Unilever recently added to the writing on the wall for traditional advertising agencies when it announced that whilst it increased its marketing spend in 2011, it had cut spending on advertising agencies and production companies.
Speaking last week at Unilever's investor presentation, Ad Age reported CFO Jean-Marc Huet as saying, "We significantly reduced our non-productive spend during the year. As you know, that's the money we spend on production costs and agency fees, money that's not directly driving the exposure of our brands to the community and consumers."
Couple that with the decision late last year by South African retailer Woolworths to take its advertising account in-house and a clear message is that the value-add of agencies is being questioned.
Cutting-back agency spend in tough economic times is not new, but one gets the feeling that this time the clients’ intention is more long term and agencies need to redefine their value add for clients.
Creativity is an easy target for clients wishing to save money and the recession is making it easier. As retrenched creatives find themselves on the outside of agencies, clients are able to pick up excellent creative skills much cheaper than from an agency which leads to in-house agencies.
The move away from traditional agencies is, in part, also driven by a move towards more digital communication and the question whether the traditional structure of agencies is the best one to handle messaging in the social media arena.
Added to that, our own experience is that clients are also questioning the value of the traditional account planning service offered by advertising and creative agencies and are looking for more management-type consulting on how to position and manage their brands in tough market conditions.
Perhaps the combination of more strategic consulting, digital savvy and affordable creativity is the sweet spot that clients are looking for.