Editor's Note: The following is a guest post from Michael Farmer, the author of "Madison Avenue Manslaughter: An Inside View of Fee-Cutting Clients, Profit-Hungry Owners and Declining Ad Agencies," a consultant and a professor of branding and integrated communications at The City College of New York. In a previous column for Marketing Dive, Farmer addressed the trust issue between brands and agencies.
In a recent "rallying" speech at the 4A's Transformation show, Marc Pritchard, the chief brand officer of Procter & Gamble, said that "P&G views agencies as partners, not suppliers," and that "We're refining our compensation to make sure we're paying for the work that you do and the talent that you bring to our brands." However, these supportive messages emerged from a much stronger one, in the face of the ongoing transparency and ethics debate, enjoining ad agencies to "get simpler" and media companies to increase transparency.
Advertiser-agency relationships have devolved over the past several decades. What was once the strongest of strategic relationships during the golden age of the Creative Revolution has become lopsided and imbalanced.
Advertisers never made a conscious decision to marginalize agencies; marginalization was the outcome of the shift from media commissions to labor-based fees, the rise of brand globalization, the adoption of "shareholder value" as the corporate mantra, the empowerment of procurement to drive down costs and the digital and social revolutions, which fragmented agencies into specialized suppliers and led to astounding increases in marketing Statement of Work (SOW) workloads.
This sequence of market changes saw advertisers initiate change while their agencies reacted to change. The relationship was like a tennis match where one player charges the net while the other falls back on his heels. A pattern of "winner" and "loser" developed early during this transition, except that there were no real winners. Agencies reacted to fee reductions by downsizing and "juniorizing," or reducing their strategic and creative capabilities at a time when their clients' marketing problems were growing in complexity. Everyone was a loser.
Advertisers' brands remain stagnant today, contributing to CMO and agency turnover. Many legacy brands have failed to manage the customer transition from Baby Boomers to millennials, or to deal successfully with the rise of online commerce. Their agency "partners," marginalized over the past decade, are not able to help.
While neither party is fully responsible for this state of affairs, it's time for both sides to step up and take actions that will shift the balance in the marketing game, while allowing both brands and agencies to grow once again. Here are some ways advertisers and agencies can work together constructively to realize the full performance potential of their brands, ultimately enhancing working relationships and avoiding or ending behaviors that undermine relationships and prospects for success:
1.) Partners, not vendors
Brand holders need to view their agency relationships as strategic partnerships designed to deliver improved results, not as commodity-like relationships between customers and vendors that are bought and sold on cost.
2.) Simplicity, not complexity
Brand holders need to simplify their portfolios and work with a minimum number of partners to reduce complexity and increase long-term focus on results. This will require enhanced agency capabilities and long-term commitments from advertisers.
3.) Analysis and planning, not ad hoc experimentation
Together, brands and agencies need to analyze and determine the brands' long-term growth potential and plan annual media, media mixes, spend levels and Scope of Work deliverables that have the highest probability of achieving brand success. Brands need to adjust their marketing programs based on concrete feedback and learnings — actual return on investment — rather than on speculation or hope.
4.) Fair fees and resources for the work
Agency fees and resources need to be re-determined transparently, based on the work to be done at market billing rates that support agency talent needs. Over time, agency value-added work will be expected to deliver a multiple of cumulative fees paid.
5.) No dysfunctional practices
Both sides need to monitor and root out unacceptable practices, such as unplanned ad hoc SOWs, unpaid scope creep, inefficient briefing and ad approval processes, off-brief creative work, excessive rework, excessive resources for relationship and project management, abusive relationship behaviors, use of one-sided (and questionable) benchmarks and unnecessary agency churn.
The industry is nearing a tipping point on these issues, and now is a good time to take the problems by the throat and do something about them. Pritchard's blunt words for the industry point in this direction.
"Ads are too expensive. They're not driving client sales growth," he said. "Agency structures are too complicated. We at P&G fed the complexity beast by hiring thousands of agencies globally."
On the agency side, Ogilvy & Mather has recently tackled excessive complexity under CEO John Seifert by consolidating the various Ogilvy "brands" and reducing the number of competing profit centers, all in the name of providing improved integration for the service of clients.
Will the industry wake up in time for match point? As of this writing, from the ANA Financial Management conference in San Diego, the 4As' new CEO Marla Kaplowitz tweeted: "Leadership requires being comfortable taking risks; failure brings a gift called experience."
While this is pretty bland and generalized, on the positive side she also said: "Great work comes from trust, people do their best creative work when they are in a trust-based relationship with clients."
That’s more like it.