A Conversation With Joe Cappo

"I am afraid that a new generation of marketing consultants is going to come into the picture and start working on a strategic level for top managers while agencies continue to make ads for middle managers. If I were a management consultant, that's the kind of practice I would be developing right now." - Joe Cappo

Editor's Note:

If you have been in the ad world for any time at all, you are most likely very familiar with the name Joe Cappo. Mr. Cappo recently retired from Crain Communications after 25 years with the company. At Crain, he was Senior Vice President and he is also a previous publisher of Advertising Age. Lately, he has been promoting his new book, The Future of Advertising: New Media, New Clients, New Consumers in the Post Television Age, which traces ad agency consolidation, the impeding demise of television as an ad force, and lays out a startling yet ultimately logical roadmap for the future of brand marketing and advertising.

A Conversation with Joe Cappo

BusinessMedia: You speak of a major revolution taking place in the advertising and marketing industry. What is the biggest mistake firms can make in terms of not changing the way they do business?

Joe Cappo: The biggest mistake anyone can make is assuming that everything will remain the same. As a result, they fight change, rather than study it, respond correctly to it or even create the change. The magazine industry saw television come onto the scene 50 years ago and decided to fight it. Television threatened their advertising base. Magazine publishers failed to see that television was here to stay. They should have become content providers and strategic partners for television, rather than competitors. Magazines with their great content, well-known brands, and knowledge about their audiences could have helped shape television and reached more readers and viewers. What's ironic is that today there are more magazines based on television than there are television shows based on magazines.

BM: What are the critical drivers that are pushing the industry to change? Is it primarily technological or demographic?

Cappo: The cause of change in the advertising and marketing industry can come from virtually anywhere. For the past few years, the primary driver was technology. Back in the 1950's and 60's it was the demographic changes caused by Baby Boomers. But the impact can come from many sources, such as wars, immigration, disease and psychographic shifts. Maybe the advertising changes of recent years came about because of a change in attitude by clients. They wanted more accountability. They saw that a lot of their advertising was wasted. And they finally figured out that paying an ad agency based on how much money they spent on media was a lousy form of compensation.

BM: You mention a dramatic change in consumers and how they purchase goods today. Is the situation similar for "purchasers" of business-to-business services? Are they guided by similar "consumer" habits?

Cappo: There is very little difference between consumer attitudes and business attitudes. Businesses are run by individuals. Just like consumers, they want good products, prompt service and the best prices they can get. In fact, there are a considerable number of businesses that serve both business and consumers, such as Amazon.com, Home Depot, Dell, Motorola, Southwest Airlines, etc. The good ones have created brands that are consistent in tone, whether aimed at businesses or consumers.

BM: How has an increase in retailer power affected the advertising industry?

Cappo: No matter how great your advertising is and how much you spend on it, you are not going to sell products if you can't get distribution. When the number of new products coming onto the market started outstripping the increase in shelf space a few years back, marketers started devoting more money to sales promotion and trade promotion. Advertisers that want to get into the distribution channel of any supermarket chain today, have to pay a slotting allowance, followed by all kinds of trade promotions to get store managers interested in their products. That's one example of growing retail power. Another is Wal-Mart. No matter how much money is spent on dog food advertising, Wal-Mart's house brand, Ol' Roy dog food, is number one in the category. Consolidation in the retail arena has put more power into their hands. And this consolidation has taken place in virtually every retail product area, from cars to toys to packaged goods.

BM: In your opinion, where is the biggest opportunity for marketers and their agencies in the "new" world of advertising and marketing?

Cappo: Opportunities are different for different elements of business. But let me talk about ad agencies, because they are the most vulnerable segment of the marketing chain. Agencies have to stop being merely providers of advertising services and take on a more holistic role for their clients. One major deficiency in many clients is the lack of integration in marketing services, but few ad agencies are geared to helping these clients because they are basically creators of advertising. I am afraid that a new generation of marketing consultants is going to come into the picture and start working on a strategic level for top managers while agencies continue to make ads for middle managers. If I were a management consultant, that's the kind of practice I would be developing right now.

BM: Will anything in the advertising industry remain the same?

Cappo: No. Everything is changing or will change. My favorite saying is: If you don't like change, you won't like life.

BM: What is the ideal picture of a 21st century agency?

Cappo: The ideal 21st century agency should be more than an advertising agency. It should be a marketing architect for its clients. Just as an architect is supposed to know all of the elements of building a stable structure, an agency should know how to build a marketing campaign for a client that might include many forms of marketing disciplines, from sales promotion to public relations to direct response. This doesn't mean the agency has to perform all of these functions, but it should be able to make a strategic plan and find the various "sub-contractors" to put the project together.

BM: What is the major difference between B2C and B2B advertising in relation to this revolution?

Cappo: There is considerable difference between the average BtoB agency and the average BtoC agency. The most obvious is that many BtoB shops have been serving as their clients' strategic partners for years. They create media advertising, but they might also produce collateral, design trade show exhibits, do public relations, design packaging, etc. In other words, they are way ahead of the typical consumer advertising agency that fell in love with the glamour and money involved in producing television commercials...and isn't interested in the more mundane aspects of a client's marketing challenges.

BM: Given all of these changes, how will agencies have to think differently, and do you believe this will change the fundamental structure of the industry (e.g. four major players, vs. numerous small shops)?

Cappo: There will always be small, entrepreneurial agencies to serve entrepreneurial clients, but consolidation will continue in advertising as it has in other service fields such as public accounting. Huge global clients - and the number of them is growing---like to be served by huge global advertising agencies. The Big Four marketing companies already account for 82% of the advertising in the U.S. and 50% in the world.

They really can't get much bigger. One thing the big guys don't like to talk about is the problem of client conflict. Some advertisers don't seem to mind that a sister agency of their own agency might be handling a direct competitor. But others do mind and the consolidation has caused many accounts to move their business to a different holding company. As media selection becomes more strategic, I expect that clients won't like their media-buying agencies to be also serving their competitors.

BM: You mention that a key component in the future will be "place-based" marketing. How valuable will this medium be for B2B advertisers?

Cappo: I think place-based marketing will be a valuable tool for many BtoB advertisers. But I don't think it is all that new to them. Participating in a trade show, conference or industry golf outing, for example, are all forms of place-based marketing. Creating new places in which to promote your product or service is the challenge for clients and their agencies. It presents a classic case for thinking outside the box.

BM: Do you foresee a dramatic rise in co-branding in the B2B arena and if so, what will this look like?

Cappo: Co-branding will grow only as the art of branding grows. Anyone that is thinking of co-branding wants a partner that will bring some benefits to its own brand. I think the kind of branding that Intel has done with computer makers is a good example for the future. It certainly can work well in the business arena, maybe more successfully than in the consumer arena, but I can't predict that any rise will be dramatic.

:BM: What new or different skills will be required for marketers in this "new reality" of advertising?

Cappo: There are two specific skills that are growing increasingly important as businesses evolve. The first is the need for all aspects of the marketing business, agencies and clients alike, to take one step backward and look at the totality of their marketing plans, rather than at each individual function. The need to integrate marketing services is greater than ever because there are so many more media, new media and alternative media to take into account. Knowing the ROI of each medium will become an important function in the years to come.

The second need is to look at least five years into the future while conducting a total self-audit of their companies. Who are they? What do they do? What services do they perform? Are they prepared for a technological change that may make their product or service obsolete? How about a psychographic change? There is a simple reason for this: We will live the rest of our lives in the future. One cannot change the past, but can alter the future.

BM: As you mention, the industry has consolidated and changed quite significantly in the last couple of decades. As a result of this change, what do you believe has been gained - or lost for the industry as a whole?

Cappo: As we become inundated with marketing messages, I believe there is growing cynicism on the part of individual and business customers toward all advertising. We are drowning in a sea of overblown claims and pompous puffery. Just think about all of the behemoths that claim how important your business is to them. But in reality, they don't want to be bothered by you. Example: I wanted to question a charge of $59 for a 19-minute international call to Italy on my AT&T bill (especially since I recall seeing ads promoting calls for 7 to 35 cents.). I tried for more than 30 minutes to speak to someone at AT&T, but was never able to get a human being on the telephone. This is the same company that has been begging me to give them my local service.

BM: As proliferation of the sponsorship of public venues continues to increase, at what point will the consumer "tune it out" and how can you truly measure ROI of this medium?

Cappo: Consumers have already tuned out in large part. I think most of these sponsorships are meaningless. If Pepsi puts its name on a huge arena, and also arranges to have only its own products served there, that means something. Forcing fanatic Coke drinkers to try Pepsi is an excellent tactic. There is some potential for sponsors if they use their relationship with a stadium to give away coupons, do research, run sweepstakes, etc.

But many venues are already swamped with a multitude of giveaway days for all kinds of marketers. Advertisers have been agitated into a stampede as they negotiate huge fees to put their names on venues. Much of this is a waste of money. If anyone disagrees, please show me how the ROI on a stadium name compares with the ROI on a solid sale promotion campaign.

BM: What are the unexplored territories of advertising? Is there any area that hasn't yet been touched by advertisers?

Cappo: Everything we come in contact with will drown in a tidal wave of advertising. I don't think you will ever find a company's logo on communion wafers. But as they say in New York: "Hey, you never know."