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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