With increased competition from local and offshore low-cost digital production outfits and a growing take-up of insourcing amongst clients, how can big ad agencies compete and differentiate themselves? Writes Cecile Ferre
Ad agencies are facing increased competition from offshore low-cost digital production shops. These shops can scale up at short notice to handle high volumes of work. They charge rates agencies cannot compete with. The question then becomes when and how to leverage their capabilities for our own and our clients’ benefits?
The local competition is no less significant. With marketing budgets contracting, agencies increasingly see their production fees benchmarked by their clients against smaller, cheaper local digital shops.
Some pro-actively initiate this benchmarking in order to keep their production costs down. At times, outsourcing to a lower cost partner of their choice becomes the only way of retaining control over the execution of their campaign ideas.
Additionally, clients have started insourcing all or part of their digital production requirements, mostly in an effort to generate further cost efficiencies. This can be observed with small and large businesses alike, and as it reduces their reliance on agencies, it gives the latter another reason to relook at their digital production strategy.
All of those trends combined have impacted on ad agencies’ digital production pipeline, with their operational costs and financial targets making it difficult to impossible to undercut in order to retain the work in house.
One other emerging trend is the set up of digital innovation labs start-up style within large client organizations. US corporations in retail and publishing are leading the way, such as Walmart with WalmartLabs and New York Times with its R&D Lab.
This shows there is an emerging yet growing appetite for digital products that will enhance or at best revolutionize existing business models as brands are trying to leverage new consumers’ behaviours. This is not so much of a threat however, but rather an opportunity for agencies with the right digital capabilities to tap into, lead and differentiate.
How can ad agencies differentiate and create a digital operation fit for future?
I believe in the virtues of an operational model whereby we become more discerning on what we can realistically produce in house successfully versus what technologies or skills we are better off outsourcing to protect our clients’ timelines, the quality of our products and our margins.
This seems simple in theory; in practice, it is not so. It requires a fundamental change of mindset for some staff i.e. an acceptance that the work when outsourced won’t be less exciting for it. It also requires an adjustment to our ways of working and critically, a business decision and consensus on the skills that are best retained and up-skilled into versus those best outsourced.
In my opinion, outsourcing is well-suited for the production of both low-risk highly-commoditized and high-risk highly-specialized deliverables.
Banner resizes and eDMs fall into the first category – they rely on ever cheaper, standardized and common technologies and are often required in high volumes and short turnaround times; this makes offshore outsourcing the right solution.
Some of us may argue offshore shops will also soon master the production of high-end, complex digital products. The lack of local specialist talent and slow take-up of development and QA best practices however remain 2 major obstacles to this happening any time soon.
Niche technologies fall into the second category. A constant race to up-skilling across all new and emerging technologies and platforms is pointless. With so many appearing all the time and more frequently, it is hard to distinguish fads from enduring ones.
Agencies are better off learning fewer technologies and core frameworks that have longevity, which they can own and master. By outsourcing the others, they remove the risks of up-skilling on the job including missing deadlines and burning more head hours than planned for.
In both instances, considerable delivery risks exist, ranging from missed deadlines through misunderstood brief to poor quality control and coding standards. Poor coding standards make it hard to maintain and build upon the existing product in future, putting the initial investment at risk. These risks are best managed by specialist agency staff on behalf of their clients, leaving them less exposed.
The digital production skills ad agencies should retain in house for their own and clients’ benefits are those that not only are integral to the campaign idea generation process but also guarantee the viability, usability and quality of the end creative product.
These skills make up for a unique differentiator and a key contributing factor to the campaign success. They are a necessary part of the digital production process yet equally critical to shaping the campaign idea ahead of production commencing.
These skills are those detained by our user experience designers and creative technologists. Both are creative professionals in their own rights as well as production experts in their discipline. Their talent is critical to researching, prototyping and specifying in the detail the making of the digital ideas our clients buy.
The pairing of an art director and a writer with a UX designer and a creative technologist simply makes the digital end product stronger. As an integral part of the creative development process and campaign product DNA, their work should not be left to a third party – it is simply too invaluable a part of the IP our clients are buying.
By adhering to these key principles, we have found a way to maximise both campaign and cost effectiveness for our clients.
Cecile Ferre is GM of Digital Arts Network Sydney (part of the Whybin TBWA Network Australia)