Ongoing erosion
The process matter-of-factly described as market shakeout has cost jobs in recent years and is buffeting the entire creative industry.
Seeking ostensible salvation by treading new paths, tapping into new business lines and carving out competencies in various related areas in an effort to survive as an agency is no easy step. The investment involved, in creative manpower as well as of the financial kind, is a bold venture. Yet without diversification survival is that bit more difficult on today's markets. Even good, distinguished agencies - not least among them Wiesbaden-based on air - have had to call it a day because they were no longer able to deliver the up-front input that principals now expect.
"We've got a cultural clash in Germany. The cultural difference between ‘big companies and ‘small agencies is still relatively firmly cemented," Lutz Engelke, managing director of Triad Berlin, cites as another reason for the tailspin. Jan Pauen, in charge of marketing and communication at Triad, also takes a rather critical view of the way companies treat their creative service providers. "One reason for the failure of new strategies and creative solutions lies in the occasionally heavily ritualised communication between ‘principal' and ‘provider', because the success of a project stands and falls with how trustfully the two parties interact with one another."
One sticking point that the entire creative community and not just agencies have been battling against in vain for years is the "culture" of unpaid bids. "Pitches with eight agencies for EUR 100,000 knock any form of creativity on the head," Pauen says. And consequently any form of the creative resources that agencies need. This comes, moreover, despite the current fragility of the advertising industry, with a forecast result for this year hovering somewhere between treading water and growth of 1 % to around EUR 29.5 billion, as the ZAW German Advertising Federation predicted at the end of August.
Pauen insists that agencies should seek to get to grips with the way companies handle the agency sector as a whole and find different ways of approaching each other rather than aiming for mutual elimination through competition. "A communication culture based on partnership between companies and agencies is crucial to high-impact and excellent creative services. In the long run it is more successful, enhances the reputation of companies and agencies alike and demonstrates a sense of responsibility for the industry."
But the question is how these new agency-customer relations are supposed to work. The standard-bearer agency Springer & Jacoby in Hamburg has caused a huge and rather negative uproar in the industry with its announcement of swingeing restructuring and efficiency-based compensation. Engelke sees this as an illustration of how creativity is being hamstrung. He perceives the danger of Springer & Jacoby's jeopardizing its own corporate culture by stifling its creative high performers. "In this situation it's fairness that suffers - both internally towards the staff and externally in terms of quality and creativity. Quality and creativity are not in the business of split-second performance, they have a lot to do with developing potential and processes. Production lines work by different rules ...," Triad's managing director believes.
But many companies are still far from realising that developments of this kind ultimately also hit their bottom line. Jan Pauen: "There's still dissent between specialist departments and buyers. Although marketing ideally sides with the agencies, it's political role-play."
The ones that suffer are the agencies: "We sometimes get the impression that badly thought-out briefings, through to inadequate marketing strategies, are not corrected until it comes to the pitch. From a variety of different approaches clients can cherry-pick what they'd really always had in mind," Lutz Engelke says rather baldly. Agencies as a corrective of insufficient preparation by corporate customers are just one aspect of the pitch culture, he believes.
He is convinced that the product of a client-agency relationship is all the better, the more competent the other side is and the longer-term the partnership. "Basically, creative service providers are nowadays financing very specific segments of communication and marketing departments in German industry. We're the ones that have to take out loans and provide input up-front, which ties up our capital. We hold the creative manpower available. The inflationary and sometimes arbitrary pitch culture undermines long-term relationships with clients. In the below-the-line segment of marketing people think too much from one event to the next. Then we're supposed to grin and bear it - that's a lot to swallow," he criticises. First a few companies go bust because of this, and then an entire industry.
That advertising companies sought 59 % fewer specialists year on year for advertising work in the first six months of 2005 fits this picture. The ZAW's explanation: Following the intensive search for professionals in 2004, agencies have evidently finished retooling their personnel.
At present it can safely be assumed that companies will be the last to depart from a course that is so convenient for them. "They have realised that they can play the agencies off against each other. The only thing that will help is to persuade both agencies and companies that unpaid pitches are beyond the pale. You have to keep on bringing up the issue so that the players involved start thinking beyond the short term and a new sort of solidarity can emerge."
What is more, Engelke is convinced that the situation is now turning into a locational problem that should not be taken lightly, given that an entire creative industry is feeling the fallout. After all, innovation is concerned not only with high-tech from Siemens and Transrapid railway systems operating in China, it is also about training programmes and jobs that have been created in his sector over the past ten years. "But good people look for work on flourishing, not anaemic markets." Parts of German industry are forgetting that it is in their very own interests to develop "Created in Germany" into a trademark for products, brands and their communication. If they do not wake up to this, Engelke sees Germany losing further ground in international competition. Triad's strategy for coping with the situation: "We are diversifying successfully, we are investing in customer relations and we are not permitting ourselves to become reliant on one branch of industry, one theme or one client." So as not to let the matter rest, Engelke proposes a round table that would gather together interested players from companies and agencies to identify new ways of working together - not least to enhance the performance of creative workers, companies and Germany as a business location. Annic Kolbrück
m+a report Nr.7 / 2005 vom 27.10.2005
m+a report vom 27. Oktober 2005