Is "Agency" Still the Right Word?

Blair stops to think about what "agency" actually means, and if it's the right term to describe firms in the creative services space.

Transcript

David: Blair, this is going to be a thought-provoking topic for me and I think it's not just me, I think other people have had the same sort of sensation. Just feeling strongly about certain terms, and the one we're going to talk about today is agency. I remember people feeling strongly around a phrase like account executive too, and if you were running a firm in a small town and you had an account executive, it's like, "That's from the big agency people. That's just going to slow communication down, it's going to add layers, it's going to cost money," and the same sort of thinking about agency too. I'm looking forward to this conversation. It's fraught with all- and maybe because it feels like a landmine here.

Blair: Should you really or should your firm really be an agency? Maybe it is a landmine. It's one of those words, and there are so many of them, that where we use it quite often, especially those of us in the creative services business, and we often don't stop to think about what it means. I'd like to talk about, is it the right term?

Is it the right word to describe what we do? Then also, should we be thinking beyond the business model that the agency implies, but let's begin with the terms. Let me just throw it back to you. When you hear agency, what did it used to mean to you before you did your research for this episode and what does it mean to you now?

David: What it used to mean to me is like this is a pretty convenient holding bucket for anybody in the communications business for money, but what it really meant in the early days, and I think this is where some of the discomfort comes, is that it meant that you were an agency representing somebody who had something to sell, and that was always ad space in newspapers and then of course it expanded to radio and then TV and so on, and out of home, billboard.

Really there was nothing else they did, and in the early days, they were simply peddling space, but once they realized that there was a model here that could be exploited, they decided that they could sell more space if they also developed the ads themselves. Now, they didn't charge any extra for that, it just came with it, and all of the compensation was 15%. There are not many people making 15% on this stuff anymore.

Even back in the '50s and '60s and as recently as the early '80s, you would have firms that would express their size, referencing back the days when they were selling space. You would hear this phrase, capitalize billings. There would be a little town in the capital of North Dakota and there would be a yearly business rag that said, "All right, who are the biggest firms?" If you didn't pass media through, then you would not want to be at a disadvantage so you would capitalize your billings, which essentially was to say, "All right, if all the money that we made was commissions, what would our top line be?" So you'd multiply that by seven, or whatever the number was, still kind of harking back to those days.

That world has changed so dramatically, even if you think about most recently how firms are still functioning as an agency, but they're selling digital space, and that media planning is so much more complicated, and the dollars are so much lower, that that old way of getting paid by the commission just didn't make any sense. We have all this history jumbled together and I think some of the newer folks don't even understand where that came from.

Blair: Yes, it's been many, many decades since we in the agency world were agents of the daily newspapers and other media, and even though for many years agencies earned their commission from, as you said, straight 15% media commission and all of the services that they offered were paid for under that 15%. Even though that's only recently gone away, when we think back to the 150 or 200 years or whatever, since agencies had been around, you can correct me on the time frame.

Even then, we weren't really agents of the media so much as we were agents of the client, the loyalty kind of switched in my mind. If you go to buy and sell a house in most jurisdictions in North America, although this is recently changed in British Columbia. If you are buying a house and you enlist the help of a real estate agent, or what they call an estate agent in the UK or Australia. Unbeknownst to you, most of that time, that agent was the agent of the seller.

Even though the seller had their own agent, both agents were agents of the seller. You thought your agent as the buyer had your best interests at heart and maybe they did, but their financial incentives and their legal obligation was to the seller, and in British Columbia, that's just changed. Now the buying agent is an agent of the actual buyer, not the seller. I feel like there was this unspoken shift in the agency land, but agencies were still agents and you think of, what does agency mean?

Agency simply means power, and usually when you talk about agency relationships in the larger sense of the term, its agency in principle, so who's the principal who is bestowing some of their power on to their agent? Even though that's shifted a little bit over time, I really think that media has been disintermediated from the other services, so the services are delivered on a fee, the media commissions are far less than 15%. You get some media commission, and then you get a bunch of fees. Are we really agents of anybody? Probably we've outgrown the word in the pure sense, don't you think?

David: Yes, in fact those commissions have gone down to zero in many cases, where we just let the client pay directly and then we just charge a fee for service that reflects our thinking, which I think is much better, actually I've been advocating that for a long time. Part of what came with the AOR side, the agency of record, was the power to bind the client to contracts, and that is gone in almost every case as well. Then there's one of my favorite things to talk about, which I won't get into here, is the whole notion of sequential liability, where somebody was still responsible for a bill even if the agency didn't pay it, but had been paid by the client.

That's a fascinating doctrine that's all over the US still. Most people don't think about that too much, and we have to allow for the fact that terms change, right? I could call myself an agency without all the baggage that comes with it, and in some ways, I mean, what's a better phrase? This is a really fascinating question to me. I have this discussion with my clients all the time. I'll say something, "I think you are this kind of firm," and they'll stop me and say, "Wait a second, what do you mean by that?"

You've got creative, you've got design, you've got dev shop, you've got marketing firm, public relations, public affairs. What's the overall umbrella? To me, it seems like a marketing firm, but there's quite a bit of push back around that too. A lot of people in this space do not want to be that closely associated with marketing, which strikes me as odd.

Blair: Well, I think we need to unpack marketing, and then we need to unpack firm, right? The first half of this podcast is all about semantics. Last five minutes, we're going to give some real answers, but we're just pretending to be on the board.

David: [laughs] The first 25 is a history lesson.

Blair: Yes, I'm with you. Take a typical design firm, and my long standing advice has been, I think it's better to see design as a tool that you use to help your clients accomplish certain objectives. You can take those objectives and put them into one of three buckets. You can help your clients sell more things to their customers. I would call that marketing. It's design, communications, around increasing or retaining market share or sales. That's marketing.

Then there's communications to audiences of non buyers, so you might think analysts, maybe channels. Probably not, but analysts and internal audiences of employees and internal stakeholders would be the other obvious one. I would put that into the bucket of communications. We've got marketing, we've got communications, and then the other thing that a design firm might do is they might design the actual product. You think of an industrial design firm or a digital product firm, where the app is the product, or the website is the product.

I think if a listener to this is referring to their firm as a design firm, I would just ask, what is it that we're helping our clients design, and therefore should we be in the marketing bucket, the communications bucket, or the product development bucket?

David: Three, we're helping our clients achieve their goal of changing consumption habits in some way, or we're helping our client meet a goal of helping somebody think differently, or we're actually creating something that will or will not be sold, but it's a thing, even if it's just digital. Those three categories.

Blair: Yes, I think that's a great encapsulation of those three points. That's how I see marketing, and you?

David: Marketing to me, it needs to have some commercial component to it, so issues management for instance, is not marketing to me. I'm somewhat lazy. Agency isn't the right word. Marketing isn't the right word. Firm, let's unpack that a little bit. What do these people want to be called? If it's not an agency, what is it? A firm.

I want to talk a little bit more about creative as a phrase too. There's the creative, somebody who went to design school, and now does some facet of that in their firm. Then you have a creative firm, that second phrase, I'm not real comfortable with it. We understand what that means. I'm not sure that it sends the right signal to our clients and our prospects.

Blair: Do you suffer from this? Do you suffer from not knowing how to label your audience? The market that you serve, the market that we're talking to right now?

David: All the time, and so I'll use seven or eight different terms interchangeably throughout the presentation, hoping I don't-- Well, I'll probably just offend everybody. [laughs] I don't know.

Blair: I'm the same. I've kind of settled on creative firm or creative services firm, even though I acknowledge that there are a whole bunch of marketing firms that that doesn't cover, because they don't come from the creative side. Maybe they come from the digital side. Maybe they come from the strategy side, and to me those are an equally relevant audience, to me and my business, and I think they are to yours.

I keep going back and forth on the description of the market, but to your point of creative firm, or what I would call creative services firms, I think that's a label that the market understands, so I think it's okay for you and I to use that, but I'm tempted to side with you that it might not be the best outward descriptor for our listeners. I can see the odd, really, really good hot shot, famous design firm, simply saying, "We are a design firm," and the implication is, "We will design whatever needs to be designed because we are so good at designing."

I would say that is the top 0.1% of design firms can pull off that positioning. I think everybody else, and you should just assume that you are in the everybody else category, should be looking at, "Okay, it's not design, it's marketing, communications, product development." It might be okay to use design in that mix, but you should really think about what is it that you're helping your client do.

David: Why do so few firms flirt with the idea of being a consulting, or probably a less onerous term would be an advisory firm? Why do so few firms stay away from that?

Blair: I think if you come from the creative side of the business, you feel like a little bit of an imposter trying on the consultant word, because you're thinking of the kind of the MBA McKinsey space.

David: The Bobs

[laughter]

Blair: You think in that space. You can be a consultant and an advisor of an entirely different type. We've talked about this before in the episode, what we can learn from consulting firms. You can think of it as a standard consulting firm brings this convergent thinking, like these big brains solve the problem in a space, and then they just roll out that solution across all other clients. A creative person is more of a divergent thinker and a creative firm is a divergently thinking firm, which is like just pulling ideas from everywhere and bringing a uniqueness to every engagement, rather than bringing a really standard type model.

I'm not opposed to models. I'm just saying, if you hire a creative consultant, you should expect the experience, I believe, to be entirely different from hiring a standard business consultant. I would expect the creative consultant engagement would be more creative. By that, I mean innovative ideas on how to do this, and how to come up with innovative ideas for us to take to market or whatever we're doing. It's a good question and I think more creative firms out there should embrace the idea of consultancy or advisory firm in the names or descriptions of what they do.

David: One difference between those two approaches is that the creative side would probably surface more roads that we're not going to go down, but they were worth exploring. There might be more surprises along the way. There probably needs to be more awareness of how we wrap the recommendations, because they're going to be very human centered. There's going to be some objection to the change that comes from it.

We may not even get to the real topic today but this just brings up something that I cannot quit thinking about and that's-- There's three categories here. Between you and I, we're trying to change the world. It's to change consumption habits, it's to change how somebody thinks, whether they are buying or not, and it's creating something. Tie that back to the education that most people bring to this field. How much training do they really get in those things, especially the first two of those three?

Blair: What does training look like? Design school, if you're coming from the creative side. Maybe you're coming from the business side, some education in marketing.

David: I think it highlights how important it is to be working at the right firm, where you're learning from people who can help you absorb this stuff. You have to learn in a real world environment, very much like an apprentice sort of thing, because every one of these situations is so different, and critical to all three of these. We're starting to realize this, especially about that third one, about creating products, is that we are helping humanity make decisions.

If you think about how an algorithm is constructed in say a social media product, you have to know more than how to code. You have to understand how people think, and what the impact is going to be on those sorts of things. It's like unwittingly from the bottom, we have become more effective, or more influential anyway, in terms of how the world operates and communicates and does thing.

Blair: We're a long way from just designing a beautiful skin on something, aren't we?

David: Right. Not a brochure.

Blair: The real reason I wanted to cover this topic today is--

David: Finally, right? [laughter] What time is it? Here we are. Okay.

Blair: The idea of, should you really be an agency? Let's just assume that now we've unpacked that word. Let's just assume that agency no longer means being an agent of anybody. It means the fee for service model of a marketing or creative firm. [chuckles] We can't even decide what we're going to call all you people listening. It's the fee for service model.

I wanted to make the case based on a conversation you and I had via text a couple of weeks ago, that when a principal of a firm is considering their positioning, the business model should be on the table, because as I've said on this podcast before, I've seen a lot of really good business ideas crushed as the owner tried to squeeze them into a fee for service model, because they just assumed that they come out of the agency world, they've run an agency for a while and they just assume when they reposition, that whatever the outcome of that repositioning is going to be another agency. I think that is seriously limited thinking.

It was brought to bear by the conversation we were having when you were saying, "Here I am in yet another engagement where one of the principals of the firm does not believe they need to participate in the conversation around positioning the firm." I said to you, "Well, I think that's because they see it as a linguistic exercise." What's the new language that we're going to use to describe what we've always done to the people we've already served? Not only should they be open to rethinking both the discipline and the market, but the business model of how they deliver value to that market. I think that should be on the table. Do you see any problems with that?

David: No. It ought to be on the table which is going to impact so many things. The first thing that comes to my mind is it impacts who they're going to be working with on the other side of the table too. How are you going to be addressing business model working with a marketing assistant, right?

Blair: Yes.

David: We've done lots of events together and I don't know how many years ago, but we did an event in Atlanta at a brewery. It was called Revenue 2.0. That may have been my favorite event, because what we were doing, there were I think 70 or 80 firms there, was helping them think through what business they were in, and what they were selling and how to wrap that differently. It was about surfacing and then monetizing your IP.

Every one of those discussions was new and fresh because we were trying to think about how we shouldn't think of ourselves the way we had in the past and there were so many more opportunities. We brought 20 or 30 examples of firms that you and I have worked with, that have really rethought what they did and therefore how they delivered it and how they priced it and all of that. I see a lot of hope out there for that, but it seems we're at the cusp of even bigger, better things around that. I'm not sure why, but it seems that way.

Blair: I feel like it too and I think it's part of the natural fragmentation of the marketplace. It's like we all used to be in this one big bucket and now we're all in a whole bunch of smaller buckets. This idea that we're all agencies. Some of us are product companies, some of us are marketing companies, some of us are consulting firms. I have a call with a client of mine from years ago, I haven't talked to him in a few years. He worked with you as well, recently published a book. He reached out to me and said, "Hey, I'm stuck between, I don't know if you use the term agency, but like marketing firm and training company, and I need to make a decision, and you've been stuck there before, Blair, between consultant and training company. Can I talk to you about this?"

I remember when he dipped his toe into the training waters, because he had launched a new firm, newly repositioned, I think you were involved in helping him with the positioning. He came to us for some sales training and he was having a hard time getting traction in the marketplace. What he was offering was needed, but very few people were willing to hire him to do what you would call consulting work. He decided to launch, at our behest, launch a couple of training programs to see if he could get some people pay a little bit of money, thinking that he can teach them how to do this themselves and then they'll go off and do it themselves and then realize, oh, we can't really do it ourselves, we need a whole bunch of implementation guidance.

He did that, that has been quite successful for him and now he's got to make a decision one way or the other, or can he continue to have a foot in both worlds? I think consulting, training, some of these firms should be SAS companies. Not a lot of them, but some of them have an offering that might be more aligned to a SAS company.

Product companies, I've said before, if you're in the video production business. There's more money to be made actually using your video skills to create a product and be the client. We talked about that in an earlier episode too. Those are just some examples of how an agency model might not be the right model for your firm.

David: I wonder if the way, the people that go through your training, where they experience the discussions around pricing. I wonder if that would be different if they started with a different business model, because helping them think differently about how to price the services that they've always been offering, feels like a different thing than if they rethought their business model first and then it would make so much sense to be pricing that differently than they had in the past as well. That's what we're really trying to do, is ask them to think about the business model that they're in carefully, and then that can influence so many other things.

Blair: Yes. Your point about how people think about pricing. You're exactly right. The first exercise we do when we're teaching people the value conversation is we have them conduct a value-- I almost don't want to say this out loud, but we have them conduct a value conversation on a problem for which they do not have domain expertise. They have to let go of all of their baggage about bringing, immediately matching a solution to it and being stuck in that model.

When we take away the ability to sell anything or all subject matter expertise, then all they have left is this methodology, this model that has them focused on the client. They talk to the client about what the problem is, how much value could be created, what they would be willing to pay for that and there's no discussion around solution at all. Now, if we did the first exercise in an area where they had domain expertise, they're immediately tapping into all of the things that they know and they're getting locked in by the patterns.

One of those patterns is the business model, how they deliver services. They see the pattern and they go, "Yes, I know what your problem is. I know what your solution is. I know what a firm like ours needs to charge to do this right." They think there's one right solution and one price, and they've got it all figured out. As soon as you take their business away from them and have them conduct that conversation, then they're not thinking about solutions, they're just thinking about value creation and they have a conversation about what somebody is willing to pay for it.

If we didn't sneak up on them and have them do that exercise first, I think most people would not be able to make the fundamental shift to intellectually understanding the power of value-based pricing.

David: I'm not sure I could do an exercise like that, to talk about something that I don't know a lot about. I can't imagine a topic that I don't know a lot-- I'm kidding, okay, just relax.

Blair: You should come to the next pricing creativity bootcamp. We'll put you through some exercises and we'll get you talking about personal problems and we'll have a consultant-- [laughs]

David: You just slipped right into a sales sort of a sing song on me.

Blair: I sell selling, David, do you want me to just turn that off?

David: If we want to leave people with a thought, it's to think about, first of all, which of those three categories or maybe a mix, they fall in. Are you helping somebody change their consumption habits? Are you helping them change how they think about something? Are you creating something that will be used either by the business or the public? Then what's the best way to deliver that?

What's the business model? Then go back and listen to some of the other episodes about pricing too, which would really make a lot more sense now in this context.

Blair: Yes. There's nothing I would add to that. I think that's a great summary.

David: Good.

Blair: Words matter. We keep using them, so here I am adding to it. Shut up, Blair. Great episode, David.

David: Thank you, Blair.

Blair: Thanks.