By Kimberly A. Whitler
An interview with Alexei Orlov, during his tenure as Global CEO of the RAPP Agency, one of the world’s leading CRM and customer experience agency networks.
The shift to analytics-driven marketing and technology-enabled business growth has changed the nature of advertising agencies. The era of “Mad Men,” where advertisers primarily focused on TV, radio, and print advertising is gone. In its place are specialists who focus on social media, digital media, and traditional media. And, there are behemoths who attempt to pull all disciplines into a single house.
On top of it, the traditional agency model was built on a revenue generation approach that included media placement; while there were different models, the most common one was based on a percentage of the media placed (e.g., 15% of the value of media placed). That model is being disrupted as programmatic media buying takes hold and clients push for changes in the agency compensation model.
With expectations of agency performance increasing (i.e., linking agency performance to client in-market performance), the agency compensation model being disrupted, and new, leaner competitors cropping up, one could argue that the golden years of agencies are over. To better understand this shift, I recently talked with Alexei Orlov, Global CEO of Rapp. What makes Orlov’s perspective interesting is that, having spent most of his career on the client side (was the CMO of Volkswagon, China prior to Rapp), he provides unique insight on the future of agencies, what agencies need to do to better meet client expectations, and how clients can get more out of their agencies.
Kimberly Whitler: How are advertising agencies changing?
Alexei Orlov: The actual model is changing. As recently as roughly eight years ago, advertising ruled everything; it was the golden era of cinema and TV. Clients would start with a budget and then ask agencies to develop creative that would be spent against that budget. Now the world has changed. The power has shifted from brands to people. Today, brands need people more than people need brands. The challenge for brands is delivering real benefits in real time such that you create a discreet experience. And you have to do this every day, bit by bit, minute by minute, that aggregates over time to a holistic view that the consumer has about the brand. This has caused a fundamental shift as agencies now have to develop deep, meaningful insight from data that can take a brand and catapult it to another place. This takes precision. Companies that succeed will be able to take a nuance of data that is real, meaningful, and unique and then shape the insight in a way that makes people stop.
Additionally, agencies need to understand that co-creation is happening. Gone are the days when companies threw everything at an agency and the agency was expected to come back with a final product. Clients want to be involved in creating the end product. Often, they want the consumer, or other critical stakeholders to be involved as well. Agencies have to open up the process and let clients in—the black box era of creation is over.
Whitler: How does this impact the structure and organization of agencies?
Orlov: There is a big change in the architecture of great agencies. First, there are fewer creatives as the head of advertising agencies and more creative communities. These communities include graphic designers, copywriters, analysts, strategists, and big thinkers. It is an integrative team brought together to combine left and right brain thinking into superior strategy and creative. Second, there are less account managers/executives and far more practitioners at agencies than in the past. The reason for this is because clients understand how to monetize technologies, leverage cross-channel personalization, and actually how to connect with the clients better.