The Future of Advertising : Joe Cappo

[Paramvir]

Reproduced from iMedia Connetion: Please find full article here


The fololowing is an excerpt from an interview of Joe Cappo. Have you read his book? What do the readers think of the future of the advertising business, and do uou think the 15% commission system should be back?


Joe Cappo’s book, The Future of Advertising: New Media, New Clients, New Consumers in the Post-Television Age traces ad agency consolidation, the impeding demise of television as an ad force, and more -- then lays out a startling yet ultimately logical roadmap for the future of bran marketing and advertising. Cappo recently retired from Crain Communications, Inc., where he was senior vice president. He also was publisher of Advertising Age, and is a world-class speaker.

Few people know the industry as well as Cappo does or have as intriguing a perspective on what’s to come. Here’s the first part of Cappo’s fascinating and challenging conversation with Doug Weaver, president of Upstream Group, at the February's iMedia Brand Summit.


iMediaConnection: Joe, in the book you offer a really vivid picture of the ad business and the market and the social forces that really took it to the place that it is today. So how about starting us off with some context. How did a business that was seemingly so rich and profitable and exciting back in the late 1970s end up where it is today? What happened?

JC: Well, its food source was cut off, and as soon as you cut off a food source, any industry or any individual is going to be in trouble. I started actively covering the advertising business in 1968, and at that time, it was a personality business. It was a business of creativity. It was a business of entrepreneurs. There was only one publicly held ad agency in 1968, which was Foote, Cone & Belding. And even then, Foote, Cone & Belding had a very small core of owners, most of whom were employees of the agency.

At the time, advertising agencies had a sweet deal. They charged 15 percent commission on any media that they bought for their clients. So if they bought a hundred million dollars worth of television time, which you could do with one telephone call, they would get $15 million in income. With that money -- in fact, I interviewed the former president of J. Walter Thompson, who said, “You know, in 1965, in our Chicago office alone, which was the second largest office at the time with about 600 employees, they had a research department, they had a PR department, they had a merchandising department, they had a sales promotion department.” They were an all-inclusive, full-service ad agency, and they didn’t charge clients for any of those services because they made so much money from the commissions on buying media, especially television, that they were able to give all these services away as sort of a value-added kind of a proposition for their clients.

Well, what happened to J. Walter, as well as all the other agencies, is that as we went through time, as we went through the ‘80s and then toward the end of the ‘80s, this phenomenon called the “media buying specialist” started in Europe. And that is that clients would say, “Okay, I want you to create my advertising, but I’m going to go over here and have these media specialists buy the time because they’re only going to charge me 4 percent or 3 percent or 2 percent commission in order to buy my time on the television or radio or my space in publications.”

And so what allowed the agencies years ago to be a marketing partner with their clients all of a sudden just evaporated. The agencies were being paid then a creative fee for doing something or an hourly type of a fee or something, but nothing ever to match the 15 percent commission that they were getting for their services previously.


Now, a typical example is in the agency selection business. When I started covering the industry in the late 1960s, if Kraft wanted to hire an agency, they would get the ad director. The ad director would get four or five agencies. They would call them and say come on in and do a presentation, et cetera. Great.

Now if Kraft wants to hire an ad agency, they call an agency selection consultant who will send all kinds of questionnaires out to a hundred different agencies. They’ll talk to 40 or 50 of the agencies. They’ll whittle them down to four or five good prospects for this particular account, and then the client will come in and talk to these three or four agencies. This has created another barrier between the agency and the client, and this is sort of what’s happened.


An example I give in The Future of Advertising is that years ago, Fairfax Cone, the chairman of Foote, Cone & Belding, was a buddy, a close friend, of Joyce Hall, who was the chairman of Hallmark. For all of those years, they went fishing together and hunting together, et cetera. Foote, Cone & Belding was not only the agency, they were the marketing partner for Hallmark cards. Foote, Cone & Belding was the producer of the Hallmark Hall of Fame, and everything they did, they did everything for their client within that. They designed the racks and everything else like that. That kind of -- of course, Foote, Cone went public, Hallmark went public, they became part of bigger organizations, there’s no more contact, and the client is now at Leo Burnett and with nowhere -- believe me, the chairman of Leo Burnett has no contact with the head of Hallmark. You have an account supervisor at Leo Burnett who is dealing with an ad director or a marketing director at Hallmark. It’s on a lower level.
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[FC]

thanks.

[Sourabh]

thanks.

?????
whats your opinion?

[Paramvir]

David Innis has writtenthsi wonderful piece from canada and he sends us all Christmas Wishes! A very Merry Christmas to you too, David, from all of us at Desi:

Great article and very relevant today.
While the rest of the world has evolved and moved on, including the Indian Railways, advertising agencies have been caught standing still.
Weren't they the last to embrace the internet as a marketing tool?

Fundamentally, more and more clients are refusing to pay for process and overhead. I see it every day.

Clients realize there are more nimble suppliers out there delivering better work, faster and cheaper - not because they're cheap, but because they are more efficient. Media is the classic example. Take Canada for example. Three English national papers. Really, a handful of TV stations (yes I know we have 594 numbers on the TV guide, but in reality, the Weather Network or Canadian Parliament isn't an option). How hard is it really to knock out numbers and a plan? Not to undermine media planners, but it appears proficiency with Excel is the key qualification. Creative Media Planners are at a premium. For agencies to expect 15% time and time again, using the same template, churning out the same stuff, using the same formulas and hitting enter on the keyboard, is ridiculous. Any client worth his or her salt will question it and want to pump the extra dollars into other marketing channels. Media can't be that hard. I'm doing it. And before you ask, I haven't screwed it up till now.

While agencies whine - and what else do they do these days - they neglect to see the opportunity.

And the opportunity is going back to being an Idea Driven Business.
Create an environment that encourages ideas, get clients to recognise the value of ideas, and charging for them for ideas.

Last summer, for example, during the opening day of some blockbuster film, Ikea brought in a ton of chairs for people in the line up to sit on.
That along with a free bottle of water.
Such a cool media op and creative idea.
Of course the agency offices were opposite the theatres, which sparked the idea, but nevertheless, a good idea it was.
And Ikea paid for that.

Clients are looking for ideas. More so in an increasingly competitive market.
And bigger agencies don't deliver ideas anymore because the importance of an idea isn't valued at the same level, within an agency.
Which also explains people leaving agencies at a time when they should be in full bloom.
By the time you hit your mid-thirties, you've had enough of the politics and you've been buried by the weight of rejected ideas.

Agencies need to lose weight. They need to get creative people to understand the business of the business. And empower generators of ideas - wherever they may be.

That makes for more profit and more fun.

See you guys in India, end January.

Take care and a wonderful Christmas and New Year to all my desi brethren.

You guys are the best because you question. Don't ever stop doing that.

[Desh Premi]

Right said David.

[jungle ki raani]

i wonder how many clients are willing to understand how the media has changed. i dont see any web 2.0 savve clients here