view of the ad industry

“Think of the marketing profession as an orchestra.  Each marketing activity-media advertising, public relations, retail distribution, direct marketing, sponsorships, and so on-is an individual instrument.  A company hires the orchestra.  Who acts as the conductor?  The answer has usually been the advertising agency.  These days, the answer is increasingly anyone but the ad agency.”

            Over the past decade, Reinhard has seen his DDB Worldwide grow to have offices in 96 countries and global billings of eleven billion U.S. dollars.  DDB ranks as the fourth-largest agency in the world, behind McCann-Erickson, BBDO Inc (which, like DDB, is owned by Omnicom Inc.), and Young & Rubicam.  DDB has found itself increasingly relegated to the orchestra.  Reinhard’s opinion on this matter is that the ad industry needs to aspire to “the conductor’s job.”  His orchestra analogy is not an original.  For years Ogilvy & Mather has talked about its “orchestration” strategy, but today agencies like Ogilvy and DDB are struggling to retain control of the orchestra.  At the same time, the revenue base is shrinking as clients cut their fees and focus their financing into other areas of brand-building.  The first trend feeds the second: as agencies’ role in the marketing process shrinks, their fees are reduced.

            Reinhard’s proposed solution to the problem is to reinvent the entire industry.  “If it doesn’t,” he says, “we will become carpenters, as opposed to the architects we aspire to be.”  There is no easy answer to the question of how to reinvent an entire industry, nor will the process be a painless one.  Agencies must change their entire structure, hire new people with different skills to the ones usually sought in ad agency executives, and find new revenue streams.  But the key thing agencies need to do, according to Reinhard, is to find a way to charge for their core competency:  the creation of ideas.

            Reinhard is typically shocked at the thought of an industry that does not charge for its core competency, but agrees that the industry’s real problem is its reluctance to change.  “Agencies cherish words such as innovation and change,” he says, “but we have not changed for decades.  The industry’s structure, practices and remuneration systems are the same as they were in the 1960s.”  Ad agency executives like to describe themselves as their clients’ marketing partners, but that role is being stolen away by management consultants.  Reinhard wants agencies to be paid for their ideas.  The only way to achieve that is by changing the way clients view agencies-the work they do, the value they offer, and the importance of the ideas they generate.