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Tuesday, August 15, 2006

Ad Agency Deathwatch: Winterberry Study

A study by the Winterberry Group based on interviews with 70 senior agency executives found that agencies are adapting their services and price structures and are increasingly forced to compete with specialized service providers. In addition, it appears that marketers are increasingly looking to develop internal resources to handle digital channel marketing.

Consumers weaned on the power of the Internet and weary of intrusive media bombardment, expect that relevant product information will be available at their fingertips. Marketers, meanwhile, are confronting new rules of customer engagement as well as enhanced ROI demands from the C-suite, resulting in the ascendance of "below-the-line" promotional channels once thought of as supplementary to the primary branding effort.

Anthony J. Hopp, chairman of the Association of American Advertising Agencies, is quoted as saying "The agencies that will succeed are the ones... that can find the new ways to engage and connect with consumers. If you're not doing that, you're not going to be in business."

This study shows how market and industry trends are driving systemic change across the agency landscape, and concludes:

-The complex demands of the multichannel selling environment require that agencies provide clients with a unified offering spanning both "above the line" and "below the line" marketing channels

-Heightened demand for marketing program accountability is forcing agencies to adapt their service offerings, pricing structures, reporting capabilities and managerial focus*Compressed margin availability, expanded client scrutiny and the emergence of alternative service providers are raising the competitive pressure for agencies of all sizes

-Integrated service providers are seeking to command a greater presence in the agency environment, but struggle to sell their strategic and creative offerings to marketers who associate their brand with other services

-Clients are increasingly leaning on internal strategy and creative capabilities as well as procurement departments to support marketing initiatives and generate leverage in negotiations with external agencies

-The prevalent agency holding company model is poorly equipped to provide the organizational agility and cross-channel service offering that today's marketers demand.

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