Do Agencies Need to Create Their Own Brands to Survive?

This guest article is written by redpepper founder Dave McMullen.

Most ad agencies live and die by a single metric. Some measure everything about it and all around it. Others ignore it and just hope they get it. It's the fuel that drives the modern advertising business.

It's the billable hour.

In order to grow profitably, agencies need to hire more people and bill them out at a minimum of 65-75 percent of their day. Unfortunately selling, assigning, and working by the hour and for the hour is not very motivating. And this can cause problems in an agency's culture by killing the inspiration needed to find creative solutions to problems.

More and more, agencies are trying to break away from the billable hour's tyranny by seeking alternative revenue sources. For some, that looks like creating startup companies within their own walls. From developing new apps to selling candles and chocolate, agencies are the ones creating a new wave of products in a broad range of markets.

Take Pocket Hercules for example, who partnered with a client to launch its own beer in 2008 and has since sold more than 100,000 cases. Or Anomaly, with their own line of women's shaving and skin care products (Eos) that's being sold at Target. These agencies are not just marketing their own products but can also channel their learnings to become better marketers for their clients.

After all, what better environment to incubate a new business idea than a place that's built to conceive a brand, develop a strategy, write a message, design packaging, and lay out a go-to-market strategy? If an agency can afford to carve out a few hours a day for skunk works projects, they'll position themselves to bask in the rewards of becoming a launch pad for business ideas.

Like the opportunity for earning revenue while you sleep, which is the overwhelming beauty of non-hourly business models. By making money outside of the client-controlled billable hour, agencies can focus more on passion projects and work that inspires them rather than work that simply pays the bills. Saying no thanks to an unfavorable RFP is a luxury most agencies wouldn't dare take without a steady flow of income far into the future.

Owning a breakthrough original idea will undoubtedly fan the agency culture flame, too. That's just what happens when creative people collaborate on a problem with a common goal, especially when that goal is to build their own idea the way they want (in other words, without clients). The result is inspiring, fulfilling work that's organized around people's talents and passions instead of client needs.

What's more, agencies actually become more empathetic for clients in the process. When agency folks who usually never have to worry about things like funding, distribution and, well, ROI, actually watch their own product move from idea to shelf, they get a 360-degree view of the entire value chain. That fuller picture of the business world helps them understand those client feelings of confusion, indecision and paranoia, and makes them better marketers in the process.

Our own agency, redpepper, has learned these lessons firsthand as we've brought team-inspired ideas to life. Our recent launch of Primary Coffee, a coffee created by creatives for creatives, came from the huge passion of many within our walls. Our team took Primary from idea to market in only eight weeks, and now we're selling our very own brand of coffee online. We've experienced the same kinds of challenges as our clients along the way, and we have a deeper understanding of the complete business cycle.

No matter their role in the agency, most advertising professionals prefer to be inspired by the brand, the product, or the market for which they work. But the traditional environment, with its work-for-hire, bill-by-the-hour projects, just doesn't provide much opportunity for that. And for too long, the result has been uninspired people doing mediocre work. If an agency is serious about empowering its team to do better work, it's going to take a radical shift in perspective. And the best way to change the way we look at things is to change the things we look at. By taking a chance on a new venture or running with that crazy business idea, agencies will find a new ability to nurture creativity and break those billable-hour bonds.

Ad agency by day, invention lab by night - redpepper is a Southeast-based full-service agency that specializes in integrated marketing solutions.