July 31, 2014

Digital Graffiti

Tuesday's Ad Contrarian post called "The Consumer Is In Charge. Of What?" didn't exactly go viral, but it went kind of semi-bacterial.

Here at the Ketel One wing of The Ad Contrarian global headquarters, we pay very close attention to the social media commentary about our blog posts.

Okay, maybe not very close.

Okay, maybe not at all.

It's not that we don't respect the opinions of others, it's just that we don't really give a shit. (Try it. It's liberating.)

Nonetheless, we studied up on the commentary generated by the post in question. As the title suggests, the post concerned the digi-doofuses who think "the consumer is in charge." As I expected, it generated a lot of hot air about social media being the way consumers are banding together to control everything.

This is me giggling.

Social media whining is to marketing as graffiti is to politics. It is little more than the drumbeat of the powerless trying to get the attention of our corporate masters.

The people who post "McDonald's Sucks" on Twitter and think it affects anything other than some poor bastard locked in a "social media war room" (gag me) in a basement in Chicago are totally delusional.

Do you think the United Airlines guitar guy didn't teach the big boys a lesson? Do you think they don't know how to neutralized your social media bedwetting? Do you think the  corporate PR monkeys haven't figured out how to handle your digital graffiti yet? Do you think the $5 coupon they send you when you complain on Twitter is anything other than lip-service?

Social media complaining is the opiate of the asses.

Amigo, you are not in charge. Get used to it.

July 29, 2014

The Consumer Is In Charge. Of What?

"The Consumer Is In Charge" says Kaiser Permanente CIO

"Consumers and their demands are in charge of business" says Frito-Lay’s senior vice president and chief marketing officer.

“Today, the customer is in charge,” said SrVP for marketing at Wal-Mart Stores, 
One of the inescapable clich├ęs of modern marketing is that "the consumer is in charge."

It's virtually impossible to talk with anyone in the marketing industry for any period of time without hearing this trite lump of nothing.

There are three things horribly wrong with it:
1. It assumes that there was a time in the past in which the consumer wasn't in charge of making buying decisions. I'd love to know when that was.

2. It assumes the usual bullshit about the web having "changed everything." For a nice chuckle about this lovely bit of stupidity, I refer you to one of my favorite all-time classics of marketing doubletalk.

3. Most depressingly, it shows a remarkable and frightening lack of understanding about what's really going on in the world.
Today, we going to focus on item #3.

Among the most disturbing aspects of economics and society today is the alarming degree to which a handful of companies control what we see, hear, and buy. Never before in my lifetime has so much power been consolidated into the hands of so few entities. Never before have the choices for consumers been so concentrated.

Here's a look at the food industry in the U.S.

According to the Huffington Post "These 10 Companies Control Enormous Number Of Consumer Brands" (click to enlarge.)

Media is even worse. Here is an infographic from 2012 reproduced by Business Insider, that claimed that 6 companies control 90% of the media in the U.S. A few things have changed since 2012, but the trend is no better.

The financial industry is equally concentrated. Here's a chart from Mother Jones that shows how 37 banks became 4.

As for the mythical democratizing effect of the web, Google, Facebook and Yahoo dominate web traffic pretty effectively. Google alone is responsible for about 1/4 of all web traffic. And more than 50% of all web video is shared by YouTube and Netflix.

And please don't get me started about the hideous amount of information these creeps are collecting on us.

You have to do some truly monumental logic torturing to come up with a story in which all this consolidation and concentration of economic, marketing, and communication power leaves the consumer in charge. 

More than ever in my lifetime, the big guys are driving the bus. The bullshit about the consumer being in charge is just the blind utopian rubbish of clueless digital nitwits.

July 28, 2014

What Are Agency Services Worth?

I spent 40 years in the agency business. For about 35 of those years I was in agency "management." By that I mean I was a shareholder or partial owner of an agency.

One of the most confusing parts of managing an agency is figuring out what to charge clients.

When I started, it was pretty easy. Generally, we got the equivalent of a 15% commission on media spending. Sometimes, it was structured as a true commission. Sometimes it was structured as a fee based on an implied commission. Most times it was a combination of things that added up to somewhere in the neighborhood of 15% of the marketing budget.

That model died a long time ago.

It died for several reasons. First, clients felt that the assumption that agency services were worth 15% of their budget was too generous. This was both true and not true. In the case of very large media budgets, agencies probably earned too much. In the case of small to moderate media budgets, agencies earned too little.

The model has changed radically, and it is very hard to find a consensus on how to calculate the value of agency services. Each agreement seems to be negotiated ad hoc, with no standard to go by.

Agencies generally struggle to make a decent profit. Managing an advertising account is far more time intensive than it appears to outsiders. This is particularly true when a substantial component of the activity is web-based. Web stuff devours hours.

Generally, an agency's profit margin is the difference between what it really should be providing to clients and what it can get away with providing.

The reason for this is twofold. First, agencies have gotten too process oriented. Process takes time and resources. In other words, it's expensive. And process doesn't do much for the client. It's mostly about keeping the agency systems and people on track.

The second reason is client incompetence. Agencies are often forced to deal with low level functionaries who give the agency bad direction, incorrect information, or are guilty of inept decision-making. This leads to endless meetings and limitless rounds of strategic, creative, and media wheel-spinning.

When the real decision makers finally get a look at the result, the agency often looks like it has spent mountains of time and money foolishly.

One of the biggest problems agencies have when it comes to calculating a fair compensation model is projecting how many complicators are going to interpose themselves between them and the real decision makers.

One of the biggest problems clients have in comprehending why agency costs are so high is understanding how much agency time they waste needlessly.

In the long run, the only unique asset an agency has to sell is creativity. Clients can get everything else elsewhere, usually for less. If your creative contribution is not highly valued by your client, you have no compensation leverage.

In other words, agencies should strive to do good creative work if for no other reason than it is good for the bottom line.