This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
Okay, perhaps not yours Marc, but when you recently stated that you would like three quarters of your agencies to be creative, it made me reflect on the literally hundreds of agency remuneration deals we have benchmarked, negotiated and managed over the past 18 years and the fact that in every case the agency resources required were directly related to the requirements and expectations of the marketers.
Not just the marketers currently in the marketing department, but also the generations of marketers that have added to the huge amount of complexity within marketing and their marketing departments. Because as you acknowledge, part of the problem Marc is that marketers often expect agencies to mirror or partner with the marketing teams, but it is worse than that.
In the increasingly complex and complicated world of corporate marketing, the number of agency resources required has been increasing for the past three decades and the number of account management people, or project managers as you refer to them, has been multiplying for some very specific reasons.
Interestingly the marketing department causes all of these reasons and the marketing department can directly manage all of them. But they do not. Let me explain.
The creative to account management ratio
In our work with advertisers and marketers on their agency remuneration, one of the important factors we consider is the creative FTE (Full Time Equivalents) to Account Management FTE ratio (C/AM).
Why? Because this provides an indication of the complexity or demands of the client on the agency. Let me explain.
As Michael Farmer discovered in his early projects on scope of work measurement with Ogilvy & Mather in the 1990s, the number of creative personnel to account management personnel was 1.5. (Michael has reported that that this has since dropped to 1 to 1 under client pressure for efficiencies and lower costs).
What this means is that if the creative work required takes one creative person full time to deliver that work then it would typically require 1.5 account management people to manage, administer and co-ordinate the other client, agency and supplier functions to complete the task.
A low C/AM means that there is less administration, management and co-ordination, so more of what Marc Pritchard says he wants. A high C/AM means more administration, management and co-ordination to the creative time spent.
We similarly use this as a measure of complexity and demand. We did call this a measure of account maintenance but some advertisers where offended by being labelled ‘High Maintenance’ so changed it to complexity. But findings go beyond an industry average and start to look at the C/AM by category of advertiser and by individual advertiser to determine a measure of efficiency.
You see, Marc Pritchard is right in saying that a higher level of account management to creative is a sign that the relationship is overly complex and therefore highly demanding of the agency from an administrative and management perspective.
What we found was there is a significant range in the C/AM from 1 to 1, as reported by Michael Farmer, right up to the highest ratio so far of 1 to 7.2. We have excluded relationships, which have had no creative requirements but included relationships where the bulk of the creative work was adaptations of the global creative in regional and local markets.
Measuring retained resources to actual resources used
One of the important issues to consider when measuring the C/AM is that you need to often look beyond the number of agency resources in the retainer and try to establish the actual resources used by the agency to deliver the scope of work. Increasingly we find that the actual agency resources required could be more than 40 or 50% of the resources actually retained.
But it is incredibly difficult for agencies to charge for these as often the resources are highly fragmented with up to 20 or 30 individuals contributing to a handful of FTEs. That is because while the advertiser may retain say 3 people or FTEs in creative, this could be delivered by many more individuals contributing fractions of their time to make up the 3 FTEs.
Revealing this to the client would indicate a lack of cohesion and consistency of work in the creative department and raise unwanted questions of the agency. Continue reading “Marc Prichard, the low creative ratio at your agencies is not their fault, it’s yours”