Ogilvy recently undertook a major restructuring of its agencies in an effort to become more simplified, unified and client-centric. Is it just another attempt to create a so-called "super agency" or can the group successfully reconfigure its relationships with brands?
Agencies' relationships with their brand clients have been under pressure for years as workloads have increased and fees have been reduced, leading to downsizing and more work for junior employees. This is hardly a controversy Ogilvy has been free from, as the recent death of a brand strategist at the agency was partially attributed to being overworked.
On the brand side, marketers are dealing with changing purchasing behaviors, short CMO tenures and difficulties driving results in digital and social realms.
While the digital revolution is part of the changing agency landscape, Ogilvy's restructuring goes much deeper than a reaction to new technology and marketing channels, according to the group's Worldwide Chief Marketing Officer Lauren Crampsie.
"'Digital' isn’t much of a qualifier anymore,” she said. "It’s everywhere and has caused everything to move more rapidly. The agency of today and tomorrow is one that's nimble, able to bring together experts quickly to provide solutions for clients for a new marketing age.
"While we have much to be proud of in our digital journey as a company, we are not where we need to be in terms of leading our clients and their brands to fully embrace all of the possibilities of our digitally driven world," she said. "That’s a key priority of our transformation journey."
Finding common ground
Marketing has become a fast-pace and constantly evolving practice as new channels, technologies and opportunities constantly arise. Before the digital revolution and the advent of data-driven marketing things were simpler. Big brands and smaller companies alike hired agencies to create campaigns that ran across a limited range of what is now considered "traditional" channels such as TV, print, radio and out-of-home like billboards.
Cut to today where even the biggest brands are still struggling with digital and even agency relationships. In fact, a couple of years ago a record number of brand/agency relationships dollar-wise went under review. Many agencies admitted having issues transitioning to the new reality of customer-centric marketing and constantly shifting sands in the digital era. In response, some agencies have been rethinking the fundamental basis of their business.
The relationship between brands and agencies is moving in the direction of increased power and influence by the advertisers and increased marginalization of individual ad agencies. These changes are viewed as "unfortunate" by Michael Farmer, president of Farmer & Company, a consultancy to the advertising industry, and author of "Madison Avenue Manslaughter: An Inside View of Fee-Cutting Clients, Profit-Hungry Owners and Declining Ad Agencies."
"The media landscape is increasingly complex; there is a generational consumer transition from Baby Boomers to millennials; legacy brands are stagnating," Farmer told Marketing Dive. "Advertisers do not have the budget or experience to become 'smarter' at a rate that exceeds the marginalization of their ad agency partners."
These changes include experimentation by advertisers in social and digital media which is driving up scope-of-work workloads for agencies. Fees have come under pressure at the same time, which has encouraged marketers to work with many narrowly focused agencies as well as invest in in-house agencies, said Farmer.
Another shift is brands are moving production responsibilities from agencies to low-cost, high-volume independent production operations.
While all of these changes have weakened agencies in Farmer's estimation, he also insists that agencies shoulder part of the blame going back 10 years when they decided against becoming experts in digital and social media technologies and executions, leaving that business open to the new specialty shops.
The restructuring, announced in February and called a "refounding" by the agency, came from a realization that the consumer world is in a state of change spurred by globalization and the digital revolution, said Crampsie.
That change has been coupled with what she called a "new buyer" with a more diverse mix of talents and skills than ever before, which led Ogilvy's Worldwide Chairman and CEO John Seifert to lay out a vision that puts the agency's clients at the center of everything it does with a structure that makes it easier to bring its experts together to provide the agency’s best work.
Farmer praised Ogilvy's initiative to restructure the business even if it’s coming late in the game by his estimation.
"The multiple Ogilvy brands, each with its particular expertise, will be consolidated into a single brand — Ogilvy & Mather," he said. "The many associated separate profit centers will disappear. This will permit O&M to reduce the number of redundant senior executives who formerly led these profit centers, and to provide more integrated services to clients."
Groups and domains
Ogilvy's revamped structure is based around "groups" and "domains." The groups represent nine individual portfolios with a diverse mix of clients and employees across the agency’s core competencies including four departments: Account, Strategy, Creative and Program Management.
Those core competencies span across the domains, which Crampsie described as "communities of experts, running across all of the groups with a shared mission and ability to solve some of the most challenging issues facing our clients today."
The domains include:
- Enterprise Branding
- Digital and Innovation
- Customer Engagement and Commerce
- Influence and PR
- Media and Distribution
- And integrated function like finance, talent, business development and communications will also serve across Ogilvy’s enterprise
Ogilvy will roll out the new structure in the U.S. first to set the stage for the global enterprise agenda with a client-centric focus and entirely integrated services.
Crampsie said the agency thinks of the refounding as invoking its founding principles and spirit, but reinterpreted for the future.
"There’s no doubt that Ogilvy has a strong founder culture, and this transformation is putting an even clearer focus back on the culture that David Ogilvy built," she said. "The goal is to be a leading brand, an inclusive, diverse and forward-thinking integrated marketing company that will deliver for our clients and define the future of our industry."
What will the brand/agency future look like?
There is opportunity for growth if advertisers and agencies can find a way to better support each other going forward, according to Farmer. It will require advertisers shifting away from an attitude of "You work for me and do everything we ask you to do, and we'll pay you commodity-like fees."
Instead, advertisers should think about taking a long-term approach focused on figuring out how best to build strong brands first, followed by putting together a program of media and scopes-of-work to make it happen. Advertisers need to pay their agencies for the work they do and the resources required to do the work, per Farmer. As success is achieved, advertisers should pay at even more attractive rates.
This new model — more a consultancy than a traditional agency — is the only way Farmer sees getting past the current impasse.
The trend of holding companies offering marketers a full range of services is a partial solution, he insists.
"If holding companies become ‘the integrated agency of the future’ then the branded creative agencies as we know them (Saatchi & Saatchi, Leo Burnett, etc.) will become even further marginalized — and it will be difficult for them to recruit talent," said Farmer. "Nevertheless, that may just be the way things develop. Even if this is the case, the holding companies will need to change the way relationships are conceived rather than simply become super-agencies."