Ever since the venerable ad agency first moved into its midtown Toronto office location in the mid-80s, its name had been emblazoned in big, bold lettering atop the building.

But after recent successive years of plummeting revenues and staff cutbacks, the agency no longer qualified as the building's anchor tenant. So, one Saturday last year, its iconic sign was ignominiously hauled down and replaced with that of an insurance company.

At one time, this agency was one of the largest and most prestigious in the country. Its sharp decline had nothing to do with the quality of its creative work—in fact, it continues to produce award-winning ads—rather, it was due more to the deplorable state of the business. All traditional agencies are suffering—some more so than others, particularly if they've been slow to recognize that the industry is at a crossroads.

Ad spending is in the doldrums, with no sign of a revival anytime soon. According to Ad Age, the industry barely showed a pulse in 2002 after negative growth the previous year.

Marketing budgets everywhere are being slashed. And, unlike the past, when ad spending could be counted on to rebound with the economy, the cuts this time are permanent. More than at anytime, ad expenditures are under grave scrutiny by skeptical senior management. In a recent Ad Age poll, 70% of marketers admitted that ROI accountability “represents a long-term change in how they do business.”

Under threat of further budget cuts, marketers are crying out for help. How can they do more with less? What mix of channels will deliver the highest return? How can they prove the effectiveness of multimedia campaigns?

Faced with an almost unrecognizable consumer environment rapidly mutating before their eyes, they now realize the answers lie outside the customary 4Ps. Unsure of themselves, marketers are more open to experimentation with contemporary formulas suited to a digital age.

The problem is, they can't rely on their general agencies to serve up much more than the usual bromides—or even to offer impartial advice. As much as agencies like to depict themselves as being media neutral, their natural bias is toward TV, where they have historically reeled in the biggest dollars.

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ABOUT THE AUTHOR

Stephen Shaw is vice-president of strategic services with The Kenna Group, a full-service customer relationship management company. He can be reached at 905-361-4046 or via email: sshaw@thekennagroup.com.