Michael Farmer is the author of Madison Avenue Manslaughter: an inside view of fee-cutting clients, profit-hungry owners and declining ad agencies (Third Edition, 2019), which won four publishers’ awards for excellence in marketing and advertising. He has an MBA from Harvard Business School and was previously a Director of Bain & Company. He is the Executive Chairman of TrinityP3 USA, and also serves as Professor of Branding and Integrated Communications at The City College of New York (CCNY).
Client Heads endure the daily combat of client-agency relationships. They get no glory for their efforts or sacrifices. They suffer the consequences of scope of work increases, fee reductions, inadequate resources and relationship threats. They hold the line and try to keep things from getting worse. They’re on their own. This is not right — agency transformations depend on Client Head successes in battle. Client Heads are receiving inadequate support from their leaders.
Client Heads have been fighting a losing war since the advent of labour-based fees and the rise of client procurement departments. Agency fees have been under constant attack, and clients have won every fee battle for the past two decades. Every three or four years, agencies are put up for review by clients, and relationships are terminated. Agencies then seek and win new clients, most often at lower fees, and the war-losing cycle continues.
The addition of digital and social briefs into agency scopes of work has made the Client Heads’ job even worse. The massive increase in digital and social work is like an enemy’s use of cluster bombs against friendly troops — they’re small and deadly. Agency two-person creative teams have seen their yearly outputs increase from 25 briefs per year to over 500 per year during the past decade (this calculation counts Facebook unique posts, Instagram ads, programmatic deliverables, banner ads, online print / video insertions, email marketing and other small deliverables).
Client Heads spend much of their time ensuring that the huge number of briefs get done on time rather than ensuring that the creative work is strategic and on brief.
And while this is happening, clients invest in their own internal agency operations, taking creative work away from agencies but reducing agency fees at an even faster rate.
Despite the growth of digital and social briefs, client topline growth remains stagnant. Twenty top advertisers in the US saw their aggregate sales decline by 4% between 2009 and 2019, before COVID-19 made this even worse in 2020.
This unhappy situation raises some important questions about the support being given to Client Heads:
- Partnerships. Have agencies developed partnership strategies to help their clients grow — or are agencies resigned to remain commodity suppliers of client-generated work? What do agencies expect their Client Heads to do about their relationships — other than “don’t lose them?”
- Business Strategies. Have agencies developed new business strategies to halt the decline of fees — or are they content to downsize and hold salaries down, as they have for the past decade? What do agencies expect their Client Heads to do about fees?
- Executive Priorities. Have agency C-Suite executives put in the time to develop new relationship and business strategies, or are they content to accept the current situation and focus instead on winning new business to replace the clients being lost?
- Client Head Mobilisation. Are Client Heads being trained and mobilised to carry out new strategies, or are they left to figure things out for themselves?
Sadly, there is little evidence that new strategies are being developed or that Client Heads are trained and mobilised for the challenges they face.
Senior executives often talk about “improved creativity” as the solution for agency problems, but this is wishful thinking. Improved creativity is certainly an appropriate goal, but past creative improvements have not delivered improved performance. What kind of creative improvements are we talking about? How are they going to be implemented to help clients grow and pay better fees? How will improved creativity halt the inflation of scopes of work and the stagnation of agency salaries?
“Improved creativity” is certainly more exciting to talk about than “improved business practices,” but this should not mislead senior agency executives. Agencies need to get smarter about their business practices. Here’s what’s needed:
- SOW Control. Client Heads need to learn how to take the initiative with scopes of work, recommending scopes of work that have a high probability of delivering topline growth for their clients. It is not good enough to “do what the client wants.” That has clearly not worked during the past decade.
- Pay by Deliverable. Client Heads need to be capable of ensuring that their clients pay for all the work that is done, using transparent measures of scope size and complexity. “Pay by deliverable” is an appropriate way forward, and it should become a strategic foundation for every client-agency relationship. This is not pie-in-the-sky thinking. A global advertiser is now piloting a new agency scope of work remuneration system, using our ScopeMetric® SOW classification and measurement scheme with a number of its agencies. Ironically, we developed this system to help agencies negotiate better fees from their scopes of work. Instead, our system is being piloted by procurement, who see ScopeMetrics® as simplifying fee negotiations and ensuring a better understanding of SOWs by brand executives and their agencies.
- Training. Client Heads need to be trained uniformly by their agencies in fee and SOW management. Agencies need to have a clear “Agency Way” of doing business. The Agency Way would include this policy statement:
- Every client we serve will have its scopes of work documented and measured uniformly, using our SOW system.
- Client teams will use our SOW metrics to negotiate creative work and fees for the resources we provide.
- Best Practices. Inevitably, throughout the fragmented and decentralised agency organisation, some Client Heads will perform better than others. The learnings from “best practices” are strategically important. Agency leaders need to develop the capability to identify and propagate agency “best practices” throughout their organisations. Consulting firms have done this for decades; it’s time for agencies to follow suit.
Client Heads have been the front-line troops in the relationship and business battles with clients. There have been many instances of individual heroism within the ranks of the troops, but the war they’ve been fighting has been a losing one. It’s now time for agency senior leaders to step up efforts to arm Client Heads — and help them win the battles that they face daily.
Photo credit: Frank Cotham, The New Yorker, The Cartoon Bank. With permission.
This post was first published at Media Village
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