Getting the perfect advertising agency.

Let’s face it, if you’re involved in the marketing of your business, it’s highly likely that you’ll have to deal with an advertising agency.

There are hordes of advertising agencies out there, and the truth is they’re all pretty much the same: clones with only the slightest imperfections differentiating one from the other. They all have access to the same computers, the same software, and the same media info. They even all have the same swanky offices and fast cars. What really differentiates an advertising agency is its people. So how do you know you’re getting the right people? Here’s some valuable insight to help you make what can be a difficult decision.

Ditch the “pitch”.

If you spend large sums of your money on advertising agencies, and if your profits are dependent on their efficiency, it is your duty to take great pains to find the best possible advertising agency. 

Amateurs do it by cajoling a group of advertising agencies into submitting free campaigns on speculation. This is called a "pitch", and it’s a complete waste of time.

Let’s put the “pitch” into another real-world example. You decide to go out for dinner. You head to the nearest mall and choose a restaurant at random. Once seated you tell the waiter you’d like a glass of water and some meat. The waiter is stunned and replies “What kind of meat, sir? We have a number of different dishes, all of them equally delicious.” To which you respond, “bring me something that I’ll like and if I don’t like it I’m leaving and I refuse to pay for it.”

Now that’s guaranteed to get you thrown out (and hopefully beaten to a pulp) and that’s why no one orders a meal like that. It’s rude and just plain stupid – how can you possibly get what you want? And that’s really the advertising agency “pitch” summed up quite nicely: a pack of hyenas chasing a slab of meat.

A Hyena shows a real world example of the advertising "pitch"

The “pitch” is perhaps the biggest misrepresentation of the capabilities of any advertising agency.

The advertising agencies that win these “pitches” are the ones that use their best brains for soliciting new accounts, which means they relegate their existing clients to their second-best brains.

This is because everyone (and I really do mean everyone) in advertising knows it’s way easier to keep a client than it is to get a new one. It’s a guarantee that the genius intellects you see at the pitch will rarely be seen once the agency gets your signature.

David Ogilvy was in complete agreement, and he said, “If I were a client, I would look for an advertising agency which had no new business department. The best agencies don’t need them; they get all the business they can handle without preparing speculative campaigns.”

The sensible way to pick an agency is to employ a marketing manager who knows enough about what is going on in the advertising world to make an informed decision. Ask him to show you the work from the three or four agencies he believes to be best qualified for your account. 

Once you have your shortlist it’s time to call some of their clients. This can be particularly revealing. Be completely honest when you call and see how these clients respond to your probing. Do they feel threatened that another (perhaps bigger) company might be coming onto the client roster? Ask them who they deal with on a daily basis, and what they’d change in the relationship if they could.

Go back to school.

Once you’ve done this, it’s time to break out some old school thinking. Invite the head honchos from each of the leading contenders to bring two of their key people to dinner at your house. Loosen their tongues. Find out if they’re discreet about the secrets of their present clients. Find out if they have the spine to disagree when you say something ridiculous.

Observe their relationship with each other; are they professional colleagues or quarrelsome politicians? Do they promise you results that are obviously exaggerated? Do they sound like extinct volcanoes always harking back to their glory days, or are they alive with possibility and endeavour?

Most importantly, are they good listeners and are they honest? The purpose of this exercise is to find out if you like them enough to give them your money to spend. The relationship between client and agency has to be an intimate one, and it can be hell if the personal chemistry is sour. 

So before you commit, ask any agencies that want your business to show you the five most surprising, challenging and innovative things they took to their existing clients over the past year. A blank look at this point is sufficient reason to usher them out of your home, but a fired up and enthusiastic response showing some really clever thinking – well, that’s a very strong reason to keep chatting.

Once you’re committed to an agency, and your expectations are clear to them, then they need to be delivering everything they promised right from the start. More importantly, they should be exceeding your expectations on a regular basis and they should be surprising you by pushing the boundaries and bringing you ideas that make you a little nervous, that break new ground, that you haven’t seen before.

If you only ever see executions and campaigns that you expect, then the agency isn’t really looking to grow your business as much as it should be.  

What Advertisers Can Learn From Toyota

Many years ago, the American car manufacturing industry ruled the world, but that was only until Toyota came along.

Why was Toyota more successful than General Motors? They both had access to the exact same technology, their products are essentially identical (four wheels and an engine), and their customers are also basically the same. But GM currently has a market capitalisation of $60 billion whilst Toyota has a market capitalisation of $202 billion. Why the big difference?

Toyota had a simple (and better) working philosophy: continuous improvement and respect for people. It’s called The Toyota Way and is essentially an approach that involves the company’s front-line workers in improving their own work. It has much to do with the Japanese philosophy of Kaizen – “perfection in manufacture”.

Toyota’s idea of drawing improvements from the people on the front line is critical to the company’s success and is something many New Zealand businesses would be wise to take note of, regardless of their industry. Companies that push work improvements from the top down usually generate weak front-line enthusiasm, and I think we all know why.  Despite some missteps in recent years, Toyota’s ascent to the top of the auto industry has been due to one reason and one reason only: quality. And the main reasons for its unrivalled quality are worker participation and total focus.

When a problem is discovered on Toyota’s production line, Toyota stops everything to sort it out then and there. Production would actually have to wait for the problem to be solved before continuing. There are numerous legendary stories covering just how precise Toyota was at sorting out even the smallest of hiccups. The story I like the most is this one:

On the Toyota production line, in the days before automated robotics, every worker was given precisely the right amount of tools and equipment he needed to get the job done. Assembling 12 doors? Needing four bolts per door, the worker gets 48 bolts, and that’s it. If some sort of malfunction happened with any one of those 48 bolts (or anything associated with them) the entire production line stopped.

The problem was assessed right there at the production line and solved. And once it was solved it rarely appeared again. This is in stark contrast to the way the Americans did it. Assembling 12 doors? Again needing four bolts per door, the American worker gets a bucket of bolts. If one bolt doesn’t work, throw it out and find another bolt to replace it with! And you better do it quickly before you lose your job. Nothing stops the production line.

At Toyota, everyone’s job description is to improve on what they’re already doing. The company culture encourages front-line workers to suggest improvements to their work and to help make them. Management has a relationship of mutual trust and respect so workers can make suggestions without fear of getting fired. So workers are deeply engaged in improving both the quality of their work and their work conditions and also form a sense of pride and togetherness. Unlike most companies, Toyota doesn’t keep top management away from the field by using suggestion boxes. Senior managers go to the front line and listen, which shows respect to those far from the executive suite. That in turn further energizes workers.

So what does The Toyota Way have to do with advertising and marketing? Quite a lot actually. No amount of marketing and clever TV ads could make Toyotas reliable and well-built. Every single person at Toyota empowered the company’s marketing. This philosophy and the associated principles made marketing Toyotas so much easier.

I’ll be the first to admit that Toyota isn’t the coolest or hippest of the car manufacturers (except for the 86 model) but they’re good, honest cars, and you know that the marketing was thought of way before the car went onto the production line. This is in stark contrast to Nissan, whose advertising is so over the top and so vacuous that they have to put disclaimers on the ads saying, “Fantasy, do not attempt. Cars can’t jump on trains.”

Whilst Toyota didn’t revolutionise marketing, they at least allowed everyone at the company to contribute to it if they wanted to, and that’s vitally important. If you want to make your marketing job easier, then start looking for ways to get more of your colleagues involved. The truth is that they want to be involved whether you like it or not. After all, marketing is a creative field and anyone can be creative (so the saying goes). But we all know that creativity can be extremely hard to measure and understand, just ask Vincent Van Gogh. So rather than taking it all on yourself, get some help from those around you, because marketing is too important to be left to the marketing department.

An eight year old’s guide to advertising and money

So what's the point of money?

While driving my eight-year-old son to football practice, he asked me if we were rich.

Like most parents, I believe my son is fairly intelligent for his age, so I did my best to explain. 

I told him that being rich was a matter of perspective. He said he didn’t know what perspective was, so in my most humble voice I said, “Well, we’re richer than some guy living under Grafton Bridge but way poorer than John Key, who in turn is way poorer than Bill Gates.” We drove a bit further in silence until he asked, “So what’s the point of money?” Now that’s an amazingly difficult question to answer correctly, even when trying to explain it to an adult, never mind an eight-year-old. I honestly did my best. I explained to him that money allowed you to do stuff and enjoy yourself, and sometimes having more is great and sometimes having less is great too. Thankfully we got to his football practice and I was done with trying to weasel my way out of the moral web he’d spun for me.

What I should have said to him was that money isn't real. It's a method of exchange, a unit we exchange for something we want or value. It has worth because we agree it has worth, because we agree what it can be exchanged for. But there's something far more powerful going on here. We don't actually agree, because each person's valuation of money is based on the stories we tell ourselves about it.

Our bank balance is merely a number, bits represented on a screen, but it's also a signal and a symptom. We tell ourselves a story about how we got that money, what it says about us, what we're going to do with it and how other people judge us because of it. We tell ourselves a story about how our money might grow, and more vividly, how that money might disappear or shrink or be taken away.

And those stories, those very powerful unstated stories, impact the narrative of just about everything else we do. So yes, there's money. But before there's money, there's the story we tell ourselves about money. It turns out that once you change the story, the money changes too.

If one of your colleagues told you they donated $100 to charity, how would you respond? Most likely with a pat on the shoulder or something equally blasé. The reason isn’t that you’re a heartless soul but rather it’s because of the story behind the $100. You know that just about anyone can (if they want) give away $100 today and (if they’re able) maybe $200 tomorrow, so what’s all the fuss?

What would happen if that same colleague had instead said they’d donated 100 hours to charity work? That’s completely different. Why? Because the story we tell ourselves about time is different to the story we tell ourselves about money. Once you give away your time it’s gone forever. Time isn’t money and anyone who still cries that tired old cliché needs to leave the building.

Look familiar?

In our mad rush to close deals and sell products to customers, time has become an extremely valuable treasure, more so than ever before. Consider that on YouTube you have the option to “Skip Ad” after just five seconds. That’s all it takes for marketing efforts to be consigned to the dustbin of “I don’t give a damn”. Five seconds! It takes me longer to put toothpaste on my toothbrush.

It’s strange that half a century ago this was quite the opposite. Clever marketers were actually getting people to give up their time in exchange for products. The perfect example can be found in the cigarette industry. Cigarettes are the ultimate, deadly parity product. All of them look the same, they basically smell the same and they all do the same thing. No one buys cigarettes because the box is red or white or green, or because one brand tastes like peaches and cream and another brand tastes like vanilla honey. People give away their time to smoke cigarettes because of the story behind them, the stories that advertisers and marketers created for them.

The thing is there is a multitude of stories out there, and it’s becoming harder and harder for marketers to break through and create resonance with consumers. If you want your story to make an impact you have to forget what your own personal story is and create a story for your customers. A story compelling and interesting enough that they’ll actually be prepared to give up some of their time to listen to it, and if you’re very lucky or very good, to even engage with it. But run-of-the-mill, outdated thinking just can’t do that in this day and age. 

The skewed logic of advertising

I love movies, but going to the movies drives me crazy.

The reason is simple: there’s no logic to the way movies are marketed. The entire experience of going to the movies lies in the movie itself, not the $10 popcorn or the $12 soft drinks. Our enjoyment starts when the movie starts, and most of us are prepared to sit through a movie regardless of the distractions that come with it; like mobile phones that go off, rude movie talkers, stinky seats, sticky floors and so forth. So why do cinemas discount the actual movie (half-price Tuesdays, half-price every day before Noon) and overcharge for everything else?

It boils down to profit and margins. Popcorn and Coke cost next to nothing to make and sell, whilst the movie itself has royalties and fees. However if you’re discounting the primary purpose of your industry (in this case it’s to entertain and not to feed), then why would people value what you sell? Why shouldn’t we download movies from the Internet when we’re being told that popcorn is more important and more valuable than the movie itself? I guess that’s the status quo, so why change it? Why indeed.

Another amazing example of skewed marketing logic can be found in the real estate industry. In real estate, the marketing is built around commissions, and the lower the better. This is illogical because the incentives for each party involved in the sale are not aligned using this approach. Sure you’ll save money paying a lower commission but you’d actually make more paying a higher commission. Confused? Then consider this scenario:

You’ve decided to sell your home and you’ve hired an agent to sell it because everyone knows you can’t sell your own home. The agent takes some pics, writes a seductive ad and hosts the show days. Most importantly, he negotiates aggressively on your behalf for a “killer deal”. Let’s assume your estate agent presents you with an offer of $500,000. A standard agency commission is 5%, of which your agent normally splits half with his agency, so he only gets 2.5%. This means on your sale he gets $12,500. Not bad for a day‘s work. But what if your home was worth more than $500,000?

What if, with a little more effort and patience, the agent could get you $525,000? After you pay commission on this bigger sale, you would find an extra $23,500 in your pocket. But the agent’s additional share – his extra 2.5% - is a puny $625. So if you earn $23,500 and the agent only earns $625, the incentives aren’t aligned at all. Is the agent willing to put in all the required time and work to secure a higher price of $625? Not likely.

So why do estate agents market their business this way? Based on this logic, every estate agent should charge a higher commission but they don’t and they won’t. The reason? It’s always easier to sell something for less than for more. Again, that’s the status quo.

Still not convinced? What would you think of a gym that charged you incrementally for every day you don’t go to the gym instead of debiting a monthly fee? They’d start with a dollar and double it every day you don’t go. So $1 for the first missed day, then $2, then $4, then $8, then $16 and so on. You’d be at that gym every day without fail. But this will never happen because the incentives between gym owners (needs to make money) and gym-goers (needs to get in shape) are not the same and the status quo of how gyms market themselves will most likely never change in such a fundamental level. Even if they did, would consumers accept the change? I wouldn’t.

And what about an advertising agency that charged clients based on the success of the advertising they created? The current status quo in advertising is that clients pay regardless of success. With this approach, if an advertising agency launched a new product and the launch bombed, they would get no payment at all. Obviously, if it was a big success you’d pay them heaps more. So why doesn’t anyone do it? I do.

There are more examples out there but the point is obvious. Finding ways to align your incentives with those of your customers will give you a way to break the status quo and effectively crush the competition.