time to put the intellectual back into ip and agency remuneration | the national business review
TRANSCRIPT
NBR STAFF · FRIDAY OCTOBER 10, 2014
SHARETalk to marketers and ad agency folk and many will agree; the
way we do business sometimes seems a bit mad.
At heart is dissatisfaction with the process (protracted), costs
(opaque), risks (usually client-sided) and outcomes (uncertain).
That’s before you’ve even talked about how much profit is derived
(who really knows?). Clients have huge difficulty drawing a clear
line between marketing communications (marcoms) and return
on investment. Not many agencies are getting rich in the creative-
guns-for-hire business these days either.
Everyone violently agrees on the prize – effective, creative
business thinking is one of the last, great, unfair competitive
advantages. Every day we see old, slow brands leap-frogged by
those with better ideas, design savvy or market buzz.
The methods these days are myriad: mobile, social media, web,
search, advertising, PR, design and more. Let’s just call it
“marketing IP.” Problem is; the way we approach creating this kind
of intellectual property is anything but intellectual.
Think about how you pay or get paid for most kinds of agency
services now.
If it’s on project, retainer or commissions – all based broadly on
head hours – then the fact is that what you’re paying for (smart
people to churn out ads, logos, press releases, code or media
schedules) often has only a casual relationship to the real drivers of
success (buyers and believers). Put another way; getting to an
amazing idea can take an agency 30,300 or 3000 hours – none of
which has any correlation to that same idea’s potential to transform
the market and your business.
In what other facet of business would you be satisfied with that
kind of fundamental disconnect? When things don’t quite make
sense, it’s sometimes interesting to look for parallels in other
categories.
Consider how “software as a service” (SaaS) is turning the IT
industry on its head:
Time to put the intellectual back into IPand agency remuneration
Time to put the intellectual back into IP and agency remuneration
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• the initial IP investment is borne upfront by the creator or
developer;
• the creator or developer monetises that investment across the
number of customer users or territories it is used in;
• instead of purchasing a licence and owning an “asset” outright,
that rapidly becomes obsolete;
• the customer pays by way of a subscription or monthly fee; and
• they get to use that tool for as long as it is of value to their
business.
This new model delivers greatly reduced upfront cost, ease of exit
and flexibility. Perhaps buy a full licence, move to the enterprise
level platform – even enter into a joint venture to develop a more
sophisticated global system.
How might a “creative as a service” (CaaS) model allow agencies
and clients to build better marketing IP?
• What if the ad agency shared partial or total risk up front in the
creation of marketing IP?
• What if the client could licence that material for as long as it was a
valuable driver of the business?
• And remunerate the agency more fairly for narrow vs. widespread
or more successful usage?
• What if that IP usage was covered by subscription, royalties, or
sales commissions? With bonuses for market share milestones,
enquiry rates, net promoter scores, or web traffic?
Of course, this is just one way to try to re-connect inputs (IP) and
outputs (results) along more sensible lines. There are many other
ways for more adventurous souls – including joint ventures and
equity relationships.
There are precedents for performance-paid IP. The motion picture
industry has paid actors for their imagery and IP by way of
royalties for many years – and it’s worth looking at agencies like
Anomaly out of New York or Zag within the BBH group as early
adopters in this space.
Our agency’s first foray into this area was nine years ago with the
launch of online DVD rental business, fatso.co.nz. The naming
process, brand identity and launch communications were all
contributed at the agency’s risk in lieu of a small sweat-equity stake.
The business grew and was partially bought by Sky Television, who
bought the remainder this year – when we recouped value for that
initial marketing IP investment.
It’s not right for everyone and, yes, it requires more care and
attention to monitor return on investment and success. However
the traditional excuse that it is too hard to measure marcoms
success is wearing pretty thin these days – there are many rich data
sources that provide a much clearer picture of what works and
how.
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So, maybe it’s time we all got a bit smarter with this stuff – and give
credit where credit is due. It’s marketing IP that makes the till ring.
Maybe your agency should survive and thrive on that basis too.
Jeremy Johnston is managing partner, Sugar and Partners
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