Five models will define the way advertising agencies and brands work together in the next decade, a new IPA report predicts, despite “polarised” industry views about which approach is the best.
The Future of Brand and Agency Relationships, set to be published tomorrow at an IPA conference, gives five models that are best viewed as sitting on a pendulum rather than a status spectrum, such is the dynamic ecosystem of some agency/brand remits.
The models are:
The Titan Model – a brand selects one single external body to provide all marketing services across both strategy development and the execution of advertising operations. (The report predicts its growth potential is moderate.)
The Engineer Model – the overarching marketing strategy is developed by a single, external body, while the execution of the strategy is undertaken by a multitude of agencies. (Its growth potential is predicted to be significant.)
The Coalition Model – the overarching marketing strategy for a brand and the execution of the strategy is developed and deployed by a coalition of multiple agencies. (Its growth potential is deemed low.)
The Hybrid Model – a combination of in-house client services and external agency services are utilised for both the development and execution of the marketing strategy. (Its growth potential is considered as significant.)
The In-house Model – the vast majority of a brand’s marketing activities are moved in-house, operated by the brand itself. (It has a moderate growth potential, according to the report.)
These models (pictured, below) sit on an axis where the key factor that shapes each one is the extent to which the marketing strategy and the execution of that strategy are provided by external or in-house teams.
The “titan” and “engineer” models are more likely to result in longer-term relationships between brand and agency, the report notes, as well as a harder set of measurement KPIs that are more closely linked to joint business-growth metrics. Meanwhile, the models on the right, “in-house” or “hybrid”, are likely to result in weaker KPIs linked to traditional areas of measurement, such as share of voice, or engagement for a specific short-term campaign.
The coronavirus pandemic is likely to amplify the polarisation of demand across either side of this axis, the report adds.
It explains: “[For] brands who operate with models towards the left side of the spectrum and whose commercial performance is heavily reliant on marketing efforts, there is a risk that moving towards a more in-house approach will be viewed as an unnecessary cause for upheaval at times of economic uncertainty. Conversely, the pressure on budgets presented by Covid-19 will have the opposite effect on other brands who seek to move more operations in-house as part of wider cost-cutting efforts.”
There is a polarised view of the role of the agency in addressing these changes, the report also reveals. Opinions differ particularly over whether a single agency should have the remit and capability to help brands in responding to their full range of challenges or whether they should provide focused and highly specialised services for one specific marketing function.
Nigel Vaz, IPA president and global chief executive of Publicis Sapient, said: “This report comes at a pivotal moment for agencies and their clients and should give us all food for thought. For agencies, it affords an opportunity to consider which business model will best suit them and help their clients to identify and realise value. For clients, it acts as a guide to which of their agency partners can help, how and when.
“The report concludes – as many of us intrinsically know to be true – that, despite disruptive change, and sometimes because of it, there is an incredible opportunity ahead for agencies to become long-term and integral business partners to their clients, fundamental to their commercial success and sustainable growth.”
Vaz believes the ad industry needs to redefine itself in order to remain relevant to clients, and last year he set out his “Reimagine” presidential agenda to IPA members, which focuses on an agency's role, revenue and responsibility.
Eighteen “brand and agency experts” were interviewed between July and September to inform the relationship models section of the report.