Machine Masters – the practical implications of AI for marketing agencies

Barely six months ago, hardly anyone had even heard of Generative AI. Then ChatGPT exploded onto the scene. In the short period since then, we’ve seen the release of even more powerful AI services.

Examples include: GPT-4, the next generation of the AI model behind ChatGPT, which introduces multi-modal text and image capabilities; Microsoft Co-pilot, which brings generative AI to tools such as Word, Excel, PowerPoint and Excel to materially improve user productivity; and AutoGPT, which uses generative AI to achieve complex tasks by recursively breaking them down into simpler ones that can be executed using online services.

New generative AI solutions and innovations are hitting the market at a blistering pace. This is true exponential change in action. Indeed, it’s almost impossible to keep pace with the evolving technology, and the temptation may be to set AI to one side and carry on as before.

The implications you can’t afford to ignore

Agencies are essentially all about communications and AI has now reached a tipping point: it can imitate the nuances of human communication to a level where it is good enough for many tasks.

Critically for agencies, AI is also now multi-modal, so it can generate written, visual or spoken communications (or any combination) with great fidelity.

We aren’t far from a world where we have truly interactive generative media, which offers highly personalised and adaptive customer communications in real-time – AI that can respond persuasively to your personal communications preferences and behaviour in a genuine market of one, instantly and at low marginal cost.

How should agencies adapt to this AI-enabled future?

Our view is that we will see the rise of a new generation of agency which will fully exploit the capabilities of advanced technology alongside the best of human capabilities, bringing collaborative value to customers. We call these agencies Machine Masters.

Of course there’s nothing new about marketing agencies using technology, so what’s different about this new breed of agency?

Let’s be clear that human originality and creativity will always be in the mix: communication is intrinsically about relationships and this ultimately requires a unique human touch. However, Machine Masters will ruthlessly exploit cutting edge technology to maximise customer value and they will integrate technology into the heart of their value proposition, skillset and business model.

Here’s how they’ll do it:

1. The agency skills base will change

Technology will rapidly automate many agency tasks that have historically been delivered by people. Any task that is data-centric and resource-intensive will be highly automated. This brings in a wide range of activities from copywriting and artwork creation, to social media content and search optimisation. As a minimum, technology will give a starting-point for outputs that can be refined by a human specialist.

The impact on skills requirements will be profound:

  • To start with, agencies will need people who can extract magic from the technology itself (think prompt engineers).

  • Highly skilled strategists will be needed to overlay human judgement on top of the predictions and outputs generated by software, pushing the bar much higher in terms of experience and expertise. Fewer generalists and juniors will be needed on each project.

  • Agencies will also need to have technology specialists on the team, who can keep on top of the ever-evolving plethora of systems in the market and continually test, purchase and integrate the very best into the agency’s tech stack.

  • Finally, agency leaders will need to hone their skills in change management to inspire their teams to perform under conditions of extreme and ongoing uncertainty.

2. The agency value proposition will change

AI will unlock new sources of customer value: speed, efficiency, accuracy, insight, impact. This will enable agency customers to achieve new levels of marketing ROI, whether this is realised directly through increased sales or improved business efficiency, or indirectly through enhanced customer loyalty and share of wallet.

Smart agencies will harness the technology to unlock these new sources of value, combine them with the unique capabilities of their team, and encapsulate this into an enhanced customer value proposition.

This new combination of ruthless application of technology to drive operational improvements, along with the creativity and judgement of a great team, will set Machine Masters apart from competitors, and give them a clear value edge with customers who are hungry for enhanced marketing results and customer success.

3. The agency business model will change

  • Charging for employee’s time, on either a retained or project basis, will no longer be an adequate business model in the AI-enabled agency world. Technology will greatly reduce the cost of many activities that have historically been resource-intensive: search optimisation, copywriting, performance reporting, web creation… the list goes on. At the same time, it will hugely accelerate the speed with which outputs can be delivered.

  • Similarly, agencies will have costs for advanced software systems that can’t be absorbed as overheads. These will need to be passed to the customer in some way, either directly by the software vendor or aligned closely to the vendor’s agency charging model, depending on how the software is licensed.

  • The value of the people in the agency will actually rise as automation increases as their activity becomes focused on higher value tasks such as managing the outputs of technology systems, setting business strategy and making judgements where there are complex trade-offs or human emotions to be factored into decisions. As such, there can be a price premium for such people which is higher than before automation. Essentially, automation gives better predictions on which judgement can be based, increasing the value of the latter. Agencies need to recognise this value shift in their charging models.

  • The huge changes in how value is created and consumed point towards radically different charging models for agency support. An example would be an ‘Always On’ service, where technology drives continuous real-time results, which are fine-tuned in real-time by domain experts. Agencies will also need to trade pricing of individual customer engagements, which could be at a lower price point due to automation, with a new found ability to service more customers without increasing their resources.

So how do agencies go forward into the AI-enabled world of Machine Masters?

The first step for aspiring agencies is to recognise that technology-led change is inevitable and to emotionally commit to a journey of strategic change to embrace the power of technology alongside human capital.

Beyond this, early experimentation is critical so the potential for automation can be better understood and key lessons can be learned before committing to wholesale change. A thorough analysis of each customer offering can be followed by a re-imagination process to explore what these offers might look like in an AI-enabled world. The new propositions can then be tested through experiments, to give key learnings and a baseline for a business case for scaling new ways of working across the agency customer base.

The exponential progress of technology means that those moving first with well-planned experiments will gain a huge advantage over those who choose to let change happen around them.

Martin Ward

Post by Martin Ward

Partner at Waypoint Partners

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