Who is your real competition?
March 13, 2012 | Author: Tim Williams
Remember from science class the principle of “diffusion?” It’s diffusion in action when you put a drop of ink in a glass of water and it eventually spreads to color the entire glass. And diffusion is what is happening to the advertising business.
Here’s an email I received recently from the leader of a respected agency (a name you would know):
“As the world changes, and I continue to explore different business models, I keep running up against new competitors. I'm trying to map out as many different places that we intersect and compete with companies in other industries as possible. From media companies like Meredith who have purchased agencies so they can create content directly for clients, to entertainment companies like Electus in Hollywood, to data companies, to technology companies like Foursquare that have direct client relationships, to media agencies that are now in the content creation business like Starcom’s Liquid Thread, to PR firms, to design firms, even companies like Accenture vying for their share of analytics and digital production. This is not a comprehensive list by any means.
The pool of marketing dollars is being bellied up to by everyone. Technology has made it possible for everyone to expand their capabilities and all of the different ways to reach the consumer has really grayed who does what.
Net, not only have our options to reach consumers increased exponentially, but also the universe of our competition.”
Just like ink – or blood -- in water, agencies tend to diffuse their offerings until they appear to offer everything. As Ignition has written many times, diversification is an unfortunate human tendency. We reason that because everybody else is headed in a particular direction, it must be the way to go. As a result, by the end of the 20th century the advertising agency industry had converged around “full-service” and “integrated.” Today it’s converging around “channel-neutral,” and “branded content provider.”
Here are some recent examples from Ignition’s consulting work:
- A major PR firm in the Midwest who wants to add “paid” and “owned” media capabilities to its already impressive “earned” media credentials
- A major brand identity firm who wants to expand services enough to be considered as an “agency of record”
- A leading digital firm in Canada who is adding services and capabilities that would make them a direct competitor with so-called “lead agencies”
One interesting recent example of this phenomenon is Ruth, Edelman’s newest entry into the marketplace.
The ultimate one-stop shop?
Rather than differentiating their offering by sticking to what they know best, agencies are rushing to be seen as the ultimate one-stop marketing shop. Problem is, sophisticated marketers aren’t really looking for that. They’re looking for best-in-class specialists.
We’re firmly in the era of the “long tail”, where major client organizations employ an average of 17 agencies (according to the ANA). Not only is it true that clients aren’t looking for generalists, there really is no such thing as an “agency of record” any more.
So pursuing a strategy of more “AOR” assignments doesn’t hold a lot of promise. While small marketers can often be served by a single small agency, it’s pretty unlikely that a large marketer is going to one day decide that they can get the dozens of different specialized marketing services they need from a single “channel-neutral branded content provider.”
Refuse to diffuse
Avoid the pull of convergence. By appearing to be able to do everything, you end up being known for nothing. It’s the General Motors strategy applied to advertising agencies. There’s no such thing as a “general market” or “general needs,” There are only specific markets and specific needs. Pick your spot and be the best at what you do. It’s impossible to be the best at everything.