Agency selection is not the solution to your agency compensation issues

There is an article on page 40 of the Financial Review (Sept 12 2011) titled “McInnes moves to one pitch at a time”. In it Mark McInnes, ex-CEO of David Jones and now boss of Premier Retail has axed agency retainers and has the agencies pitching on a project by project basis.

In the article I am referenced as saying this has been shown to not be a successful medium to long term solution.

 

There are several marketers who have gone down this track, including GMH Holden, Vodafone, more recently Subaru and now Premier Retail.

In every case it led to the rostered agencies playing this game for a number of months before resigning the business. And ultimately most go back to a traditional model with their agencies.

Why?

Because Mr McInnes, agency pitching is NOT the solution to your agency compensation issues. I agree that for an increasing number of advertisers, retainers are not an efficient way to remunerate your agencies. They are very popular because they can be easy to set and forget and this is why they become inefficient.

There are many other different variations of agency compensation models and relationship structures to address individual marketer needs. But putting the account to pitch either to the market or to a “panel” of agencies is the least effective short and long term.

1. It is costly on agencies and the marketing team in time and resources
2. It requires a huge focus on discipline from the marketers to stay on strategy
3. It means you get the solution you want and not necessarily the ones you need

The proof is in the fact that it ultimately fails as Mr McInnes acknowledges himself in the article with “It may take up to a year to find the right agency”. In actual fact he is using this process to find an agency partner.

And this procurement strategy is just reinforced by the “30 agencies approaching him for work”.

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About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
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One Response to Agency selection is not the solution to your agency compensation issues

  1. Anne Miles says:

    I agree. The wastage across the board with several agencies pitching each time is a massive waste of resources that could be better spent to do some amazing work for the wider industry or to get out to the public.

    If you must have a roster, pitch once and appoint the work based on the known credentials and past work with a group of suppliers chosen to target the needs of the business – not a 'free for all' like this.

    A good process between the suppliers is important when there is fragmentation like this and TrinityP3 have some good options there including Evalu8ing to keep it accountable.

    Retainers are popular with agencies too because there is a certain level of comfort there, although my personal experience with smaller (under $20M sized businesses) is that the client wins out with retainers, and the agency often over delivers making the account less profitable than it could be without one. We see this same effect on creativity with clients going for the safe and known option over the unknown. We all like some certainty for a healthy relationship so it's about getting a balance I feel.

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