May 2009 – Column: The Media Report

The Vision Conundrum

By Jack Myers

How realistic is it–in these near-impossible economic times–to invest in building long-term brand relationships when there are insufficient budgets to drive sales today and tomorrow? For consumer brands, the decision is difficult enough. For electronic retailers and direct marketers who are enmeshed in a pressure cooker of downward pricing demands and intensifying competition, it’s a near-impossible goal until the market rebounds. But for service agencies and organizations that have next-to-zero margins and commoditized offerings, investment in brand differentiation is a mandate for survival.

The conundrum faced by all service companies–large and small–is how can they invest in collaboration and long-term vision when the fundamental resources required to service their clients on a day-to-day basis are being eroded? How can they invest in innovation that requires manpower and support, when every man-hour needs to be assigned to a specific client task in order to optimize revenues?

CHANGING YOUR VISION
Our business is becoming increasingly commoditized as the economy worsens. The reality is that service companies have no option but to define their long-term vision and goals. If they are unable to invest in achieving these goals, then they should seriously consider whether their business model is a viable one.

Overcoming day-to-day obstacles that prevent a focus on long-term vision is a key to future success.

It’s this reality that is leading companies of all types to use this economic crisis as an opportunity to slowly evolve their traditional competition-centric business model to one focused on collaboration. Rather than engaging in intense pricing battles with competitors and instead of driving vendors to offer terms that are near-unprofitable for them, companies are exploring new models that encourage partnerships, alliances and brand-building initiatives.

In the advertising and media business, the large holding companies own and control a disproportionate percentage of agency services required by leading consumer brands. Creative, media planning and buying, public relations, promotion, research and direct marketing all fall under the umbrella of services offered by Optimedia, Publicis, WPP, Interpublic Group, Aegis, Havas and a couple other massive global groups. Within these companies live hundreds of large and small divisions that compete for a share of clients’ rapidly eroding budgets. Intensified competition, consolidation, divestiture, trading and unbundling all are on the horizon for these companies. Throughout the 1990s, success at these organizations was measured by mass, scale and clout. While this remains an important criterion, in the future, success will be defined by service offerings and capabilities that are truly differentiated and focused on:

• the core customized needs of their clients;
• actual sales–and profitability–measures; and
• collaboration and managing across multiple partnerships and alliances of a common need and interest.

Jack Myers writes a weekly blog on media for JackMyersThinkTank.com and The Huffington Post, and consults with companies on defining, developing and implementing transformative business models. He can be reached at jm@jackmyers.com.