Agency Remuneration: A Loser’s Game

This 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 the best marketing / advertising book of 2016.

agency remuneration

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.

It’s become a buyer’s market for advertisers, who change agencies with regularity and drive down remuneration with every pitch. Advertisers seek “best in class” agencies who specialise by media, and the definition of “best in class” is a fluid one. It cannot be based on “who delivers the best results,” because agencies do not hang around long enough to deliver improved results.

Their relationships with their clients last no longer than the tenure of the CMOs for whom they work — and CMOs, per research by Russell Reynolds, have the highest turnover among executives in the C-Suite.

Advertisers never made a conscious decision to marginalise agencies. Marginalisation was the outcome of the shift from media commissions to labour-based fees; the rise of brand globalisation; the adoption of “shareholder value” as the corporate mantra; the empowerment of procurement to drive down costs, and the digital and social revolutions, which fragmented agencies into specialised suppliers and led to astounding increases in marketing SOW workloads. Continue reading “Agency Remuneration: A Loser’s Game”

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Managing Marketing: The challenges facing the advertising agency business model

Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

Andrew Reeves is the Founder and CEO of ARC Limited with a lifetime of experience as an agency CFO. Here he chats with Darren on the current agency remuneration and business models and the challenges facing agencies in finding ways to make this work in rewarding agencies for the value they create.

Andrew Reeves on the advertising agency business model.

You can listen to the podcast here:

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Transcription:

Darren:

Welcome to Managing Marketing and we’re coming from downtown Shoreditch in London and today I’m spending some time with Andrew Reeves who is the founder and CEO of ARC Consulting. Andrew’s a long-time agency CFO and CEO. Welcome, Andrew.

Andrew:

Thank you very much, Darren; it’s a pleasure to be here.

Darren:

It’s interesting being here in what feels like the new hub of London creativity: Shoreditch.

Andrew:

Yeah, it used to be Soho and I think in the last five years it moved spectacularly towards Shoreditch, which is where all the best gigs are from an advertising perspective these days.

Darren:

Well, probably also because of the real estate cost, isn’t it? Soho became quite expensive.

Andrew:

Yeah, it certainly did. I think Shoreditch, at one stage, was one of the cheapest parts in town; £34 per square foot or something but as soon the marketing folk moved in here they’ve done it all up to suit the market and it’s gone literally through the roof. It’s gone from about £34 per square foot to 60 in the last year.

The role of finance in the creative industries

Darren:

Look, the reason I bring that up is because one of the things I want to discuss today is the role of finance in accounting in the creative industries because it’s one of those areas that people have really quite diverse views on.

Andrew:

Absolutely. I’ve been in the industry for about 20 years now and it’s funny because even working for some of the big brands like WPP, which is headed by some of the most astute financial people in the industry, finance and operations always seems to come way down the chain in terms of priorities for owner-managed creative businesses.

Darren:

That’s one of the issues isn’t it, where does the balance get struck between running a sound business and investing in things like creativity? If you listen to some people it’s impossible to manage the creative process. But they’re still businesses, aren’t they?

Andrew:

It’s funny the amount of times that I’ve been into agencies and they talk about it being a creative business but the business element of it is the weaker part. As an industry we pride ourselves on the creativity but we’re not very good at the business side.

And I think that comes from both how we look at our client’s businesses, which is why we’re in business in the first place, and the input that we have and the impact that we have on their top line and bottom line as well as how we run our own businesses. I just don’t think we’re particularly astute at it.

Continue reading “Managing Marketing: The challenges facing the advertising agency business model”

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5 questions to help charities drive a greater return on marketing investment

This post is by Anton Buchner, a senior consultant with TrinityP3. Anton is one of Australia’s leaders in data-driven marketing. Helping navigate through the bells, whistles and hype to identify genuine marketing value when it comes to technology, digital activity, and the resulting data footprint.

Return on marketing investment

In the highly concentrated charity sector*, charities must evolve from making people feel sorry to give money, to being truly people centric in approaching their mission.

So with clutter being the constant, the world’s best charities and not-for-profit organisations are transforming their organisation and marketing strategies around actionable data insights. Aimed at helping them inform the direction and stories that people are interested in when it comes to a relevant mission.  

For example The Cure Brain Cancer Foundation has become the 25th most innovative organisation in Australia and has been named the 2016 Australian Charity of the Year.

It has focused on delivering actionable results, by taking part in a world-first global adaptive clinical trial. The trial puts people onto real treatment options, and tests drugs based on people’s bio-markers and their type of tumour.

This is creating a wealth of data that is being fed into an algorithm that is delivering insights into what works for one person but not for another. Treatments are then adapted for new patients that enter the trial. Hence results are achieved in a much faster time-frame, versus traditional trial methods that can take up to 12 years:

The foundation has refocussed its marketing strategy by humanising the benefit of the trial, ensuring that people affected by brain cancer are the story.

And The Starlight Foundation is also transforming its technology and digital capability with the appointment of an IT advisory board. This is helping improve the way that it connects people. It is also making it more efficient in delivering its wonderful experiences. Insights are being gleaned from the mass of data that they collect with the 360 degree view of their supporters.

The above are just two examples. However, these organisations have identified that a lot more work is required in identifying the true trends and more meaningful metrics that underpin people’s activity in and around a cause. Thus achieving more emotional engagement and a greater return on marketing investment.

Here are our top 5 questions to focus on when transforming to people centricity

Continue reading “5 questions to help charities drive a greater return on marketing investment”

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Learn how CEOs & CMOs are restructuring their marketing teams for success – Infographic

This post is by Darren Woolley, Founder of TrinityP3With 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.

Some of the more interesting work we have been undertaking at TrinityP3 in the past five years is designing new marketing structures for our clients. This work arose from the projects where we would restructure their external roster of agencies and suppliers to their strategy, only to have them ask if we could do the same with their internal structure, which they had realised through the process, was often aligned to the business silo structure and not the customer strategy.

This work has been done for a wide range of companies and categories including Financial Services, Automotive, Higher Education, Property & Construction and more.

Late last year I was interviewed by Lara Sinclair from Simple.HQ on the trends in marketing structures we had observed beyond the centralised and decentralised dichotomy typically seen in the past.

This was along with her interviews of other market experts including Mark O’Connor, Managing Director, Perceptor; Kobie Fuller, Investment Partner, Accel Partners; Grant Pattison, Senior Manager, IAG Commercial; Anthony Kennada, VP Marketing, Gainsight; Ryan Bonnici, Marketing Director, Hubspot; Jenny Wilson, Head of Customer Strategy & Insight, Deloitte Australia; Tien Tzuo, CEO, Zuora and more.

The report and insights based on this market review; “The Changing Structure of Marketing in the Age of Disruption” can be downloaded for free here at Simple.HQ

It is also beautifully summarised here in this infographic developed from the report. Continue reading “Learn how CEOs & CMOs are restructuring their marketing teams for success – Infographic”

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It’s more than the agency roster and the scope of work. It’s the relationship, stupid!

This 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 the best marketing / advertising book of 2016.

Agency roster and remuneration

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.

These briefing decisions are now made project by project, and individual agencies have to be prepared to bid project by project in order to secure their piece of the action.  This competitive bidding pits client agency against client agency — even though the portfolio of agencies is supposed to be working harmoniously on behalf of client brands across the media landscape.

Further complicating this picture is the overwhelming number of deliverables that now make up client Scopes of Work.  Marketing departments experiment aggressively to see what kinds of digital and social deliverables will have a positive effect in the marketplace.

They treat this kind of experimentation as cost-free for their agencies, so they load on the work without matching it with proportional fees. One agency office I worked with saw its 2015 workload increase from 3,600 deliverables to over 11,500 deliverables in 2016. The fees for this work increased by only 25%.

In today’s project-based relationships, individual agencies have less voice and less influence over their clients’ brand strategies — and not very surprisingly, agencies are putting fewer seasoned account management and planning resources on their accounts.  Poor fee economics drive this decision, along with the ongoing need to deliver profits to their holding company owners. Agencies are becoming more junior and transactional rather than experienced and strategic.

In the meantime, their clients’ legacy brands languish in the marketplace, and CMOs are replaced regularly as a result of their failure to deliver improved results.

This relationship pattern has weakened the branded agencies and increased the logic for holding company relationships, where WPP, Omnicom, Publicis Groupe and Interpublic organise their company-wide portfolio of resources in an effort to re-establish exclusive AOR relationships with large clients.

Publicis Groupe, in particular, under CEO Arthur Sadoun, has been aggressive about this transition. “I am committed to breaking the silo,” Sadoun told Campaign last September, noting that this integrated way of working was the future, and that the group had to remove any barriers such as financial silos. “It’s the only way to bring the best of our services to our clients,” he said.

Continue reading “It’s more than the agency roster and the scope of work. It’s the relationship, stupid!”

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Who’s to blame for the current digital media mess? We all are.

This post is by David Angell, General Manager of the fast growing Melbourne market and National Head of Media. David has extensive commercial and media experience gained through a fifteen year career in media agencies, which he uses to help drive optimal results for TrinityP3 clients.

Commentary regarding the various issues facing the digital advertising industry continues to grow. Dishonesty, corruption, complexity, lack of knowledge, inadequate marketing, inadequate agencies, inadequate measurement…the list goes on.

Based on the work we do with our clients, these issues are certainly becoming more recognised – even if many advertisers are still extremely challenged in their understanding of who, or what, they need to look at.

The trouble is, so much of the commentary lacks objectivity.

Digital media mess

Cutting a far better path is Marc Pritchard. Here’s a repeated but still refreshing sentiment from P&G’s CMO, in his recent speech to the ANA conference in Orlando, Florida.

[Media-agency relations] have become frayed by too much complexity, murkiness and waste in the supply chain that all of us have had a hand in creating.

What I like about this is that, first, he references media agency relations – not media agencies, not marketers, but the quality of relationship between them. Secondly, the phrase ‘all of us have had a hand’. The unbalanced agenda, so prevalent in this fraught and on-going debate, is largely absent.

Of course, Mr Pritchard has become relatively famous for his own recent admission that P&G had themselves been behind the 8-ball, at least contractually speaking. This further commentary shows that he’s actually ahead, not behind, when it comes to apportioning responsibility and considering the implications.

In short – we’re all responsible. We’re all to blame. Continue reading “Who’s to blame for the current digital media mess? We all are.”

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Why it is so important to have an agency scope of work

This post is by Darren Woolley, Founder of TrinityP3With 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.

This is the final in our series of articles on agency scope of work management. Managing the scope of work for your agency is possibly the easiest and fastest way to increase the buying power of your marketing budget by removing the duplication and uncertainty as much as possible from the agency work. In this way you are able to get more for your agency budget without simply driving down the rates and prices.

Agency scope of work

The concept of scope of work could be foreign to some marketers, considering that since the global recession a decade ago, agencies have been willing to discount their fees and take on additional work at no extra cost, simply to maintain the client relationship.

This encourages the client to be like the proverbial “pig at the trough” as they can eat as much agency resource as they like for the cost of the agency retainer. But the fact is that agencies are businesses that need to make profit to survive and so in these circumstances agencies will find ways to increase revenue and maintain profit.

This has put incredible pressure on the relationship between advertisers and their agencies. This is especially obvious in the media space with the issues regarding rebates, kickbacks and the lack of transparency in the digital media ecosystem and the ways media agencies and holding companies have profited from this.

But likewise the Department of Justice investigation of the production process in the USA is evidence of the potential lengths that agencies will go to increase revenue and maintain profits in the face of continuous downward pressures on agency fees.

The agency scope of work in annual negotiations

Continue reading “Why it is so important to have an agency scope of work”

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Drowning in Marketing Deliverables

This 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 the best marketing / advertising book of 2016.

Marketing Deliverables

There’s more to the Digital and Social Revolution than programmatic media, online videos, data analysis and overnight billionaires.

There’s something else, and it’s called an avalanche of workload. Ad agencies are drowning in deliverables. Scopes of Work are out of control. Advertisers are experimenting, experimenting, experimenting with out-of-scope digital and social deliverables, and agencies are overwhelmed with the amount of work they have to get out the door on a daily basis.

The Digital and Social Revolution is turning ad agencies into high-volume ad factories, cranking out massive numbers of low-value deliverables in a quest to fill up digital and social channels. It’s a world characterised by “content” and “quantity.” Adaptations abound; originations are far and few-between.

The myth about digital and social advertising is that advertisers are confidently increasing their activities in these areas because they know that digital and social media are effective. The reality is quite different. CMOs are not as confident as they appear – instead, they’re experimenting on the back of their agencies, hoping beyond hope that they can kick-start growth for their moribund brands without having to spend an arm and a leg to do so.

What works? What does not? No one is sure. Lack of certainty leads to experimentation. Continue reading “Drowning in Marketing Deliverables”

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Managing Marketing: Modern publishing and the new opportunities for advertisers

Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

Alexandra Tselios is the founder and publisher of the TheBigSmoke.com.au and here she talks with Darren on the changes in publishing and her approach to content, advertising, publicity and the opportunities for advertisers and their agencies to engage with her audience in a way that delivers value to all involved.

Alexandra Tselios Podcast

You can listen to the podcast here:

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Transcription:

Darren:

Welcome to Managing Marketing. Today I’m talking with Alexandra Tselios, publisher and founder of the media platform, ‘The Big Smoke’. Welcome, Alexandra.

Alexandra:

Thank you for having me.

Darren:

Look it’s interesting from my perspective because after 30 years in the advertising and media industry I’m used to talking and dealing with the traditional publishers (the media publishers) but you’re quite different to those traditional media publishers aren’t you (with The Big Smoke as a technology platform) so how do you see yourself as being different from them?

Alexandra:

Well, when I look at The Big Smoke as a publishing platform I see it more as an ecosystem and part of that ecosystem is that we publish front-end. But another element of that is that we aggregate writers and we aggregate content providers and we have bloggers; it’s a lot more than a site that just publishes articles for example.

I feel that there is a new way of looking at publishing in that regard and so over the last few years since I’ve launched it’s just taken a really different turn to what I expected it to be because I didn’t come from a publishing background. And I didn’t come from a media background so that was probably my saving grace to be honest with you.

Darren:

Yeah, you didn’t inherit a publishing format from your father, or grandfather. It’s not a Fairfax and it’s not a News but also you didn’t have the traditional approach they had. So what got you interested in this area?

New media – platforms and opportunities

Alexandra:

About four years ago I was sitting with a friend and I thought, ‘I’m so bored with the articles I’m reading in Australia’. Only in Australia. In the U.S I was finding some platforms that were really engaging and interesting. But I wasn’t enjoying what I was reading and I just thought there has to be a different way to have content that was by people who I might consider a little bit more relevant in terms of talking about certain issues.

I’ll give you a good example; when the Martin Place siege happened we didn’t want to have journalists writing about what was happening. We didn’t want people saying, ‘at 10.05 this happened’ and so on. What we actually did do…

Darren:

Reporting.

Alexandra:

We didn’t report because there’s enough of that. Anyone could find that out. What we did do is we got a taxi driver who was driving around Martin Place picking up people and taking them away, to write about it.  I just think there is a really great opportunity to hear these voices of people who are actually in the fields a lot of the time.

It’s more than just academics who are talking about social issues or psychology it’s actually becoming people who are barristers or doctors and I just think there is a really nice opportunity for writers to be viewed in a different way than just journalists not to say that journalists aren’t great but you know?

Darren:

It’s interesting because you are playing directly to what the founders, the creators of the internet saw the internet to be, which was a democratisation of communication. It was going to be a place where all people could be heard and in a way what you’re doing is facilitating that aren’t you?

Continue reading “Managing Marketing: Modern publishing and the new opportunities for advertisers”

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How to build flexibility into an agency scope of work

This post is by Darren Woolley, Founder of TrinityP3With 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.

This is the third in a series of articles on agency scope of work management. Managing the scope of work for your agency is possibly the easiest and fastest way to increase the buying power of your marketing budget by removing the duplication and uncertainty as much as possible from the agency work. In this way you are able to get more for your agency budget without simply driving down the rates and prices.

Scope of Work

Being able to plan all of your requirements of the agency for the coming year is an ideal situation. But the world and the market is often an unpredictable place and your brand strategy needs to be able to frame how your responds to the changes in the market place. Luckily there is a way to frame your agency scope of work in a way that lets you obtain the benefits of the increased efficiency.

Managing change and uncertainty

When we are working with advertisers on their scope of work for the agency, either as part of a tender or as part of their annual planning, one of the obstacles is a lack of certainty in the plans for the coming year. Of course it is natural that things can change. Nothing is more certain than change itself. But the causes of change vary significantly: change in strategy, change in market circumstances, change in requirements, change in marketing leadership and more.

But sometimes the lack of certainty is because the planning and requirements are decided outside of the marketing team and within the business. This makes it incredibly difficult to be able to plan the requirements, unless you are able to engage those areas of the business that create the demand in the planning process.

One of the ways we have had incredible success in doing this is being able to demonstrate through financial modeling of the agency process, the savings that can be obtained by deploying a more rigorous and certain planning and scope of work process.

Bringing certainty to uncertainty

Continue reading “How to build flexibility into an agency scope of work”

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