Brands Want Best-In-Class Marketing

LinkedIn Article by Tim Williams 
June 30, 2013

Quick, what's the top reason marketers search for a new advertising agency? If you guessed “creative differences,” “cost” or “poor service,” you’d be citing some of the reasons that do in fact show up on top 10 lists. But the key driver today in agency searches is the desire marketers have to work with “best-in-class specialists.”

Smart marketers know that no agency can be good at everything. A recent piece in Digiday quotes a brand executive as saying:

I wish sometimes that the agencies would stick to what they are good at. They try to do everything, and they would be better served to narrow their focus. You can’t do everything, and if you try to do everything, you do nothing … It drives me crazy when the agency is trying to pitch you every single service available.”

The dominant agency-client relationship model

Of the three main models major marketers use to work with agencies, the “best-of-breed” model is by far the most popular. (The other two models being the “single source” model, where the agency attempts to serve as a one-stop-shop; and the “lead agency” model used sometimes by companies like Procter & Gamble, where one agency is tasked with coordinating the efforts of other specialist agencies.)

The best-of-breed model is now the standard because it acknowledges that in today’s complex multichannel world, the expectation that any one firm can deliver every service is unrealistic if not impossible. But of course this doesn’t stop thousands of agencies from referring to themselves as “full service,” as if they are excellent in literally everything. (It's time for the term full service to be retired to the same lexicographic graveyard as “leader” and “quality.”)

We have entered squarely into what a recent piece in the Harvard Business Review calls “the age of hyperspecialization,” where economist Adam Smith’s original theory of division of labor is taken to new extremes, producing ever more specialized producers and sellers of everything – including professional services.

Two main ways to focus

In the world of advertising agencies, this trend toward specialization is fueled not only by the proliferation and complexity of communications channels, but by brand marketers’ insistence that their marketing partners have relevant experience. The result is an agency universe increasingly dominated by two types of firms that choose to be differentiated either by their expertise in a competency or their expertise in a market.

Competency specialists include the likes of SapientNitro (digital marketing), Rapp (database marketing), Edelman (public relations) and Starcom (media). These are not small companies. Rather they rank as number 3, 8, 10 and 26 on the list of largest U.S. agencies.

Market specialists include health care agencies like inVentive (ranked 18), Havas Health (42), DraftFCB Healthcare (59), and OgilvyCommonHealth (60). Zimmerman, a retail specialist, has revenues of $109 million and over 400 employees. Business-to-business specialist Gyro is a top 100 agency, and OMG Entertainment & Sports ranks 111. (Keep in mind there are, according to the latest census, around 62,000 agencies in America.)

If you drill down into the top 500 agencies, you’ll find that the fastest-growing and most profitable firms are those that are devoted to specific areas of expertise. Social media, experiential marketing, and customer relationship marketing account for many of today's competency specialists. Other types of successful market specialists include travel/tourism, agriculture, food, pharma, and senior living.

Solutions, not services

Ultimately, marketers aren’t buying a service from an agency. They’re buying a solution. And effective solutions spring from deep areas of expertise, not a from a “wide range of experience” as most agencies are prone to tout.

Examples of the benefits of a best-in-class buying strategy are on display almost every day in our personal lives. I do business with State Farm because of their expertise in insurance. It’s unlikely I would look to them to fulfill all of my family’s financial needs, even though they offer mutual funds and banking services. Most buyers of professional services operate with the same mentality. They pour their choices through a best-of-breed filter and hire the business partners that are truly excellent at what they do.