Do you remember the movie “What Women Want” with Mel Gibson and Helen Hunt?
You do watch any movie that takes place inside an advertising agency, don’t you? Anyway —the premise of the movie is that Mel Gibson is an arrogant, sexist ad guy who receives the “gift” of being able to hear what women are thinking all around him. As you might imagine, it was a shock to Mel’s ego to see himself through the eyes of the women in his life.
If you haven’t seen it — check it out. It’s definitely worth a Netflix night.
The movie popped into my head because I’ve had some interesting conversations with agency employees over the past few weeks and my conversation with Craig in this week’s podcast also touched on how our employees see the agency, and us as the agency leader. I wish you could hear their unedited thoughts because I think we unintentionally miss the mark sometimes because of our assumptions.
Like poor Mel — sometimes the listening was not easy to hear. But, given what we do for a living — we know how important perspective is and as you might imagine, the Mel at the end of the movie is a different guy than the Mel we met initially. I wonder if that would be true for you, too.
Here are some of the biggest refrains that are running through agency employees’ brains that I believe are worthy of your time and attention:
I could go on and on, but you get the point. Your team (unless you are the exception to the rule) feels a little out of the loop. While they are grateful that you work as hard as you do — it’s frustrating when they are never a consistent priority. They want more of you. More feedback. More informal teaching. More mentorship and more “Atta boys!” from you.
I watch the agency owners who truly are the exception to the rule and their agencies are on a growth path. They are experiencing less turnover and their client retention is higher. If I can sum up what they’re doing, it’s this set of behaviors and beliefs:
Every one of you is capable of all of the above. I just think you are running so fast and have so much on your mind that you forget to slow down and connect with your team. I know you want to be an amazing leader. I know you want to inspire confidence and trust. I know you want to build a team that will follow you into battle and do you proud.
Make it a priority. Schedule the time on your calendar. See those thought bubbles over their heads and anticipate what they might be concerned about and proactively deal with those worries.
You’ve got this. I know you do.
Another great contribution by Drew McLellan, CEO AMI (Agency Management Institute)
Silly question you might say, but what’s your website for anyway?
Before You Had Your Website:
Before you had a website, you should have had an agency brochure. Something you kept in inventory for those times when a prospect conversation ended with “can you send me something?” Off went the brochure with an accompanying cover letter. This package was normally sent by the person charged with agency business development and following a meaningful telephone conversation. The cover letter was written accordingly.
A good “agency business development person” (ABD) would make a follow-up call to confirm package receipt and continue with a probative conversation. Using what was learned during that call, the ABD now sent a very carefully considered and grouped collection of materials designed to emphasize and confirm the agency’s suitability and candidacy for handling the client’s business.
This process was carefully tailored to each client and each client’s interest; when speaking with a B2B client, there was generally no show and tell of fashion-related experience. Conversely fashion prospects were not burdened with industrial examples. Thinking back, didn’t this all make sense?
What’s Your Website Today?
What’s your website today? A pithy management mini tome declaring purpose and intent; a collection of everything you do and have done; an introduction to smiling team leaders with photos and bios, text hopefully appealing to all visitors, samples of current work in all categories, a listing of current but seldom past clients, concluding with a “Contact Us” page. Not necessarily in that order, but available for viewing.
Many variables determine why an agency is selected by a client, but all will agree that “chemistry” or likeability plays a deciding factor in the final selection. Knowing that, good agency people also know that “chemistry” plays a factor from the very beginning. Meaning – “You never get a second change to make a first impression” and undeniably the ABD can make or break your chance for success from the get-go.
If that’s the case, why not give your ABD star billing on the Contact Us Page? A handsome photo, and brief but credentialed bio, and multiple contact options. And while you’re at it, if your ABD is engaged in multiple forms of proactive outreach, rather than pointing to your website as all your competitors do, suggest they engage in that initial telephone conversation; then respond with a “custom digital agency brochure” tailored to that discussion.
How About A New Website?
As to your website? Just a powerful page or two declaring your understanding of the importance of relationships and of one-to-one conversation. Agency-to-client and client-to customer. Let them know your initial conversation will lead to a uniquely-selected collection of samples and examples specific to their interest and needs. Not like other “we-do-it-all” agency websites. Incorporate AI to let them schedule a day and time for their call and conversation. Confirm by email plus a real honest-to-goodness agency card via USPS.
Oh BTW – agency websites are used to recruit new hires too. But rather than burdening someone on staff who often has limited HR experience, why not engage an employee search consultant to narrow the field and present only qualified candidates? (as they’ve done for years)
Traditional media has met its match with the advent of digital, and the advertisers have been weighing out the pros and cons for each medium to make spending decisions ever since. Media players however, are now saying the debate should stop because at the end of the day, content is king.
Havas Group Singapore’s chief executive officer, Jacqui Lim said that contrary to popular beliefs, the first steps for her team after receiving a brief and budget from the client is not to build a media plan and decide which channels. Instead, a lot of planning goes into optimising metrics and understanding what hits the right key performance indicators. This is driven by clients’ expectation for the agency to look at things in an integrated, platform-agnostic and audience-centric fashion.
To decide on the right medium, there are several dimensions to consider, Lim said. For example,
Clients believe in a much more trackable and attributable kind of platforms, but the traditional or broadcast media comes in to help us amplify.
Rather that choosing traditional “or” digital, general manager of Unilever Singapore Banjo Castillo advises that advertisers shift their mindsets to “and”, and move the conversation towards how they can make the best use of finite resources.
With consumer journeys crossing not just media platforms but different screens as well, Castillo said that the company is focused on building its data-driven capabilities to boost campaign efficiency. This includes precision and performance marketing.
Havas’ Lim suggested a more unified currency for traditional and digital media buys, where television goes programmatic, and measurement and targeting are as transparent as that of digital. She added that making interaction and engagement metrics possible will also assure clients that they are making meaningful connections with their customers.
Additionally, the panellists at the event hosted by Mediacorp urged marketers to focus on effective storytelling as content is what matters to people and catches their attention. Ajay Vidyasagar, regional director, YouTube partnerships, who had previously also spent almost two decades in the television industry, said that digital has not only changed the way viewers consume, but allowed people to create content as well. This was what led to a surge of users on YouTube. He added,
“The walls between digital and traditional media are truly breaking. Consumers want content when they want it, in a form that they are able to consume, on a device they are comfortable reaching out to at that moment.”
Meanwhile, Castillo said that marketers can leverage digital to craft messages and develop products tailored to customers’ wants and needs. Digital has for instance, changed the way Unilever gets to know its customers.
He added, “When we do consumer research, it takes three to six months to come in, before we even get to analyse it. Now, through the power of digital, we can actually do social listening, and learn about consumers on the fly.”
by Avelyn Ng Courtesy the MARKETER
But the agency president and copywriter does believe in work-life balance.
Connelly Partners’ President and Copywriter Steve Connelly believes that working from home kills agency culture. However, he also tells employees, “If you don’t have a life outside of the office, you are useless to me.”
These are two of Connelly’s “strands of DNA,” which he tells Campaign US is a “blend of pragmatism and some basic human tribal beliefs I have that help us yield good work.”
He explained that no one can be creative 24 or 12 hours a day and he doesn’t expect staffers to work very long hours, but he does want them to be focused when they’re in the office.
“I have kids in their 20s and I certainly hear a lot about liberal work from home policies and I think that’s fine if you’re into productivity and staying connected, but if your focus and priority is culture, which mine is, then you have to be in the office, you have to talk to people and feel the energy around you,” he said.
But this doesn’t mean the agency doesn’t believe in work-life balance. Connelly said that if a staffer needs to work from home because he or she needs a mental health day or has a sick child, he’s totally fine with that. Plus, the shop offers unlimited vacation days.
“What you need to do to take time to refresh and stay charged and bring new experiences into the office you should do, but I’m not saying that I’ll pay for three days and then have you work from home on the fourth and fifth day. That’s not culturally beneficial,” he said.
Mothers who want or need to work from home are on a case-by-case basis. Connelly said he wants to make sure he stays connected with working moms and gets them back in the workplace, but he says if you’re in a leadership position, “You can’t lead by phone – you need to lead by example.”
He said he’d rather have a working mother tap into a truncated schedule in which she comes in earlier and leaves earlier than have her work from home.
Connelly also strongly believes in having a life outside of the office. “The more successful you become in this business, the more you’re taken away from what made you successful – the everyday things and people,” he said.
He added:” If you’re job is to tell so a wide range of people, you better be able to observe a wide range of lives. Go learn, live and find, and sometimes you suck up experiences without even knowing it.”
The agency’s culture is “familial” and “imperfect like most families, but with a lot of honest inside,” according to Connelly. The shop was built around a living room, kitchen table and bar because those rooms are often where the best conversations take place. “It’s a very educated treehouse,” said Connelly.
For agencies looking to figure out or build their own cultures, Connelly has some advice: “Please understand that culture is organic If you’re going to commit to culture, understand that you are the dirt, not the seed or plant, and your job is to provide the best growing environment.”
Note: Steve Connelly and his agency are proudly “one of ours!”
Employees don’t like them. Research proves they’re ineffective. Why is it taking so long for us to get rid of them?
First, you tear down the walls and dispense with the soulless cubicles. Then you put everyone at long tables, shoulder to shoulder, so that they can talk more easily. Ditch any remaining private offices, which only enforce the idea that some people are better than others, and seat your most senior employees in the mix. People will collaborate. Ideas will spark. Outsiders will look at your office and think, This place has energy. Your staff will be more productive. Your company will create products unlike any the world has ever seen.
There’s just one problem. Employees hate open offices. They’re distracting. They’re loud. There’s often little privacy. “The sensory overload that comes with open-office plans gets to a point where I can barely function,” says one 47-year-old graphic designer who has spent more than two decades working in open environments. “I even had to quit a job once because of it.”
For as long as these floor plans have been in vogue, studies have debunked their benefits. Researchers have shown that people in open offices take nearly two-thirds more sick leave and report greater unhappiness, more stress, and less productivity than those with more privacy. A 2018 study by Harvard Business School found that open offices reduce face-to-face interaction by about 70% and increase email and messaging by roughly 50%, shattering the notion that they make workers collaborative. (They’re even subtly sexist.) And yet, the open plan persists–too symbolically powerful (and cheap) for many companies to abandon.
As with so many things today, we have Google, at least in part, to thank. Open floors have existed since the secretarial pools of the 1940s, but when the then seven-year-old Google renovated its headquarters in Mountain View, California, in 2005, the lofty, light-filled result was more than a showcase for the company’s growing wealth and influence; it signaled the dawn of a new professional era. Architect Clive Wilkinson eschewed the cubicle-heavy interiors of the company’s previous office for something that resembled a neighborhood: There were still some private spaces, but also lots of communal workplaces and small, glassed-in meeting rooms. “The attitude was: We’re inventing a new world, why do we need the old world?” Wilkinson says. With Google’s rise, his vision for a collaborative workplace took off. “We had [companies] come to us and say, ‘We want to be like Google.’ They were less sure about their own identity, but they were sure they wanted to be like Google.”
Around the same time, a more radical version of the open office was emerging from other startups founded during the dotcom boom of the late ’90s. As these companies proliferated, they looked for cheap ways to differentiate themselves from each other and their predecessors. They found inspiration, Wilkinson says, in the more playful offices that had long been common in the advertising industry. Some moved into the unfinished lofts of San Francisco’s South of Market district–and left them that way. Walls only make things complicated when you’re rapidly adding (and eliminating) staff. “Those places were terrible,” says Joel Spolsky, who cofounded Fog Creek Software in 2000 and is currently the cofounder and CEO of Stack Overflow. “They were so loud, because there were no drop ceilings. It was painful for everybody. But [dotcom startups] were doing it because they had literally no choice.” Out of necessity, an aesthetic was born.
By the time Facebook opened its Frank Gehry–designed Menlo Park headquarters in 2015, the open office had become not just the face of innovation in Silicon Valley but a powerful metaphor. Facebook now houses roughly 2,800 employees in a 10-acre building that the company claims is the largest open floor plan in the world. “The idea is to make the perfect engineering space: one giant room that fits thousands of people, all close enough to collaborate together,” founder and CEO Mark Zuckerberg wrote when he announced the design in 2012. Famously, he has a plain white desk in the communal area, just like everyone else. (He also has a private “conference” room, where he is rumored to spend much of his time.)
The whiff of disruption that open offices carried became irresistible to startups and established companies alike. “When you talk to leaders in corporate real estate or CEOs about why they designed their space [in an open plan], most will give some fluffy answer,” says Ben Waber, cofounder and CEO of workplace analytics company Humanyze, which uses sensors to track how people use offices and interact with each other. “But when you dig down, it’s because this is what the workplaces look like at a couple of highly successful tech companies.” Calvin Newport, a computer science professor at Georgetown University who studies how people work, takes an even more skeptical view: Open offices have become a way to indicate a company’s value to venture capitalists and talent. The goal is “not to improve productivity and collaboration, but to signal that the company [is] doing something interesting.”
According to Humanyze, open plans are great at encouraging interaction between teams, which is useful when a company is trying to create new products. But they are terrible at encouraging interaction within teams, which is necessary for execution-based work, like writing code, when employees need to be in sync. An open office might be suitable for a company coming up with new ideas, but when someone has to implement them, it becomes distracting.
Of course, one of the main reasons that business leaders default to open plans is simply that they’re inexpensive. According to commercial real estate association CoreNet Global, the average space allotted to individual employees globally fell from 225 square feet in 2010 to 176 square feet in 2013, and is projected to keep decreasing. This adds up to hundreds of millions of dollars–or more–in savings per year at the country’s largest companies, according to calculationsfrom Erik Rood, an analyst in Google’s human resources department who examines corporate financials on his personal blog, Data Interview Qs.
Perhaps no company has exploited these efficiencies more than WeWork, which popularized communal tables and lounge areas in its coworking hubs and now builds out offices for other companies. WeWork distinguishes itself by using its data to compress people into smaller areas–it recently took Expedia’s Chicago office from three floors to two–without, it says, sacrificing employee satisfaction. Liz Burow, WeWork’s director of workplace strategy, says that this entails bringing people closer so they interact more, while also creating a variety of seating arrangements and, yes, even some private areas. “People have different needs throughout their day and their life,” she says. “They might need to focus at a certain point and talk to someone at another point.”
Many architects share this vision. Janet Pogue McLaurin, a principal at the architecture firm Gensler, which has designed dozens of prominent corporate offices, says that the most effective open plans include a host of meeting rooms and private areas for deep concentration. “Innovative companies actually use more spaces throughout the office,” she says. They don’t expect the desk to be the center of an employee’s work life.
It’s an enticing idea. But, as WeWork has found, the most expensive part of an office is the small meeting room. As a workaround, WeWork offers its enterprise clients phone booths–basically, portable pods that can be dropped right into an existing layout.
At 15 square feet, they’re rather tight for a private office. But at least there’s a door.
A Great Read by Katharine Schwab, an associate editor at Fast Company
|Contributed today by Tim Williams of Ignition Consulting Group
The level of mutual trust between agencies and their clients is at an all-time low. There are many culprits, some historical and perennial, some temporary and episodic. The current debate over media “transparency” is a manifestation of the erosion of trust in agency-client relationships. But it is also symptomatic of the underlying cause of this mistrust.
Clients surmise that agencies are making money on media transactions that are not being fully disclosed. In many regions of the world, agencies earn not only a commission from the media, but also an AVB (agency volume bonus) — effectively a rebate from media properties based on total spend. In areas like Latin America, this is completely understood by clients and fully disclosed by the agencies. In fact, many agencies in these regions are heavily dependent on these volume rebates to make their numbers.
In the realm of digital media, the digital media distribution chain extracts up to 60% of every media dollar spent. Clients are understandably concerned that less than half of their digital media budget actually results in consumer exposure (and even then, just a few seconds’ view of a banner ad often qualifies as “exposure”). The digital media chain can indeed seem bloated and wasteful, and large marketers like P&G and Unilever have called for greater efficiencies and fewer handoffs in this chain.
An important part of this string is the audience data owned by third-party aggregators, the media themselves, or even agencies. Many of the large agency networks are able to add considerable value in the digital buying process by applying algorithms, appending data, and employing machine learning to enhance the effectiveness of audience targeting and delivery. In some cases, these technologies are viewed as “black boxes” by clients, and some marketers are concerned they don’t have full visibility into the process and costs involved.
The wrong end of the telescope
Underlying all of these issues is what I believe is the real problem: agencies have taught their clients they can have a full, complete, detailed view into every aspect of the agency’s business, right down to salaries, overhead costs, and margin. This, in effect, puts the client in charge of the agency’s finances. Procurement professionals now dictate which agency individuals are assigned to which projects and how many hours they can spend. They impose “industry benchmarks” on virtually all aspects of agency overhead costs, right down to rent and health insurance. In some cases, they decide the individual year-end bonuses of agency team members. That, by any reasonable standard, is insane.
Since when is it the buyer’s job to manage the margins of the seller? Why should it be the prerogative of a client buyer to dictate to a professional service firm how much profit they’re allowed to make? More to the point, how did this happen? It happened when agencies made the misguided decision to adopt a pricing methodology that dates from the industrial age: cost plus. The cost plus approach spawned a series of unintended but nonetheless pernicious consequences, ultimately producing today’s undesirable state of affairs.
By definition, the cost plus method requires that all seller costs be disclosed, and buyers therefore feel they must be vigilant in tracking and verifying these costs. What if the agency is submitting inaccurate timesheets? What if they’re charging for time that was never spent? What if they’re overstaffing the business? What if they’re earning money in ways we can’t see?
In the world of multinational agencies, what should be purely internal agency management decisions are now monitored and governed by client buyers. Hence mandated audits of agency time and materials. Hence third-party cost consultants. Hence lack of agency-client trust.
To illustrate the futility of buying buckets of time, my friend Bruno Gralpois of Agency Mania Solutions provides the analogy of enjoying a fine meal at a restaurant. As you take your place at the table, instead of ordering items from a menu with published prices, you instead ask the restaurant how many cooks will be needed, how much each of them will be paid, and how many hours it will take them to prepare your meal. Ridiculous? Yes. And it’s also a ridiculous way to buy professional services.
A simple remedy
The prevailing cost plus approach appears to be a circular conundrum, but the remedy is actually simple: agencies must stop selling their costs.
Imagine the immediate change it would make in agency-client relationships if clients bought effectiveness instead of efficiency. Marketers would cease to care how many people are assigned to their business if the agency compensation was based on the quality of the outputs instead of the quantity of the inputs. In this scenario, both parties would care about the same thing: deliverables and results, not time and materials.
In retrospect, the original commission system was far superior to cost plus. The only way for agencies to earn more money was to create effective work and make effective media placements, because that’s what spurred increases in client spending. Success breeds success. Clients in the days of Mad Men could have cared less how many people were in a meeting, because they knew the agency had the right incentive to include only the people who were essential to producing effective work and growing the brand.
If there’s one overarching principle of economics, it’s that incentives matter. As economist Stephen Landsburg observes, “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary.”
Creating value is the foundation of your firm’s success, and it rests on a clear definition and understanding of the specific client challenges your firm is best prepared to address. Most firms approach this question precisely backwards, showcasing the obligatory bullet point list of services as the standard bearer of their business strategy. But the capabilities you offer must emanate from the types of business problems you solve for your clients. Clayton Christensen frames this in context of Jobs to Be Done Theory; the idea that clients hire a specific service to solve a specific problem.
The essence of this leg of the model is to clearly define and articulate “What are the problems we solve for our clients?” The most powerful way to do this is to state these problems from the client’s point of view, in first-person language.
Equally important is a clear articulation of the markets you serve. The answer can’t be “everyone with money,” as some firms regrettably define their target market. Peter Drucker famously observed that marketing starts with the question “Who is your customer?” and this question applies just as much to professional firms as to the clients they serve. Your target market doesn’t have to be a type of industry category; it can be a type of audience or even a type of brand.
Delivering value is the second piece of your business model. This means developing and supporting an effective engagement model, which is comprised of your operating model and your production system. Most agencies get high marks from client organizations when it comes to responsiveness; meeting deadlines, reply client requests, and fulfilling scopes of work. In other words, we’re seen as very responsive. (Unfortunately, client ratings for agencies being proactive are dismally low.)
When it comes to the operating model, the central issue agencies must address is differentiating between short-, mid-, and long-tail offerings. These solution sets vary widely in perceived value to clients, and must be delivered in very different ways by agencies. Short-tail offerings are the agency’s unique blockbuster competencies; uncommon services and programs that provide high-value solutions to client problems. Mid-tail offerings are capabilities that are routinely applied in most engagements. And long-tail offerings are the widely available executional services and activities that are seen as standardized (and therefore commoditized) by most clients. These three classes of offerings must be developed, delivered and priced in very divergent ways. The mistake most firms make is bundling all three service classes under the banner of the dreaded “blended rate,” the absolute worst way to address the continually-evolving disintermediation of agency services.
Capturing value is the part of the business model where professional firms struggle the most. The root of the problem is trying to package up the value of knowledge work in a unit of time; a hugely suboptimal way to get paid for the expertise and intellectual capital that resides in your firm.
Effectively capturing value is dependent on having an actual revenue model (billing for your costs is not a revenue model, it’s just a reflection of your cost structure). Professional firms with actual revenue models have replaced their rate card with a “pricing stack, a variety of ways to capture value in ways that align with the principles and practices of modern pricing. These include such approaches as dynamic pricing, two-part pricing, royalties, licensing IP and more. At the very least, it means pricing based on the perceived value of the outputs or outcomes, not the cost of the inputs.
To fully capture the value you create also requires commercial alignment; uniting the entire organization behind a shared vision of what you really sell and how you should get paid for it.
Not planning, but choosing
Especially if your firm has been in business a decade or more, it’s very likely that you’ve arrived at your current business model more by default than by design. You are living with an emergent strategy rather than a deliberate strategy. If this describes the current state of affairs at your firm, you have the opportunity (if not the obligation) to deliberately design your business model.
Your remix is not necessarily to make plans, but to make choices. Business planning is about taking steps and deciding what to include. Business strategy is about making choices and deciding what to leave out. As you examine each element of your business model, the job is to not to figure out how you can be better, but how you can be different. As design thinker John Koklo recently observed, “Leading companies say No much more than they say Yes. Rather than chase the market with follow-on features, they lead the market with constrained focus.
Propulsion is written by Tim Williams of Ignition Consulting Group, a global consultancy devoted to helping agencies and other professional firms create and capture more value.
Remember those goals you created in your retreat, summit, on a long car drive, in the shower, etc. for 2018?
That seems like eons ago, doesn’t it? You had plenty of time. You just needed to get a few things off your plate before you really dug in and got started.
Well, guess what — we have about 90 days left. In the US, Thanksgiving is three months from today. And whether you celebrate US Thanksgiving or not, we all know that by December 1st, things begin to grind down to a crawl for that last month of the year (and the first two weeks of January). So if we’re going to make hay, we need to do it right now.
One of the most paralyzing things we do to ourselves is to bite off more than we can chew. Our grandiose plans are so overwhelming that we don’t even know where to start. It’s time to trim that plan down to the essentials.
I want you to identify the two things you can do that would have the most impact on your agency by the end of 2018. It might be getting rid of a toxic employee. It might be doubling down on mentoring an AE so they can take more day-to-day work off your plate. It could be a new business push or fixing an internal system or process that is broken.
Whatever they are — no more than two. And then this week (yes, before the end of the day Friday) put together a simple plan for making it happen. Calendar it. Commit to it. Build an internal team if you need to. But, the finish line is now visible to the naked eye, so we can’t put these things off any longer.
You’ve got 90 days to set yourself up for success in 2019. Don’t dilly or dally. Just get it done!
Thank you Drew!
Guest Author, Tim Williams
You’ve just found $100 on the sidewalk. Should you put it under your mattress or buy a lottery ticket? What role does your tolerance for risk play in your decision?
In business circles, risk is almost always treated as something to be minimized. But can risk also be an economic positive?
The iconic Peter Drucker made a profound observation when he said “All profit is derived from risk.” Ponder that truism as you consider the nature of the compensation agreements you developed over the last 12 months. It’s likely you injected little to no risk in your proposals, which is in directly violation to the principle that if you want to make more money, you must take more risk.
Harvard’s Benson Shapiro offers this perspective: “Performance-based pricing is insurance. It insures that the seller does not undercharge the buyer.” In other words, introducing an element of risk in your compensation agreements not only holds the potential of making more more, but also making you a better pricer.
Who Bears the Most Risk in Agency-Client Relationships?
Now let’s look at risk from another perspective. Jack Skeels of AgencyAgile believes “The primary mediating characteristic of buyer-seller relationships is how risk is handled.” Says Skeels:
“When we ask agencies, ‘Who carries more risk in the relationship, you or your client?’ the answer is almost always ‘We do.’ Nothing could be further from the truth. Your client carries more risk than you do … by a million miles … Clients are completely vulnerable to your efforts (which they don’t see, understand or control), and when you fail, they can die.”
The method of agency compensation is an important factor here. Clients who buy hours are really only buying buckets of inputs that may or may not correspond directly with the needed outputs. But more importantly, these inputs may or may not produce the desired outcomes. Herein lies the risk being taken on by the client. The agency will work its hours and collect its fees regardless of whether or not the work is effective. While every good agency desires to do good work, there is no real economic incentive for them to do effective work.
True, the agency can get fired at the end of the contract period, but that misses the point. After nearly 30 years using the hourly rate system, smart clients have realized that this approach has a fatal flaw. Brand growth has been stagnant for more than a decade, and most major marketers have been slogging along in a low-growth mode, unable to generate the needed ROI on their marketing investment. These clients have now concluded that the hourly rate system does absolutely nothing to help this situation; they’re simply “renting people” in advertising agencies.
Accompanying this current low-growth cycle for brands is an understandable low-cost mentality. Hence the rise and power of procurement. The prime directive at corporations everywhere seems centered on efficiency and cost cutting.
But what are these client organizations truly buying? No company ever saved its way to success. My friend Tom Lewis, formerly of the IPA, observes that professional buyers of marketing services are now squarely in the habit of attacking the seller’s cost base, insisting on as low a profit margin as possible while purposely leaving workload ill-defined. This, Lewis says, results in a low seller’s profit and a low cost of purchase for the buyer. In return for a lower price, the buyer unknowingly accepts compromised quality and effectiveness.
So instead of complying with buyer requests to lower costs— which will not provide the client with what the results they’re attempting to procure — could agencies instead lower their client’s risk?
Three Things Clients Buy
One of the world’s foremost business strategists, Michael Porter, asserts there are three main reasons businesses buy the services of companies like agencies:
To increase their revenues
To lower their costs
To decrease their risk
While most agencies don’t know it, even the most hard-core procurement professional thinks in these terms. Former WPP head of procurement Tom Kinnaird emphasizes that cost is just one of four areas in which procurement professionals seek a “win.” They also seek to obtain value, maximize cash, and minimize risk. This risk can take the form of:
The risk of suboptimal performance by the seller
The risk of not receiving the promised features and benefits
The risk of the service provider not producing the agreed-upon results
Writing in the WPP publication Atticus, Scott Brenman proposes the idea of a “threat audit” to help identify risks your clients face. He then recommends including on briefs a section about risks and threats to keep both agency and client focused on ways to minimize them.
KBS+ co-founder Jon Bond believes that agencies aren’t really in the ideas business — or even the results business — but rather the insurance business. The best agencies, he says, embrace the idea that their essential purpose is to reduce risk for their clients. Bond proposes that agencies should proactively sell their services this way, which he believes leads not only to more new business wins (risk reduction is a powerful proposition) but also better pricing (the best insurance companies command the highest premiums).
In the end, Bond says, “Economics are more powerful than negotiation.”
Propulsion is written by Tim Williams of Ignition Consulting Group, a U.S.-based consultancy devoted to helping agencies and other professional firms create and capture more value.
By Judy Shapiro. Published In AdAge November 16, 2017.
Editor comment: The headline question “Is your firm ready for this challenge” is AgencyFinder’s. As Judy points out and as I suspect you know too, your agency is challenged like never before, to integrate the technologies and media alternatives. The question might be – when will you find the time?
In a recent Ad Age post, I heralded a new era for agencies where “quality scale” was new revenue created through the design of trusted user experiences that can be deployed at scale. This level of sophisticated marketing design is beyond the scope of ad tech platforms or management consulting firms with their limited executional, real-world experience; presenting agencies with a potent new growth area.
That vision set the stage so now let’s turn our attention to the practical details which will require, perhaps, challenging almost everything we think we know about how agencies are run today.
Align to clients’ new “trust” value equation
A staggering 60% of top 100 advertisers plan to review their agencies in the next 12 months, clearly reflecting clients’ radically changing expectations of their agencies. More than ever, brands need their agencies to be experts at creating trusted digital experiences while remaining operational and financially transparent. This complex dance of positioning, creative, data and technology is new terrain agencies must conquer.
Yet this requires highly trained people not easily monetizable via typical agency fee structures. The answer lies in disrupting old fee structures in favor of industry certifications of people, not technology, similar to certified engineers from tech companies. We have the foundation for standardized accreditation with strong leadership from IAB, 4As and ANA, among others. An added benefit of standardization is that the industry can be more transparent and comprehensible in tackling complex disciplines like programmatic, predictive modeling, AI and data.
Re-invent agency structure to excel at the art and science of modern marketing
It’s no surprise that the pendulum is swinging in favor of reintegrating tech, media and creative under one roof so that agencies can focus on contextual user experiences within an agile campaign architecture. Unfortunately, this goal cannot be easily achieved by clinging to the traditional agency structure that was built 30 years ago.
It’s time to rebuild the agency model from the ground up with an emphasis on agility, measurability and efficiency. In this vision, there are three competency areas making up a core team:
Progress planners. This is where the strategy and campaign planning responsibilities are. Within this is team are account planners; creative and technical campaign planning; experiential designers — translating experiential design into workable campaigns — and social engagement planners.
Performance planners. This new expertise will plan the performance of all marketing programs with a new set of tools and competencies; media planning (all platforms), campaign proforma modeling, fraud management and customer experiential journey mapping.
Platform planners. This is where agencies connect the dots between platforms, programs and business results. This team owns predictive modeling, audience data, privacy compliance, transparency and platform auditing. This is also where clients get support with their technology challenges such as data integration.
As campaigns become a seamless integration of online and offline experiences, this new structure allows agencies to operationalize this revenue-rich experiential vision.
Pick a tech “trust” side and own it
Traditionally, agencies were neutral arbiters of tech, refraining from owning or even advocating for specific technologies. But neutrality came at high cost, leaving agencies underpowered in understanding ad tech well enough to protect clients. The opportunity for agencies of all sizes to become guardians of clients’ budgets against fraud and inefficiencies by mastering all the science behind ad tech; programmatic, content syndication, social, etc. By taking the side of transparency, agencies have an opening to reclaim their role as trusted advisors.
Agencies lost a lot in the preceding 10 years; talent, tech edge, advertiser trust and huge profits that went from agencies’ pockets into the pockets of VCs and tech ventures. To avoid the next ten years looking like the last ten, agencies must disrupt themselves to become masters of the trusted experiential world.
Judy Shapiro is CEO and founder of engageSimply.