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Author Archives: Michael Farmer
Agencies Struggle with Declining Prices
Since 1992, the average price for creative agency deliverables has declined by 70% in today’s dollars, according to my research [1] for Madison Avenue Manslaughter.
Nevertheless, agencies have managed to deliver growing profit margins for their owners throughout this 25-year period. How was this possible? Are agencies still “fat,” as many procurement executives believe, or have they starved themselves to generate profits in the face of declining prices? Continue reading
Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing procurement
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The Terrible Outcomes of Lower Growth in Advertising
Growth is the engine of wealth and success. Stock prices soar. Companies expand, hire and promote, and salaries rise. Optimism abounds. Everyone has a place in a growing future. The party does not go on forever, as we know. Growth rates slow, and sometimes they halt — the reasons vary, but it’s inevitable. Still, the end of growth is shocking, and the advertising industry is now facing the shock. Continue reading
Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing process optimisation, marketing procurement, strategic management
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Ignorance of Pricing is Ruining Ad Agencies
All companies sell products or services at a price, and managing price is a major responsibility of top management. Car companies sell cars, and sticker prices are marked on side windows. Coca-Cola sells concentrate to its bottlers, setting price per gallon to match market circumstances. Pizza-Hut sells pizzas in restaurants, and pizza prices are marked on the menus. Bain sells consulting studies to corporations and prices them by study length and complexity. Agencies, though, are confused about what they sell and how to price it. Their ignorance of pricing is ruining agency operations and destroying agency value for clients, employees and holding company owners. The advertising industry is the only industry in the world without a concept of pricing. Continue reading
Posted in agency remuneration / compensation, agency solutions, interesting observations, marketing procurement
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Heaven and Hell in Advertising
Share169 Tweet74 +18 Share10Shares 261This post is by Michael Farmer, Chairman of TrinityP3 USA and author of Madison Avenue Manslaughter: an inside view of fee-cutting clients, profit-hungry owners and declining ad agencies, which won the Axiom Gold Business Book Award for … Continue reading
Posted in agency search & selection, agency solutions, industry news & trends, interesting observations, marketing process optimisation, marketing procurement, return on investment
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Are Advertisers “Bad Hombres” for Their Ad Agencies?
Ad agencies have had a tough time for the past decade. Reduced retainers. Disappearing AOR relationships, as clients expanded their portfolios of agencies. Inflating Scopes of Work, straining the capabilities of agencies’ downsized and juniorised staffs. There’s more to this. Auction-based bidding of SOW projects. Inhouse agencies. Advertising relationships embracing management consulting firms. Significantly shortened agency-client relationships. Continue reading
Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing procurement
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The Low Road or the High Road for Ad Agencies compensation?
The industry road that ad agencies are wandering down is about to narrow. Sooner or later, agencies will find themselves at a fork that is less like a choice and more like an inevitably. The fork will not involve a 50-50 choice. Heads to the left; tails to the right? No; it’s not that kind of fork. The choice will be between the High Road, to the left, and the Low Road to the right. The choice is not about political choice during this Trumpian age. It’s not about Blue States to the left or Red States to the right. It’s not about brands-as-causes versus brands-as-brands. Continue reading
Posted in agency remuneration / compensation, agency solutions, data & direct marketing, interesting observations, social media & digital marketing, strategic management
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Industry Transparency Is a One-Way Mirror
Advertisers have found many ways to dominate and commoditise their ad agency relationships. Transparency is the latest hot issue, justifying outrage over certain media agency practices and setting the stage for reviews of media contracts and fees. Agency hiring and firing remain another advertiser favourite, and the pace of agency replacement has certainly quickened over time. Next in line are declining fees and growing creative Scopes of Work, along with benchmarking studies, the threat of internal agencies, intellectual property disputes, project-based bidding and lengthened payment terms. Continue reading
Posted in agency remuneration / compensation, agency search & selection, agency solutions, industry news & trends, marketing procurement
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Advertisers with Performance Problems Turn to Management Consultants
“Watch out! They are coming!” reported The Drum when Accenture and Deloitte appeared on the pitch list for Nissan-Renault’s global account review. They are “spreading their tentacles, seduced by marketing services!” Accenture sees it another way: “CMOs are seeking our talents, not the other way around.” Is consulting going to the mountain, or is the mountain coming to consulting? Continue reading
Posted in data & direct marketing, industry news & trends, marketing process optimisation, marketing procurement, social media & digital marketing, strategic management
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Retuning the Marketing ‘Orchestra’
The marketing ‘orchestra’ needs to be reorganised and re-tuned. The orchestra players are highly skilled and totally dedicated. The problem is, they’re playing different scores, even if the music was written by the same composer. The first violins are playing a Bach fugue. The second violins are performing a Bach prelude. The cellos are holding their own with the Second Brandenburg concerto. The string bass players are improvising – Bach jazz-fusion. And the conductor? Frustrated, he / she stops the playing. “Again, the Bach! From the top!” Continue reading
Posted in agency solutions, industry news & trends, interesting observations, marketing process optimisation, social media & digital marketing, strategic management
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CMOs, Shareholder Value and the Decline of Marketing Risk-Taking
You’d have to be older than a Millennial to remember a time when corporate CEOs were heavily involved in marketing decisions, like increased spend on media, the development of new Big Idea ads, the launching of new consumer products (rather than the spitting out of line extensions) and the formulation of strategies designed to outsmart competitors. That was a time before “shareholder value” became the universal corporate objective — the value to be delivered to shareholders because of management’s ability to grow earnings, dividends and share price. Continue reading
Posted in industry news & trends, interesting observations, marketing process optimisation, marketing procurement, social media & digital marketing, strategic management
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Why cost benchmarking is the waterboarding of the advertising industry
Procurement and benchmarking rose to corporate prominence once “increased shareholder value” became the advertiser’s mantra. Marketing declined in importance, from an investment to achieve brand growth to a cost to be optimised. Benchmarking consultants jumped on the bandwagon. 4As shamefully accepted the ANA benchmarking trend with hardly a whimper, leaving its members to fend for themselves. Benchmarking is the waterboarding of the industry, enhanced interrogation that weakens its subjects but develops no useful information. Although benchmarking has become commonplace, it has had no positive long-term benefits. Indeed, the opposite is true — advertiser brands are still not growing, CMOs last in their jobs only half as long as CEOs and agencies have been compromised and weakened. Continue reading
Posted in agency remuneration / compensation, agency search & selection, agency solutions, marketing procurement
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Agency Remuneration: A Loser’s Game
Chief Marketing Officers and their colleagues in procurement have been driving down agency remuneration for more than a decade. Simultaneously, they have been growing Scopes of Work, experimenting with digital and social marketing. Is marketing getting something for nothing, or is it playing a loser’s game? Advertiser-agency relationships have devolved over the past several decades. What was once the strongest of strategic relationships during the golden age of the Creative Revolution has become lopsided and imbalanced. Continue reading
Posted in agency remuneration / compensation, industry news & trends, marketing procurement, strategic management
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It’s more than the agency roster and the scope of work. It’s the relationship, stupid!
The disappearance of AOR relationships between advertisers and their creative agencies was not a good thing for either party. Both are at fault for letting this happen, and now both parties have suffered the consequences. Advertisers have to manage complex portfolios of specialised agencies who compete for a portion of the total fee. Advertisers have to take the responsibility for planning the detailed Scopes of Work and decide which agencies will be briefed for which deliverables. Continue reading
Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing process optimisation, social media & digital marketing, strategic management
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Can Procurement Fix Madison Avenue’s Mess?
Could Madison Avenue’s mess be any worse? The unhappy picture can be reconstructed from articles in the trade press over the past two years. They say the following: Legacy brands are languishing in the marketplace. The consumer transition from Baby Boomers to Millennials has been rocky and unsuccessful for too many large marketers. CMOs are being held responsible for the lack of growth, and their tenure is only half as long as that of CEOs’. The average CEO will go through two CMOs and see a lot of marketing smoke and mirrors. In marketing, there’s uncertainty about what media mix to use, and there are major concerns about the effectiveness of digital and social media, even though the spend level in these areas is growing. Continue reading
Posted in agency remuneration / compensation, agency solutions, Evalu8ing - Relationship Performance Monitoring, industry news & trends, marketing process optimisation, marketing procurement, strategic management
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