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Client-Agency Ties: This is where the dysfunction lies

Previously printed in Marketing Magazine January February 2014

Richard Bleasdale Regional Managing Partner at The Observatory International shares his views on what needs to be improved in client-agency ties.

What are the biggest flaws in client-agency relations?
There are four major flaws:

  • They are not a marriage of equals – that is supplier-based rather than partnership-based;
  • The operating terms and responsibilities are not clearly defined:;
  • They are not measured regularly and measured both ways;
  • They are not remunerated based on performance.

What are the biggest complaints that clients and agencies have about each other?
When we carried out a piece of research called “Off the Record” with a group of leading regional agency CEOs, it’s fair to say they had a wide range of gripes.  However, the top three quotes we heard were:

  • “We never get access to your senior decision-makers and high quality thinkers”;
  • “If we perform really well, reward us with fairer, more motivating incentives and don’t treat this as a means to get a stealth discount”;
  • “You need to take more risks trust your gut and move much faster”.

We are constantly talking to marketers about the challenges they face with their agencies.  Again, they have many complaints – but they can be summarised as follows:

  • “We never see your senior people, the people we do see are too junior and keep changing”;
  • “Get immersed in my business, spend time with me – let’s work together on this stuff”;
  • “You’re too reactive.  Where is the proactivity the energy and ideas?”

Do marketers rely too much on agencies?
There is no simple answer to this question – some do, some don’t.  Reliance on agencies can be for positive and negative reasons.  In some cases, the reliance can be negative, caused by marketers being unclear on their marketing/business problems, or their brief, and so do many rounds with the agency before getting to the right solution.  That said collaboration between marketers and their agencies is a hugely positive concept, but should be done with both parties clear on the roles and responsibilities.

Continuing the positive theme, with increasingly complex digital consumer environments, marketers have come to rely on their digital agency partners much more.  This is generally positive, since the agencies can utilise their specialist expertise to greatest effect.

Do clients really need multiple agencies or are they better served by one or at best two agencies?
It tends to be driven by the marketer’s scale and need for specialisation, as well as the agency’s depth of integrated capability.  The speed of change in the digital environment and consumers’ adaption means it is becoming impossible for any one agency to be a specialist across all digital channels.

Because many are experimental and thus riskier in nature, many marketers – particularly those with large and complex marketing activities – are choosing to appoint specialists to take advantage of their knowledge and experience.  This makes sense, but provides different challenges in terms of collaboration and co-ordination across different specialist agencies.  To try and alleviate this issue, some large brands are looking to appoint at an agency holding company level and then work with the holding company to develop an integrated team across their different specialist agencies. For some marketers, with less complex requirements, it can make more sense to get an integrated offer from one single agency – although, in this case, the quality and depth of that agency’s integrated offer is paramount.

The short answer is, there is no one-size-fits all model.

Agencies of record versus multiple shops – which will work better?
This one also plays both ways.  However, the agency of record model, inn The Observatory International’s view, should work better because it should deliver greater benefits to both the marketer and the agency.

The benefits for the marketer include a more committed agency team, more consistent talent working on its account, a team that should understand its business and its challenges in more depth and less time spent co-ordinating multiple agencies.

For the agency, the benefits include more consistent income, more settled teams and lower costs of business development.

Should marketers be paying for pitches?
In our view, yes.  The likelihood is that pitches will be run more professionally, with greater transparency, and smaller, more focused groups of agencies.  In addition, we believe agencies will also take the process more seriously, with the end result being higher quality submissions for marketers to choose from.

Does procurement have too much influence over agency selection?
To date, arguably, yes.  Many procurement professionals are measured on cost reduction; this has been particularly common over the past few years of tough economic conditions.  In this situation, unless they achieve the cost reductions they are targeting, they can become roadblocks to the process of starting or continuing a positive marketer/agency relationship.

It is not uncommon for procurement professionals to only appear once a year, for a short period, for remuneration negotiations, with the agency.  So on a day-to-day basis, procurement does not see the challenges that occur in a marketer/agency relationship, where costs have been cut too deep and working practices do not match original agreements.

However, greater involvement from procurement can reap benefits.  Procurement professionals tend to be very strong in the areas of process and measurement – often not areas of strength for marketers.  We have seen real win-win results where procurement works extensively with marketing to develop and manage detailed scope of work (SOW) documents.  A detailed SOW is probably the most important element for agencies in producing a relevant remuneration proposal.  In the same way, procurement’s strength in the process can bring real benefits to the day-to-day operation of a marketer/agency relationship.  Finally, procurement’s strength in measurement can also add huge value to the ongoing management of an agency remuneration agreement which has KPIs and/or PBR components built into it.

Agency consolidation – who wins?
I would say that generally agencies win – but potentially neither clients nor agencies.

For marketers, the only likely benefit in a reduced selection of agency options is the potentially greater media buying clout that a consolidated group can give them.  For agencies, there are certainly potential cost savings to be had from the integration of “back-office” functions, as has been trumpeted in the recently proposed Publicis-Omnicom merger.  There are also potential benefits from being able to pool differing sources of consumer and media data.

However, agencies risk losing their distinctive identity, spirit and passion – consolidation tends to drive sameness rather than differentiation.

And it is a strong and differentiated personality and offering that makes agencies appealing for both marketers and agency staff in the first place.

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