not entered the arena of brand communications and brand stewardship.

The dotcoms of the nineties gave birth to a new position at the client level: the Chief Marketing Officer (CMO). For some companies, this position has been a boon; but for most, at least in our opinion, a bane. A 2005 survey of the top 100 brand companies showed:

  • The average tenure of for CMOs was 29.9 months.
  • The average tenure for CEOs was 53.9 months.
  • Only 14% of CMOs have been with their present companies for more than three years.
  • Nearly 50% of CMOs are within 12 months of being on the job.

The need for "instant results" is reflected by this and also by the constant changes in strategies; and, therefore, changing advertising agencies. The CMO at Best Buy left the company just a few days ago, after nearly 48 months at the job -- the duration close to being a record. Best Buy will be looking for a new advertising agency very soon. That is our belief.

So what are CMOs looking for? Their top three priorities:

  • Drive revenue growth (46%)
  • Acquire, satisfy and retain customers (36%)
  • Align marketing function with business strategy (35%)
  • We find it interesting that the "customer" is not the top priority!

In order to try and attain their vision and goals, marketers are using the services of various entities:

  • Above -the-line advertising agencies.
  • Below-the-line advertising agencies.
  • Ethnic agencies.
  • Media agencies.
  • Internet agencies.
  • PR agencies.
  • Brand consultants. Other consultants.
  • Consumer research companies.

Additionally they are also reaching out to the media and looking for them to provide solutions, with their lead agency having little or no role at all to play in the development of communications. Specialized content is designed and developed to suit the perceived specific needs of a brand rather than relying on the agency that acts as their brand steward.

There certainly is a sense of frustration and despair, both latent and exhibited.

This frustration is also reflected in some of their other activities. They are going off their roster agencies to hand pick the best ideas. Companies like P&G are accepting advertising on their own branded web sites ( for example.) A few marketers are establishing internal planning departments. Some marketers are asking the losing agencies to "surrender" all ideas made at a pitch. Some are even asking the selected agency to "raid" specific personnel from the agencies not selected!

All in search of the Holy Grail...

The "Four Ps of Marketing" are being questioned. In fact, Phillip Kotler suggests they be replaced by the "Four Cs."

  • Product = Customer Value
  • Price = Customer Costs
  • Place = Customer Convenience
  • Promotion = Customer Communication

We believe this is a good idea and welcome the change. Putting the customer (what a novel idea) first!

However, we would change the word "customer" to "consumer."

The marketers may still find their Holy Grail -- it has been in front of them always: The Consumer!

The Evolving Marketplace
(The Sky is Falling... Part Three)

  • Just in the last 35 years, the world population has nearly doubled. Obviously this means that in most parts of the world, the population skews younger. However, in the US, the older demographic constitutes the majority.
  • Movement of people and goods around the globe is overnight.
  • Movement of information is instantaneous.
  • Though oil still dictates the global economy, free trade is what makes the world go around.
  • Regional tastes are becoming global and demand for goods and services is at an all time high.
  • Bigger (plasma screen TVs), smaller (mobile phones), faster (Internet connections), cheaper and better (everything) are the key market calls.
  • And, marketers are rushing to be "first to market."

Wednesday, August 30, 2006

The Age of Disruption
(The Sky is Falling... Part Two)

This "age" did not dawn overnight. While technology has been the driving force, various other players have contributed:
  • The Evolving Marketplace.
  • The Marketers.
  • The Advertising Agencies.
  • The Media.
Yes, technology has been the main driver, but that has always been the case. From the invention of the printing press, telegraph, telephone, television, VCRs, cable, satellite broadcasting, the Internet, TiVo, and wireless, technology has shaped communications, hence advertising.

Over the last few years, the problem has been the speed with which technology has changed our lives. A hundred years have been crammed into five.

In the past, adapting to changes took time. Today, this luxury is not afforded, as the speed at which changes are occurring dictates the speed of adaptation.

Saturday, August 26, 2006

The Sky is Falling...

Over the last 35 years, the advertising world has changed dramatically. Let us take a quick look...

The Seventies

  • Cigarette broadcast advertising was banned.
  • Cable TV starts in a small town in Pennsylvania.
  • FM radio was in its infancy.
  • Hard liquor advertising (self-regulated by the industry) was banned over the air waves.
  • Six-color printing was introduced.
  • Three commercial networks. Monday Night Football propels ABC.
  • Boutique agencies sprout.
  • Fuel crisis starts the down-sizing of automobiles and the first wave of of Japanese imports.
  • Informecials come into vogue, creating a new channel of distribution.
  • Direct Mail Agencies and Promotion Agencies start making a name for themselves.

The Eighties

  • The start of media proliferation. Cable TV fueled by ESPN, CNN, and MTV grows. USA Today and People hit the stands.
  • Super stations WTBS-TV and WGN-TV are born.
  • Live satellite broadcasts emerge on a regular basis.
  • The start of deregulation of various industries, including banking.
  • Fallon, Chiat/Day, Martin, Riney and others start making a name for themselves.
  • Established agencies start merging, while some die.
  • Omnicom, an advertising agency holding company, is born.
  • The U.S. represents 82% of all advertising expenditures.
  • Sports broadcasting becomes a 365(6)-day-a-year happening.
  • The Super Bowl becomes more than a sporting event, and Apple (1984) establishes the game as the "advertising watching program."

The Nineties

  • The emergence of FOX, the fourth commercial network.
  • Globalization of "everything."
  • The concept of "Account Planning" born in England, crosses the Atlantic Ocean.
  • The separation of media departments from larger agencies.
  • The birth of Internet Marketing (thanks to the www.)
  • The boom of dotcoms.
  • Media mergers.
  • New marketing and advertising terminologies mushroom.
  • Disintermediation becomes an imperative for many.
  • Branding becomes the most important issue, and brand consultations emerge.
  • e-commerce develops as a new and viable channel of distribution.

The 00's

  • Hard liquor may be advertised on television.
  • The dotcoms of the late nineties bust.
  • The Internet takes over the world.
  • Satellite TV poses competition to Cable TV.
  • Network TV viewing erodes.
  • Rampant growth of cell phone usage.
  • China, Korea, and India emerge as marketing powers (manufacturing and consumers.)
  • Procter and Gamble starts flexing its muscle, threatening every media outlet.
  • Crispin Porter + Bogusky is what every marketer wants (just like the Chiat/Days, Rineys and the Fallons of the earlier decades.)
  • The consumer starts becoming the center of attention.

Many of these events brought out Chicken Little crying, "The sky is falling! I must go tell the king." Except Chicken Little did not know who the king was.

Yet, the industry survived, and at times thrived.

Change is inevitable, and the only constant is change itself.

No, the sky is not falling!


  • Television viewing habits have changed dramatically. The major networks do not command the audiences of even ten years ago.
  • TV viewers tend to recall a particularly good (or horribly bad) commercial. However, they do not necessarily remember the featured product/brand.
  • The audiences are splintering -- too many choices. Getting their attention has become increasingly difficult.
  • The choice of products/services available is multiplying.
  • Consumers have become more skeptical about product claims.
  • Consumers have the power to pick and choose as never before.
  • The ability to get information about whatever you want, whenever you want, has given consumers unprecedented strength. The digital marketplace has truly made the claim "The Customer is King" come true.

All of this led Sir Martin Sorrell, Chairman, WPP Group to say in 2004, "This is the age of disruption. Technology is driving this change. Agencies have to deal with this reality."