Tough Times for Creative Boutiques

Creative boutiques have long been an important part of the advertising industry. The competitive advantage for boutiques has always been their ability to turn out inventive creative work quickly, without the cumbersome bureaucracy and politics of larger agencies. Large and small shops coexisted successfully because boutiques usually pursued smaller accounts than large agencies were interested in. And even as the agency business was reshaped by consolidation and the creation of large mega-agencies that now dominate the industry, creative boutiques were riding high on the dot-com boom of the late 90s that provided a boost in billings, profile, and morale for small shops. However, the dot-com wave crashed even faster than it appeared, and then came the terrorist attacks of September 11, which were followed by the worst advertising recession in decades.

Today's creative boutiques are facing major challenges, and many are struggling to identify and differentiate themselves and attract clients. They find themselves competing against the larger agencies for accounts that would have been passed over by top-tier shops during better economic times. Moreover, selling the creativity of a boutique's work is not enough, as many clients want the range of services that larger agencies provide. Creative work does not capture the imagination of the industry the way it used to, as marketers are looking for business-building ideas rather than creative home runs. As the new business director at a large New York agency notes: "Boutiques can't compete in terms of offering integrated solutions, and don't have the resources to mount serious pitches for even the smaller pieces of business that might go to a mid-size agency. They will be forever mired in project work."

Despite these obstacles, there are still those brave or foolhardy enough to believe that with a dollar and a dream they can open their own creative boutique, and they are hanging out shingles. The advertising business has always been grounded in creativity and entre-preneurship, and most boutique partners see the small shop as still relevant in an age of consolidation and multinational clients. They note that there still is a niche for creative boutiques, citing the number of big-client-small-agency relationships across the industry. Anheuser Busch, which has large multinational agencies on its roster, also works with small hybrid shops such as Fusion Idea Lab in Chicago on project assignments for Bud Light. Target parcels out project work to small shops like Peterson Milla Hooks in Minneapolis, while Boston-based Velocity's clients include Just For

Feet and the Bruegger's Bagels chain. Many of these hope to become the Next Modernista!,the Boston shop that was founded by former creative directors from Arnold Advertising and Wieden & Kennedy, New York, and in less than two years has managed to land clients such as the Gap, MTV, and General Motors' Hummer.

Many clients recognize the benefits of working directly with a smaller creative boutique where they can get more attention and better access to creative talent than they would at a larger agency. For example, the marketing director for Culver Franchising System, the parent of Culver's Frozen Custard, hired the small One and All Shop because the company was looking for an agency where the partners would be involved and there would not be a lot of layers of bureaucracy with which to deal. Creative duties on the Boston Beer Co.'s $30 million account went to a former Lowe Lintas & Partners creative director who left to form his own agency, called Big Chair. The vice president of brand development at Boston Beer explained: "I was looking for people who had beer experience, who had good experience with humor, and a shop that was unconventional and small. The creative so far has met my expectations and so has the relationship with very quick response time a very high level of thinking."

Many creative boutique owners still feel they can beat the odds and carve out a niche for themselves in the advertising agency business. Those who can survive the tough times facing the advertising industry may find a bright future, as there will always be clients who want key-principal involvement and creative people who are doing breakthrough creative work.

Sources: Anthony Vagnoni,"Small Fries," Advertising Age, March 4, 2002, pp. 20,22; Eleftheria Parpis,"The Little League," Adweek, Nov. 26, 2001, p. 3.

Exhibit 3-6 Initiative Media is the leading independent media buying relationships. Many companies have been unbundling agency services and consolidating media buying to get more clout from their advertising budgets. Nike, Maytag, and Gateway are among those that have switched some or all of their media buying from full-service agencies to independent media buyers. As noted earlier, many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients and also offer their services separately to companies interested in a more specialized or consolidated approach to media planning, research, and/or buying. Exhibit 3-6 shows a page from the website of Initiative Media Worldwide, the largest media services company in the world.

As you have seen, the type and amount of services an agency per- Age P CV Compensation forms vary from one client to another. As a result, agencies use a variety of methods to get paid for their services. Agencies are typically compensated in three ways: commissions, some type of fee arrangement, or percentage charges.

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