Originally Published in Ohio Business
By Michael E. Moore
More demanding clients, tighter ad budgets, and computerization are making Ohio’s advertising agencies change their way of doing business, wether they like it or not.
Slowly but surely, the words “advertising agency” seem to be disappearing from the ad business jargon. They’re being replaced by such terms as “marketing communications” and “marketing information services.”
Marketing is today’s buzzword, and departments such as public relations, computers, research, and focus groups are coming out of the shadows and into the limelight.
And the prime reason is money.
Traditionally, ad agencies realized their profits from the commissions (usually 15 percent of the media budget) they received for placing ads in print, radio, or television. But, that’s no longer sufficient to cover the cost of doing business, according to agency executives.
Today, more and more agencies are doing business on a fee or project basis as well as charging the client for various services, such as public relations or research, which many times in the past were “thrown in”.
“The days of a client handing an agency a million dollars and saying “go spend it” are gone” says Walter Ohlmann, president of Penny Ohlmann Neiman Inc., Dayton.
“Money is just too hard to come by and clients today are much more sophisticated about marketing. Agencies today have to use all the tools available –public relations, research, direct mail, etc.- to accomplish their goals. Ads alone do not shape the image of the client’s products, “Ohlmann says.
Bob Sullivan, president of Lord, Sullivan & Yoder Inc., Marion, agrees that agencies are changing, primarily because of the computer. “Agencies today are running their agencies as businesses. The computer has helped them – once they figured out how to use them,” Sullivan notes.
Sullivan points out that the computer has provided agencies with a lot more marketing tools. “With a computer, you can target your market, especially in the media. You couldn’t operate today without a computer.”
Patrick J. Morin, president and CEO at Griswold Inc., Cleveland, says that automation of his industry is a necessity. “We don’t have any choice. Margins for error – both on the agency and client side – are narrower today. The clients are asking for more results for the ad dollars and they are looking for more and more services from their agencies.”
But Morin feels that the trend by clients to want to see results from their advertising programs “tomorrow” is not the way the business should be operated.
“The “now mentality” that exists is wrong,” he says. “I think it reflects a lack of understanding of the role advertising can play when it is done right… and continuously.”
Morin also feels that this type of approach, where clients request ads “that have been tested to death” and require agencies to “justify themselves continuously,” has resulted in agencies playing it safer and ad people who are trained not to take risks.
An example of the positive changes in the field is Shelly Berman Communicators, Columbus. Here advertising is a business and the computer is king.
“You won’t find a typewriter in the office”, says Robert M. Gold, senior vice president and COO.
Sheldon M. Berman, president, explains that the computer has drastically changed the way his firm does business. “The commission system used to be synonymous with the agency business, but not today. Everything is costed out with computers, and charged on a fee basis. We can forecast how much time and how much money will be spent on all of our marketing programs, whether it’s public relations, research, or whatever. We can monitor results and forecast return on investment (ROI). That would have been impossible without a computer.”
Jay B. Schloemer, president of Stockton West Burkhart Advertising Inc., Cincinnati, has worked both sides of the advertising business, having spent five years as a marketing executive for a national fast-food chain. He feels that agencies today must have a better awareness of their clients’ marketing needs and be able to provide assistance in all marketing areas.
“We do not necessarily have to provide those services as an advertising agency,” Schloemer says. “Some clients may want to use us as a public relations company only. If we want to earn the money that is available, we must be able to provide the services needed.
“We would be struggling for growth if we remained a traditional ad agency. Today, we have a broader exposure to communication dollars. As a traditional ad agency we could only go in the front door. Now we can go in both side doors and the back door as well,” Schloemer says.
Ira D. Thomas, whose Youngstown agency last year merged with Joseph A. Rini’s Gregory Inc., Cleveland, to become Gregory & Thomas, is along with Rini, a firm believer in the power of the computer.
“Being accountable for what we do has taken some of the mystique out of advertising,” says Rini, agency president. “We make our people business managers. ROI is very important in our business today and computers make it easier to determine costs for our clients and stick to those costs.”
“The emergence of computers in the agency business has been dramatic,” Rini adds. “Four or five years ago I attended a 4As meeting (Association of American Advertising Agencies) when the person conducting a seminar on computers asked how many agencies present has computers. Fewer than a dozen hands went up, and all the big agencies from New York and Chicago were there. Today, just about every agency, from small to large, has one.”
The whole process of strategic thinking has changed, Thomas adds. “We want to be in on the strategic marketing thinking with our clients so we can tell them when public relations or research should be brought into the planning. Being able to obtain accurate information by using computers takes the intangible out of the planning.”