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.

July 24, 2014

Why Your Social Media Strategy Sucks

You've probably noticed that about 93% of all TV commercials are lousy.

And so are about the same percent of movies, TV shows, books, songs, and paintings.

If you think all this crappy stuff is around because people aren't trying very hard, you're wrong. The reason is actually quite simple: Producing good stuff is really, really hard. And there are very few people who can do it.

Nobody sets out to create a crappy TV spot or a crappy book or a crappy song. They just turn out that way.

Creative talent is a very rare and very precious commodity. Not everyone has it. As a matter of fact, hardly anyone has it.

That's why really good creative people -- whether singers, writers, actors, or even ad bozos -- often make a lot of money.

Fortunately, most of us don't think of ourselves as singers, writers, painters and actors. So the quantity of really shitty "art" is self-limiting. This is not the case, however, in social media.

Everyone thinks he's a capable social media creator. Believe it or not, there are actually more English language blogs in the world than there are English language native speakers.

If you're wondering why your blog, or your Facebook page, or your Twitter feed, or your "compelling" content, or your "viral" video is laying around like a dead lox, it's not hard to figure. In order to be interesting, social media requires creativity -- just like movies, TV shows, music, and writing.

Without creativity, nobody gives a shit. The world is full of dull opinions, almost-funny banter, and dreary monographs.

Your social media strategy doesn't suck because Facebook, Twitter, YouTube and blogs can't reach people. It sucks because you're stuffing it with crap that no one is interested in.

Creativity is the ability to be interesting, funny, or different. It's easy to be interesting, funny or different at lunch. It's a thousand times more difficult to do it on a page.

Very few people are capable of this. If you want to have one of the rare social media endeavors that actually makes a difference, you better find yourself someone to execute it who is highly creative.

And, take my word for it, it ain't that social media guy with the Powerpoint.