I just saw this story from Brand Republic - Thomas Cook in pitch fee row.

It reminds me of Dr. Evil from Austin Powers, demanding his one million dollars!

I spoke about this and the general concept of success fees in pitches during the Mumbrella Podcast this week.

This issue here is that the charging of success fees is false economy. Lets look at the economics of the Thomas Cook example.

The media billings per annum = £30,000,000

Agency costs for the pitch (industry estimate) = £150,000
Signing on fee (reported) = £1,000,000
Agency income in first year (Based on a generous 5% commission equivalent) = £1,500,000

Therefore in the first year the agency would have an income of £350,000.
Plus they have to deliver a 10% reduction in the consolidated media rate.

Plus Thomas Cook want a reduction in agency fee, so what if the agency fee is the equivalent of 3%? Then the agency is subsidising the client £250,000 in the first year.

This is without calculating the actual agency cost to provide the services.

Who will end up paying?

In the short term Thomas Cook. Because while they may get money up front they will end up getting what they are paying for - low price and therefore low quality media strategy and planning.

In the longer term: if this catches on, the agencies as procurement people globally will have turned the pitch into a profit centre.

My solution is posted on the Brand Republic Report:

Continue reading "Thomas Cook the new Dr. Evil, demanding £1,000,000 success fee" »

In the last week I have had several procurement people (I can't say they are professionals as referred to by their Institute) try and negotiate fees using the 3 most common lies in their industry.

Don't get me wrong, I am a champion of negotiation. I just don't rely on little white lies.

All three are from large multinational companies and all three spun their lie like they believed it. Which is sad and not very professional.

Here they are:

1. I / we don't have the money / budget.

I'm sorry, does the CEO and CFO of your company know you have no money? Do the shareholders know that this big multinational company who reported a pre-tax profit of many billions of dollars now has no money? It is ridiculous to say this, so don't.

Sure, you may not have allocated a budget for this unseen cost, but that happens all the time in business and what you do is reallocate from another budget to cover it.

We are not talking about millions of dollars here. In most cases you are lying for a difference of thousands of dollars. Is your integrity really so cheap?

What you are really saying is that you don't want to pay for fixing this problem and therefore you would rather a much smaller company, who's total turnover is a thousand times less than your annual profit, subsidise your work for you. Right?

2. Think of it as investing in the relationship.

And what type of relationship is that? One where every time we do business you try to screw a lower fee? Or threaten to go to a competitor? I wonder if they manage their personal relationships the same way?

"Yes, would love to go out to dinner, but only if you pay and only if a better offer does not present itself between now and then".

I had to bite my tongue when they said this on Thursday because I knew that in the past 3 years we had "invested" many times in this relationship and as yet have got no return as they are still dating our competitors. So I am sorry Procurement, I am not into a non-performaning investment or a polygamous relationship.

3. I have a lower quote I need you to match if you want the work.

This is the classic negotiating position. Not a good one, but a classic one.

The problem is that it is hard to justify when there has been no formal tender process and you are not comparing like-for-like and you are clearly just fishing around for leverage to get a lower price.

I am happy to give a little here and there, but when this becomes the Procurement person's standard line it really just shows they have no concept of value.

On the basis of "pay peanuts, you get monkeys", it means these procurement people are happy to work with monkeys. Well so be it.

I am, and more than happy to, leave them working in the zoo they have created.

Service Category: A high profile Local Government

Operational Challenge: A fragmented and weak Marketing Services function was unable to:
a) efficiently service the needs of various business units or
b) effectively synergise Council wide strategic branding and marketing imperatives.

Strategic Solution: TrinityP3 Consultants gained a thorough understanding of the service/expectation gaps at a functional, divisional and organisational level, combining both user and provider perspectives.

Trinity P3 made a number of recommendations that cut across strategic, structural, people, process and systems related issues to provide an improved service delivery model.

Integrated Approach: The process involved extensive desk research, several cross functional group discussions, a series of one to one interviews and high level meetings with senior managers overlaid with rigorous analysis and lateral thinking to produce a range of creative solutions.

Timeline: The engagement lasted 8 weeks from project inception to delivery.

Outcomes: The interim report presented to a cross section of stakeholders received wide support before being presented to senior management. Buy-in for the recommendations paved the way for far-reaching changes in the charter of the Marketing Services function and the character of its service portfolio.

Cost: Contact TrinityP3 for details

Love them or hate them, great jingles have a way of getting stuck in your head.

Forbes.com has just published the top 10 greatest jingles as voted by CMOs and Ad Executives in the US.

1. I'd like to buy the world a Coke (Coca Cola)
2. Oh I wish I was an Oscar Meyer Wiener (Oscar Mayer)
3. Two all beef patties... (McDonald's)
4. I don't wanna grow up. I'm a Toys R Us kid (Toys R Us)
5. You deserve a break today (McDonald's)
6. Wouldn't you like to be a pepper too? (Dr. Pepper)
7. Campbell's Soup. M'm, M'm good (Campbell's)
8. Plop, Plop, Fizz, Fizz, Oh what a relief it is (Alka Seltzer)
9. Stuck on me (Band Aid)
10. Double your pleasure, double your fun (Wrigley's Doublemint Gum)

Continue reading "The top 10 advertising jingles of the century?" »

For far too long marketers and advertisers have held on to the outdated terms of ATL and BTL with increasingly more activity being Through the Line (TTL).

Internet advertising and more importantly Social Media has blurred the traditional descriptions for ever.

The origins of the old fashioned terms ATL and BTL came from the early days of media commissions, where the agency would prepare quotes and invoices based on creative and production that was media commission generating being subsidised and "above the line" which non-media commissioned related activity was "below the line".

But the media commission in most markets is being phased out.

And the idea that ATL is mass paid media and BTL is one-to-one direct communications is also not a clear differentiator any more as technology means that you can now communicate with a mass market one-to-one.

So if it is no longer relevant to use ATL or BTL, then what should we use?

Continue reading "Replacing "Above the line" (ATL) & "Below the line" (BTL) with CONTENT & CHANNEL" »

At the ANA Marketing Financial Management conference in April this year, I was struck by the fact that the Americans' were referring to Agency Compensation and not Agency Remuneration.

I was sitting with Debbie Morrison from ISBA and she said that in the UK they refer to agency payment as Agency Remuneration too.

Okay - so what is the difference between compensation and remuneration?

Lets look at the definitions from Dictionary.com

Compensation:

–noun
1. the act or state of compensating.
2. the state of being compensated.
3. something given or received as an equivalent for services, debt, loss, injury, suffering, lack, etc.; indemnity: The insurance company paid him $2000 as compensation for the loss of his car.
4. Biology . the improvement of any defect by the excessive development or action of another structure or organ of the same structure.
5. Psychology . a mechanism by which an individual attempts to make up for some real or imagined deficiency of personality or behavior by developing or stressing another aspect of the personality or by substituting a different form of behavior.

Remuneration:

–noun
1. the act of remunerating.
2. something that remunerates; reward; pay: He received little remuneration for his services.

It makes me think that perhaps the word you use to describe how you pay your agencies could depend on if you believe you have done them harm and need to compensate them for handling your business or if they have done a good job and you want to reward them for the work.

Then again, perhaps the Americans simply have trouble putting the M before the N in

R-E-M-U-N-E-R-A-T-I-O-N

and not renumeration - which is not a word.

Retainers are still the most common form of remuneration for advertising agencies in the major markets. These retainers are based on resources multiplied by direct salary costs by overhead factor and then multiplied by profit margin.

But how do you value your remuneration / compensation model?

Value has many definitions.

But basically value can be defined as V = Q / $ which is VALUE is QUALITY and/or QUANTITY divided by COST.

So lets look at 3 different types of agency remuneration and how value is calculated:

1. Retainer / payment based on resource alone

This is the most common and is effectively the outsourced agency resource.

2. Retainer / payment based on outputs or deliverables

This model, reportedly used by Coca-Cola, values advertising like a manufacturing process.

3. Retainer / payments based on outcomes or results

This model, increasingly applied in some shape of form to varying success, links value created to cost of advertising to provide accountability.

In each each case we will look at the model, the value calculation and the strengths and weaknesses.

Continue reading "What is value based remuneration for advertising and media agencies?" »

You are a recent graduate and land your first job in an advertising agency. You start at the agency on $32,000 and the title of Account Manager. Within 12 months you get promoted to Senior Account Manager and get a $8,000 extra per annum, ten months later you get another promotion to Account Director and an $8,000 rise, and then 9 months later you get another promotion to Senior Account Director with another $12,000 a year pay rise. Total salary now is $60,000 per annum.

You are either the most talented account management practitioner in the industry or the luckiest. You can say to your friends you are a Senior Account Director, which is pretty cool.

Does this sound fantastic?

Believe me, we see this happening. It is called the "Title Promotion".

Continue reading "Agency title promotion and the impact on retainers and fees" »

Marketing Magazine report that Deloitte has released the results of a webcast poll, which found that "out of 1,675 professionals across a variety of sectors surveyed, more than half (52%) of respondents believed solicitation and negotiation posed the greatest risk for fraud. 24% separately thought contract performance presented the greatest risk".

While the report in Marketing states this is a concern across all sectors, marketing is often the focus of this type of allegation and concern.

"While the risk of supply chain fraud cannot be eliminated entirely, companies can take steps designed to reduce the risks, including company-level anti-fraud controls and risk-specific anti-fraud controls," said Bill Pollard, partner of Deloitte Financial Advisory Services LLP.

While personal experience over the past 10 years as a pitch consultant leads me to believe open corruption is relatively rare in the selection of marketing suppliers, I have heard of several examples of obvious cronyism and back room deals that have compromised the integrity of all concerned.

Only by continuing to apply rigorous due diligence and robust governance process to all aspects of marketing procurement will these concerns be minimised.

For the 21st Anniversary of the Brisbane Advertising Association, I was asked to address the question "has advertising come of age?"

Advertising is the world's second oldest profession, with the modern form of advertising agencies coming into existence more than 150 years ago.

Yet in the past 15 years advertising has undergone major changes due to the digital revolution.

So is advertising like an adolescent or a mature adult or perhaps even older and wiser?

Three cognitive signs of maturity are:

1. Taking responsibility for actions,
2. Becoming financially independent,
3. Developing a clear identity.

How advertising is addressing some of its largest issues is discussed to determine how the industry shapes up against these attributes of maturity.

In the fact of increasing demands for accountability, increasing downward pressure on costs and the ever increasing complexity of the market and the way the consumer engages with brands, the biggest issues facing the advertising industry today are:

1. Developing methodologies for proving the business value
2. Implementing a sustainable model for remuneration
3. Clearly differentiate roles and responsibilities to facilitate collaboration

Ultimately it will be the industries ability to address these issues that will prove if it has truly come of age.