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Friday, 21 January 2011

What's the best production strategy for retailers and FMCG brands?

Constantly small vs. infrequently large?

Some clients invest the majority of their annual marketing budget in one or two “blockbuster” TVCs rolled out across multiple markets. Budgets are typically very high and handled entirely by the network agency of record. Other clients spread the risk more evenly through regular output of lower cost communications – we see this with retailers and clients with large FMCG portfolios. These brands understand that a constant flow of engaging content keeps them top of mind for consumers.

I believe that the “small and constant” strategy presents the greatest opportunity for clients looking to innovate their production processes. It offers a chance to de-couple some or all elements of production from their network agency into niche specialist suppliers, but at low risk. In contrast, the cost saving benefits can be disproportionally high and so pave the way for the adoption of this approach across other communication platforms.

Key take-outs for clients are:
  • Start in areas where the stakes are low
  • Partner with leading marketing procurement consultants
  • Identify best-in-class niche suppliers, free from vested-interest agency relationships
  • Step out of your comfort zone and make it your mission to learn
  • Constantly refine ways of working through learnings from previous projects

Wednesday, 12 January 2011

Small is beautiful. Niche specialists trump generalists. Why?

I’m currently reading “Positioning For Professionals” by Tim Williams. He makes a compelling argument for the narrowing of focus as a strategy for success. This got me thinking about the polarity of niche specialists vs. generalists in the agency market.

“Full service” network agencies like their clients to believe they can cover all bases - that they have high-level skill sets across the full spectrum of strategy, account management, creative and production / execution. The truth is however that many elements of production / execution are outsourced begging the question: Why is this still in the agencies’ remit? A long linear production supply chain adds complexity and cost, but reduces transparency and visibility from a client’s perspective. As clients look to take greater control of execution, I believe we will see more direct client relationships with niche specialists across production, talent, music, photography and post-production. As ever, marketing procurement consultants will help clients to build and manage a network of niche specialists resulting in the following benefits for brand owners:

• Reduced agency fees (given that production / execution is removed from their remit)
• Direct relationships with specialist supply chain
• Removal of agency mark-up on production costs (yes, some agencies still charge this!)
• Lower supply chain costs through more effective use of competitive tendering
• Increased transparency and visibility

Tuesday, 4 January 2011

What will client-agency relationships look like in 2011?

Happy New Year!

It’s a good time to set goals for the coming year and consider how the marketing communications landscape will develop during 2011. From discussions with brands and marketing procurement consultants over the last few months, I have a few predictions to share with you. Feel free to post responses if you agree or disagree – debate is good! Here’s the first one ….

Direct Cost vs. Overhead
There’s been much discussion in the UK client & agency trade magazines about the shift from retainer to project-based client-agency relationships. Clearly, this is driven by client side cost-saving initiatives, but it suggests a deeper trend. Marketing communications agencies (& advertising agencies in particular) are likely to move towards operating models common to the TV & Film industries. i.e. small core salaried teams (overhead) with larger flexible freelance resource for specific projects (direct costs). The more recent UK agency start-ups already embrace this model, and are able to compete more effectively in an over-supplied commoditised market. What’s becoming clear is that clients are less willing to support the high overheads of large Central London agencies with several hundred people on the payroll. Agency retainers that fund teams of high-salaried staff will increasingly be challenged by clients, supported by the growing ranks of marketing procurement consultants. The long-established large agencies will be forced to adapt as their margins shrink below 10% and we may see some considerable downsizing of permanent staff. It’s true that clients enjoy spending time in the smart West End offices of their agencies – it makes a pleasant contrast to out-of-town business parks. However, increasingly the thought 'I’m paying for this!' will be front of mind for clients as they enter their agencies’ marbled halls. This thought will force agencies to change.