VIEQUES, PR — Don Draper is going through a mid-life crisis. That is to say, the ad agency business is undergoing profound change, as the rise of technology and data-driven marketing continues turning the industry inside-out.
Many people in the furnace of the fire know this much. But how exactly is the business changing, and what does that mean for ad agencies and how they must step up to the plate?
Doug Ray, an agency veteran who helms Dentsu Aegis Network’s Carat in the US, observes: “I think we are in a point of inflection, and I think we’ll continue to be in that point … at least for the next five, potentially 10 years.”
For Ray, the old agency business was about amassing agency scale sufficient to wangle preferential pricing for ads, thereby competing for client business on price. But consolidation and technology have rendered pricing mere “table stakes” as a USP.
“What I’m now seeing is that the ability to be clever and smart and to leverage data in a way that brings value, less about extracting costs, but more about creating better performance, is where we’re going,” he says. “It’s more about now having a very strong point of view about where that client needs to go.”
The whole agency evolution came in to sharp focus in 2015 amid so-called “Pitchapalooza”, a confluence of brand-agency account renewals when a reported $25bn in business was up for renegotiation – and from which Carat, Ray has previously said, emerged with $1.8bn in new business.
He says brands will make agency decisions in the future based on three criteria other than pricing:
- “It comes down to the talent. Do they buy the people, do they like the people? Chemistry’s really important when you’re in a service business.”
- “How clever?, How smart? The tools, the capabilities that we can bring, are we enabling competitive advantage?”
- “The commercials. Are we actually delivering value to them in a way that actually is going to help them with their commercials and their business?”