THE BLOG

Where There's Mystery, There's Margin

09/09/2014 13:46 BST | Updated 09/11/2014 10:59 GMT

The commoditization spiral has a gravity that slowly pulls all brands towards it. In that spiral these brands, these products and services, are compared on rational terms alone - price, performance, quantity - and the lowest cost manufacturer wins.

To stay out of the spiral we need to keep people acting irrationally, much like they act when they are in love. The ingredients of this love are mystery, sensuality and intimacy - and in building and curating the relationships people have with our brands we must always think about how we are sustaining mystery, appealing to each of the senses, and getting intimately close and personal.

Margin comes from people buying more, for more, more often. At Saatchi & Saatchi we call this creating 'Loyalty beyond reason'. In the commoditization spiral, loyalty is for a reason and therefore there's very little margin.

The same is absolutely true of agencies and clients. We've allowed too much of the mystery, sensuality and intimacy of our industry to be sucked away by procurement, benchmarking and creativity-by-numbers research.

This is not our clients' fault. I was a client for 17 years before switching to the agency-side. After completing my marketing degree and starting work with Unilever in Australia I determined early on that the arch-nemesis for my career would be the CFO. So I went back to study Applied Finance to be able to navigate a P&L and measure returns on investment. I figured if I could best explain that my marketing spend was an investment and not an expense I could get more of it, and I was right.

Our clients have been driven forever to prove return on investment and always will. Today they have better evidence than ever before to help them make this case. In macroeconomic terms the impact on industry since 2009 as the economy improves has been called a 'jobless recovery'. This is because necessity created permanent productivity improvements such that when the work returned, fewer jobs have.

In the same period, these same economic pressures on brand budgets, coupled with data availability, have risked an 'idea-less recovery' where communications are tested, proven, scaled and exhausted.

It's our fault as agencies for allowing the mystery to slip away, for taking for granted that we have a right to magic. We complain about our wafer-thin margins but we don't create the mystery to justify new margins. A large part of our business is well into the commoditization spiral - studio work, TV production for example.

The mystery around brand and consumer data has dissipated now too - with client friendly dashboards and UX to help them feel close to the facts as they live stream from their consumer interactions and conversations.

We must therefore embrace and create new fields for mystery - at the intersection of Big Data and Big Love, creating content that cannot be easily quantified but is loved and shared.

I can trace the phrase "Where there's mystery, there's margin" back to Dave Berkus who used it in the context of selling computing hardware. Hardware is an industry that since succumbed to the commoditization spiral and is a well documented case in one of my favourite books "The Innovator's Dilemma" by Clayton Christensen where mystery dissipated and incumbent leaders failed to adapt to the changing market.

Agencies should take heed while there is still some mystery left.