We are on the precipice of massive change. Retailers are shutting down stores in droves in response to changes in consumer buying habits. Product companies that rely on those retailers as channels are left with nowhere to sell their products. We are talking public companies—stalwarts of the American economy for dozens of years or more—going broke. Many will simply cease to exist.
Meanwhile, digitally driven companies have become giant killers. In 2016, General Motors sold 10 million cars for the first time. Tesla sold 76,000, yet their market cap surpassed GM in April. What does that tell you about the market’s belief in the ability of traditional market leaders to compete in the coming years?
In recent years, digital shops have not escaped the turbulence. Brands have taken many marketing functions in-house. Competition has swarmed as consultants, publishers, production companies, influencers, and more have tried to move in on the marketing services pie. Media has gone programmatic. The Google/Facebook duopoly sucks up the vast majority of digital ad dollars.
The result? Agencies have been hurting.
Case in point: A year after going on a digital spending spree, Publicis had to take a $1.5 billion write down on their digital business. Ouch.
This has created a situation where many agencies don’t have a clear understanding of the value they can actually provide to marketers. And if agencies can’t see it themselves, you can bet our clients haven’t. Many agencies scrambled to provide commoditized services to “hit their numbers” without stopping to ask if they were actually providing value to clients.
Of course, any business that does not provide value to its customers is doomed to fail.
Fear not. As we face a tectonic reshaping of the business landscape, there is a silver lining for shops with strong digital capabilities. When plates shift, things rise to the surface: for agencies, what’s surfacing is a clear picture of the value we can bring to brands.
In his book, Predicting the Turn, Dave Knox illustrates that companies like Nestle, P&G, Unilever, and Pepsi spend between 4 and 10 times the amount on marketing as they do on R&D. Amazon, on the other hand, spends more than 3 times as much on R&D. According to Know, other technology-driven companies like Google, Microsoft and Apple are following suit. Is it any wonder that that the companies that perpetually invests in its own future are the ones laying waste to its competitors across the board?
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