It’s election time, which means it’s the season for manifestos. Last week’s Cog Blog post outlined many of the problems facing the media agencies; this week’s proposes some solutions. A sort-of manifesto for the media agencies.
To recap the problem: Agencies pride themselves on their creative thinking which they marry with technology and analytics in order to deliver plans that drive business. This is the bit we all read about in the trade press and in the award papers. It’s the bit agency CEOs talk about, endlessly. But strangely, given how much the agencies themselves consider this work to be nothing short of critical for their clients, these same agency CEOs admit that they cannot persuade their clients to pay for it.
Then there’s the bit the agencies are less keen to discuss; their negotiation tactics -- and in particular those tactics that end up benefiting them as well as/instead of their clients.
So -- clients don’t pay for the bit that they should pay for; and the agencies make their money in a way that clients feel is unaudited, uncontrolled and could compromise their planning objectivity.
It’s easy to understand how we got here. Faced with a choice between a hard discussion with a client during which the agency is asked to justify the business benefit of all that planning and a far easier conversation with a vendor in which the agency holds the whip hand and basically threatens withholding revenue unless certain benefits are forthcoming, which would you go for?
So -- how to get out of this mess? Here are some actions the agencies can take to turn around an increasingly fraught relationship with their advertisers.
- Realize that the current lack of trust runs so deep and is such a threat to their futures that no agency can change the game on its own. They need to rebuild trust in the entire sector and to avoid accusations of grandstanding for competitive benefit. The big guys need to collaborate, via a moderator of some description rather as the UK creative agencies have done recently via their trade body to promote the business-building benefits of advertising.
- Accept past wrong-doing. The time has long past for attempted justifications and finger-pointing. It would be far more effective to propose a line in the sand and to focus on moving forward.
- Guarantee total transparency -- the client should be made fully aware of all discounts, rebates, kickbacks and the terms under which such benefits are paid or realized. That’s not to suggest that sometimes the agency isn’t allowed to benefit from its negotiating skills, but the client has to know what’s going on and has to agree to it in full knowledge. The time for playing semantic games in contracts and cloaking such contracts in gobbledegook has past.
- Make friends with the media auditors. It’s a foolish agency that sees the audit as a tool of the devil. Far smarter to co-operate, to explain all relevant background to the auditor, to agree on lessons learned and to see the audit process as a genuine opportunity to engage with the client.
- With the auditor as your ally, the smart agency can drive inefficiencies out of the client system, leading to better results and a far more productive relationship all around. For example, many clients don’t appreciate the dis-benefit of late approvals, nor indeed do they always understand the impact of late payment terms on the agency’s operations. A strong relationship with the client’s media auditor (hired, don’t forget, by the client) can help.
- The agencies should change their internal attitude to added-value services. Far too often such add-ons as analytics, research, market modelling and the like are seen internally purely as revenue streams, not as a means to better plans. In fact planners are often unaware of the benefits of such services and far too frequently don’t include them in their thinking. Clients soon get tired of forever being upsold, a process they see for exactly what it is. Far better to sell the benefit of better and more informed plans to the client by integrating these services more fully into the planning process. The days of separating in order to charge more have long been replaced by the desire for integrated thinking and behaviours.
- At the same time, media agencies should build closer ties with those related services contracted by their clients, even if they’re ultimately owned by a competitive holding company. Clients will choose (as one example) a particular marketing science supplier for very good reasons. How arrogant is it to assume from a position of some ignorance that the client will simply go ahead and switch to a supplier under the same ownership as the media agency? Build bridges that benefit the client; don’t assume that you have some God-given right to own every aspect of the relationship. Clients like those who make their lives easier, and collaborations between suppliers make their lives easier. And who knows, one day you might get the chance to pitch your marketing science credentials.
- Recognize that the strength of the client relationship lies with the planning agencies (by which I mean the Mindshares or the Carats of this world) and not with the trading organizations (Aegis Media, Amnet, GroupM, Xaxis). Kudos to both WPP/GroupM and Publicis/Vivaki for seeming to start to realize this. The plans must drive the buys. Central negotiating teams must refocus on delivering to plans, not on working so opaquely on driving benefits to the holding company. To be blunt, the planners work for the client; the buyers (just like any other internal group of specialists) work for the planners.
- Open up on fees. The agencies have to be prepared to explain what it costs to deliver the service they know the client needs. They must show their workings. They can and indeed should get creative with fees and bonuses. It’s easy, and foolish to give valuable added elements away for free (how valuable to the client can they be if they’re just given away?). It’s far better to justify their value to the client’s business.
The media agencies are only now starting to realize the depth of the hole they’re in. It’s time to stop digging! It’s time to start looking for the materials to build a ladder.
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