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Cost Control Survey

The High Price of Poor Process: The true cost of dysfunctional Agency Relationships

More time spent on accurate Client scoping, a unified approach to Agency costing, the honing of briefing and evaluation skills, plus improved understanding of each parties’ internal processes, would radically transform cost inefficiencies within the Client/Agency partnership.

This research was undertaken August 2008.
Summary findings

So. The Client community feels that it’s not getting great value from their Agencies. Agencies are eternally bemoaning the fact that their margins are wafer thin.

It’s a perennial conundrum and it’s not going to go away – the current financial turmoil will see to that with inevitable further shaving (or, more likely laceration) of budgets despite the Marcoms industry’s pleas to maintain spends to sustain strong brands in recessionary times.

And it’s going to get worse – a lot worse.

But the fact that there is a problem in the first place suggests that something is going wrong with the way that the two parties work together. Most Clients take special effort to appoint the right agency when they decide to work together and, believe it or not, agencies don’t go out of their way to annoy Clients by overcharging for work.

So why do these issues arise so regularly?

Well firstly, what this research evidences, it appears, is that all too often Agencies are being asked to cost against a less than specific scope of work. Sensitive to Client cost concerns, Agencies will make their best estimate against what they know the Client will require of them, but without the full picture. The chances are that they are going to under-club the costs, and then as there is inevitable scope creep, the problems start.

Invariably Clients are going to need flexibility with their activities – especially when market conditions are tough; but it is critical that both Client and Agency thrash out a logical scope that has caveats built in so that both parties are clear on what can potentially happen during the course of the year, and what the ramifications on the bottom line are likely to be. Importantly, especially given the economic climate, Agencies need to be unified and ensure that they are estimating at realistic market prices rather than attempting to undercut each other. Such short term-ism will inevitably damage the long term value of their counsel and craft.

Equally important, Clients too must avoid the short-term game as budgets get thinner, because if they don’t, they must recognise that the Agency will have no space in which to play if the scope alters significantly but the available monies remain the same. Other, of course, than to reduce the quality of personnel/service.

Despite the sometimes apparent alchemy used in creating great work, the reality is that the initial process of producing such work, of whatever type, starts with simple, logical and practical steps – namely the writing of a great brief.

Again the research points to the fact that all too often this isn’t happening because the quality of briefing is not up there. The simple fact of the matter is that very often junior and sometimes well established middle management marketers have never been given formal training on brief writing and have learned, all too regularly, on the job. This simply isn’t good enough, especially when it results in wasting both time and money for both parties.

Unless a brief is well thought through and well delivered it will leave the Agency second-guessing and presenting work which is not what the Client expected.

We are all aware what happens to training budgets when times get tight. But the reality is that the amount of re-working, with all the implications on cost, delay and frustration (from both parties’ point of view) is largely unnecessary if the brief is right from the outset.

Indications are that there could be up to a 25% saving on cost if the process was tightened and all parties were performing at the maximum of their abilities. That’s likely to be a considerable figure in any Client’s budget, so a few thousand spent on some really good brief writing training would provide for a much improved return on investment. We can also see that the same applies to evaluation and feedback skills. If the creative work isn’t right (or nearly right) first time round, then the Agency needs to understand why and be given clear and concise guidance on where the issues lie.

Providing a vague response to problem work will compound the overall situation and leave the Agency blindly struggling their way through, only to return with further inappropriate outputs. It’s the beginning of a downward spiral as disappointment is layered on disappointment, frustration layered on frustration. That, combined with Client concern over impending deadlines and Agency concern over spiralling time costs (not to mention internal de-motivation), has all the makings for a breakdown in the relationship and the inevitable danger of a pitch situation ensuing.

So, again there is a need to make sure that personnel have first rate skills in this area and if work does need revision the problems are clearly disseminated to the Agency in a way which they can act on swiftly and positively.

Finally, whilst Clients and Agencies both agree that it’s critical to understand briefing, development and implementation processes, the evidence is that, all too often, only lip service is paid to these fundamentally important elements.

An Agency having a genuine understanding from the outset on how the brief has been formulated and what the criteria are for evaluation will almost certainly approach work differently to an agency who really doesn’t know what to expect.

If Agencies don’t understand the ground rules, the chances are, they won’t get it right first time. That means that right from the moment they leave the briefing the likelihood of excessive degrees of agency time-burn is high. Little wonder agencies are feeling the pinch – especially when, as we’ve seen, Clients are unlikely to want to pay for the extra work.

It really is important that both Clients and Agencies sing from the same song sheet.

That means dedicating some time to the fundamentals of the process. Boring, we know, and when time is precious and there are other things more pressing, always something that goes straight to the back burner.

But get these issues boiling by ensuring that there’s a clear, mutual understanding in place and there will inevitably be a dramatic improvement in work, quality of output and levels of satisfaction from both sides.

Not to mention a far better return on investment for the Client, and a sensible margin for the Agency.

Critical for both parties’ survival through this period of recession.

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