Tuesday, February 10, 2009

The flight to (apparent) safety

The old expression "nobody gets fired for buying IBM," is now at play in the marketing arena. In recent weeks several large companies have elected to put their business out to pitch. Their selection criteria would not appear to be based on which ideas will make the biggest difference to the business, or who has the best consultants available to work on their business. Instead their criteria would be appear to be blunt scale and apparent price. Of course this is something of an oxymoron as large agencies typically charge higher hourly rates and typically over charge. In terms of programs these firms tend to offer fairly bland campaigns that are big on planning and short on delivery. Interestingly it is at times like this that firms need the opposite. They need PR people that are creative and who love to get their hands dirty. In short they need results.

So why do big companies take this path? At one level it does make sense. Procurement departments love this kind of deal. For a start they can be seen to centralize a contract and get their hands around the terms in a sensible way (at least it is to them). At the same time, agencies sell the idea of lower cost and better integration. In practice any cost saving tends to translate into worse results. At the same time, the hiring of a large agency tends to result in a more detached agency relationship. Smaller, more agile agencies are full of practitioners that love the craft of PR and will give their all to the task, not just the hours they are obliged to provide within the contract.

Small and mid-sized agencies will likely suffer during the next twelve months as some large companies run for the apparent safety blanket offered by large agencies. In time they will learn what they learned in better economic times - that they need an agency, or agencies that can really engage with their different business units and can make a real difference to their success. Sadly it seems that for now though the smaller agencies will have to sit tight and focus on smaller clients that understand the difference between price and value.

44 comments:

Simon Taylor said...

Tim - there's an opportunity in this environment for savvy, agile, smaller agencies to differentiate themselves. To use your analogy "nobody gets fired for buying IBM" - Apple's iconic 1984 Macintosh ad challenged this thinking head on, portraying IBM as Big Brother. There's always room for an agile challenger that tells its story well.

Tim Dyson, CEO of Next Fifteen said...

i completely agree. I don't see this environment as all bad news and do see some interesting opportunities for brave businesses. That said, I do think the market s operating irrationally in some areas and that is going to simply make it harder for many small and medium sized businesses to survive.

Anonymous said...

You make some pretty sweeping generalisations here about costs, results and overcharging. Some evidence would be useful.

There is an alternative view - that smaller agencies are short on strategic planning ability, don't have the same international perspective that the client does and are often interested in short-term tactics that are as much about the agency's own kudos as adding long-term value. But of course that's just sweeping generalisation!

Enrico Bianchessi said...

Dear Anonymous, I really do not understand for which mysterious reason strategic planning ability (a competence) should be available only in a large agency. This is ridicolous. Competence is in the people. The same for international perspective: we have been part in global PR networks where indipendent small and medium agencies (specialized and highly focussed in the specific market) worked together under the coordination of one of them, reaching very good results. And when the company did the mistake to change for a big global agency, they come back to the previous solution in 9 months (and I'm not joking...)

Enrico Bianchessi said...

.. by the way, where are you working Anonymous, Hill&Knowlton, Edelman, Fleishman ... ;-)

Anonymous said...

Enrico, if we are to believe Tim's comments this 'flght to safety' is taking place and putting aside spontaneous hysteria in lots of unconnected companies, to what do you attribute it?

Caution is playing a part I'm sure; as a corp comms director of a multi-national brand said to me the other day - this is not a year to be making a stand on anything - but caution has to be balanced by performance/ROI call it what you will.

Incidentally I run a small, autonomous, entrpreneurial agency within an international network so see it from both sides.

Tim Dyson, CEO of Next Fifteen said...

I'm glad to see this provoked a debate of sorts. Yes I did make some sweeping generalizations. My proof on charging and work comes from conversations over the last 10 years with heads of comms that have hired a specialist firm having previously used a large generalist agency. Almost without fail their commentary has been the same: the bigger the firm the fewer the results. There will always be exceptions to this of course. My point though, is that in times like this smaller agencies are viewed as risky, whereas bigger agencies are viewed as somehow more reliable. We can't escape that and it challenges all smaller firms to find ways of overcoming this problem. Smaller firms shouldn't try and pretend they are large. Instead they should focus on how their results directly link to the performance of the customer's business. They should also get closer to the sales side of the business to make sure they fully understand the challenges the client is really facing.

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