What happens when the best agencies are no longer interested in pitching for your business?

Recently we have read reports from the CEO of WPP, Sir Martin Sorell and even our own Executive Chairman, Michael Farmer, talking about the almost irrational motivation of agencies to pitch for and win business at any cost. Certainly, with so many agencies in the market, you would think there is no shortage of candidates to pitch for an advertisers business. But the fact is that not all agencies are equal, yes, some are more equal, or perhaps more desirable than others. In any market there are a handful of agencies that are considered outstanding and then there are the others and behind them the ‘also-rans’. Continue reading

Posted in agency remuneration / compensation, agency search & selection, industry news & trends, marketing procurement | Comments Off on What happens when the best agencies are no longer interested in pitching for your business?

Do You Really, Truly Want to Transform Your Agency?

Are you tired of being shoved around by clients?  Worried about your fees?  Missing your budgets?  Is your creativity undervalued?  Are your best people quitting for better jobs?  Do benchmarkers set your fees? Do you remember the good old days, when you trod the gilded C-Suite corridors?  When you were treated with respect?  When your work was award-winning and it really mattered?  When what you did made a difference?  Friend, you need a transformation.  A real transformation. Continue reading

Posted in agency remuneration / compensation, agency solutions, interesting observations, marketing process optimisation | Comments Off on Do You Really, Truly Want to Transform Your Agency?

Ad Industry’s Talent Crisis is a Symptom, Not a Disease

ANA was brave to issue a “scathing report” (per AdAge) on the lack of talent in the advertising industry.  Certain outsiders were fingered as contributing to the talent problem: universities that “aren’t keeping pace with the industry’s changing needs” and consultancies and tech giants that are offering “more generous salaries and perks.”  (Shame on them!) On top of this, Millennials remain an enigma — why aren’t they more eager to enter the industry?  What ANA did not describe were the day-to-day operations of advertisers and agencies that have turned the advertising working environment into a relatively unattractive one for job-seeking graduates, a trend that has been in swing and gaining momentum for the past 15 years.  Continue reading

Posted in agency remuneration / compensation, agency solutions, industry news & trends, interesting observations | Comments Off on Ad Industry’s Talent Crisis is a Symptom, Not a Disease

Can management consultants teach ‘value’ to the advertising agencies?

It is interesting to see how the advertising industry has reacted to the recent acquisition play of the management consultant firms like Accenture and PWC. Some people embrace the trend while others are sceptical as to the efficacy of the strategy. Will Accenture be able to leverage the value of their investment in Karmarama and Monkeys on opposite sides of the world? Or will what is seen as fundamental cultural differences cause it to fail? Time will tell. Continue reading

Posted in agency remuneration / compensation, industry news & trends, marketing procurement, return on investment, strategic management | Comments Off on Can management consultants teach ‘value’ to the advertising agencies?

Why working / non-working ratios no longer work for advertising

As an industry we love our terms. Usually they are TLA (Three Letter Acronyms) like ATL, BTL and TTL. Or RFP, RFT and RFIs. And marketing technology digital buzz words are making this even crazier.

But there is a concept which has recently made a prominent return to the industry and yet it is totally outdated and no longer relevant. That is Working and Non-Working Spend. The reason for the sudden resurgence is a combination of management consultants who are pushing Zero Based Budgeting, not so much to drive marketing performance and return on investment, but more as a marketing investment framework to reduce the marketing investment and therefore budget.

The second source is the increased activity in investments in traditional consumer package goods brand companies by private equity and venture capital, and their use of the term to inform the market that they have magically discovered the investment strategy to turn the flagging performance of these entities around by simply reducing non-working spend and improving the working to non-working ratio.

In fact, as I write this, it seems so self-evident that you wonder why the schmucks that owned the business before it was bought by these clever investors had not done this already. Why wouldn’t you reduce non-working spend. After all, if it is non-working why are you spending anything on it anyway? Continue reading

Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing process optimisation, marketing procurement, return on investment | Comments Off on Why working / non-working ratios no longer work for advertising

Are you benchmarking or butchering your agency fees?

Benchmarking has quite rightly earned a poor reputation. Recently Michael Farmer, Executive Chairman of TrinityP3, expressed this opinion in an article in Media Village republished here. This poor reputation is primarily because it is used by many in the industry to simply reduce agency fees and not as a way of obtaining a reference point for comparison, which was the original purpose of a benchmark.

I have shared this opinion with him and the industry way back in 2011 when it became obvious that many in the industry (including many competitors) were simply using benchmarking to reduce advertising agencies to the lowest common denominator. This is because many are simply benchmarking one dimension of agency being costs, such as hourly rates or day rates. In this case, they are relying on titles and position descriptions as a measure of quality, or ignoring value completely, then simply butcher the fees paid for those resources to the lowest in the market. It can certainly deliver cost reductions, but usually at the expense of the quality of those resources.

Very early on we acknowledged that the rate or fee per resource was flawed and often criticised those who used cost per FTE resources as a benchmark for being the same type of people who would buy books by weight or choose a movie based on the length expecting it to represent better value. Instead, we set about developing benchmarks that better represented a benchmark of value rather than cost.

It is not benchmarking, but the misuse of benchmarking that is the issue.

Misapplication of agency remuneration benchmarks

I participated in a meeting of a Marketing Leadership Team (MLT) and was presenting the results of the agency benchmarking we had undertaken on a number of their agencies. The various agencies had different roles in the roster of agencies in regards to the type and quality of work they were expected to produce. They also had different specialist knowledge and skills that made the roster complimentary to the capabilities required by the marketing team.

Using low, medium, and high benchmarks, and benchmarks specific to the category in which they operated, we were able to provide significant insights into the current remuneration models and how well they were performing for both the marketers and the agencies. It was not a surprise for the MLT that the lead agency was at premium to the market overall, even though the organisations procurement team had achieved a significant reduction in the agency hourly rate at the contract negotiations three years earlier, the agency was effectively working at the high benchmark because of the additional hours, particularly in creative, they were investing in delivering the scope of work.

While the procurement team had reduced the premium agency to midlevel benchmark fees the agency had managed to recover by inflating the resources required for the scope of work to make up the shortfall that would have resulted in the retainer. The marketers were comfortable with this and were also happy to know that they were getting what they were paying.

On the other hand, a second tier agency who worked on project fees were priced on an hourly rate card similar to the lead creative agency (clearly the benchmark provided at the time) and slightly higher than their market position and expertise, but were managing on a project by project basis to add incremental margin to each project quote as a way to improve profitability. Interestingly it was this second tier agency that was perceived as more cost-effective even though they were effectively more expensive overall for delivering the scope of work.

The reason for the difference in perception turned out to be that being on a project fee and being able to incrementally increase margin the second tier agency were more attentive and more available than the retained creative lead agency.

If the purpose of the original agency negotiations was to reduce cost to the organisation, the procurement team had used a common benchmark across all agencies, but in a very one dimensional manner, being rate or resource cost. In the process they had encouraged or at least allowed the agencies to game the system procurement had created by increasing resource hours in the retainer to make up for the shortfall, or allow a project system were the agency could incrementally increase costs without anyone noticing. In both cases the cookie cutter approach to benchmarking failed. Continue reading

Posted in agency remuneration / compensation, agency search & selection, interesting observations, marketing procurement, resource rate calculator, return on investment | Comments Off on Are you benchmarking or butchering your agency fees?

17 ways advertisers can make their advertising production more transparent

In light of the recent ANA Production Transparency Report in the US, and the growing trend for the ‘Big 6’ Networks to establish separate brands for production services, here is a list of key considerations for your current agency contracts. TrinityP3 believes terms and conditions should be transparent, and not support hidden agendas, especially where an agency may engage a related production supplier. So here are our seventeen areas or principles when reviewing your agency and production contracts:

Review your agency contracts regularly – The contract should contain transparent terms, which are clearly understood by both parties, and reviewed at least every third-year due to technological advancements and process efficiency within industry practices. Do you know exactly what the terms and conditions are of your agreement? If not, you should, transparency is paramount.

Be clear on the type of relationship your contract defines

Contracts are generally one of two formats. This is either one of Principal and Agent, or alternatively Principal and Contractor. Where the Agency is acting as an Agent, the Agency has a fiduciary responsibility to act in the best interests of the client, and procure production at the best possible price. However, where the contract engages the agency as a Principal and Independent Contractor, often terms allow for the agency to mark-up or provide less disclosure and transparency over the sourcing of external production services.

There has been a recent shift towards these agreements where the Agency acts as the Principal with production suppliers, to limit the ‘risk’ of audit and potential compensation in the case of a breach of terms of the agreement. The Agency engages suppliers, which are often deemed external 3rd parties (although often related), which are not subject to the terms and conditions of any Master Services Agreement.

Investigate contracting third party production companies directly

A direct Production Services Agreement with the related 3rd party production house is always recommended, which should include the same transparent terms as the Agency agreement, and especially include the right to audit. This supports the move away from ‘fixed price’ and ‘non-auditable’ external production agreements, which are common within the industry. Continue reading

Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing process optimisation, marketing procurement, television & electronic production | Comments Off on 17 ways advertisers can make their advertising production more transparent

Why performance based payments need to be an incentive not a disincentive

How do you create high-performance teams? Well if you look at what often passes as performance based compensation, you would think it is about taking money away from the agency before then setting an unreasonable and unrealistic performance metric, and then asking the agency to work at getting their money back. Talk about all stick and no carrot. Is it any wonder that so many marketers report that their agency performance remuneration efforts failed? Let’s be honest for a minute and admit that most of these performance models were really about reducing the agency fee and had very little to do with truly wanting to encourage performance. The technique would be applied usually as a way to get the agency to reduce their overall fee by 10% to 15% by placing it ‘at risk’ for an opportunity of earning back perhaps a maximum of 20%.  Continue reading

Posted in agency remuneration / compensation, industry news & trends, marketing procurement, return on investment, strategic management | Comments Off on Why performance based payments need to be an incentive not a disincentive

How long payment terms impact client / agency relationships

Let me be completely up-front here, this is not just an issue for advertising agencies, it is also an issue for consulting companies like mine. There are many major companies who will put you through a detailed and protracted procurement process, negotiate your tendered price down and then inform you that they have payment terms of 90 days or more.

Others are less obnoxious in that they state their payment terms up front, which, depending on the type and size of the project being tendered, allows us the opportunity to politely withdraw from the process because there are plenty of other more reasonable companies willing to pay for our services on 30 days and sometimes less so that we do not need to waste our time on companies who basically expect their smaller vendors and suppliers to act as their source of free cash. Continue reading

Posted in agency remuneration / compensation, industry news & trends, marketing procurement, return on investment | Comments Off on How long payment terms impact client / agency relationships

The Ad Industry at War with Itself

This month marks the one-year anniversary of the publication of ANA’s “media transparency” recommendations, which followed a major investigation of media agency practices. Lest we forget how central media transparency is to ANA, Bob Liodice (President and CEO of ANA) and Doug Wood (outside legal counsel) published a MediaVillage article in mid-July reminding us that “if the allegations against the [media] agencies are true, the behaviour is reminiscent of past high-profile financial scandals.” Continue reading

Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing procurement | Comments Off on The Ad Industry at War with Itself

The danger of confusing best practice with common practice

Many of the challenges marketers are facing are new. Digital technology has had major impact in disrupting all aspects of business and particularly marketing because it has disrupted consumer behaviour too. Therefore, while we agree that the foundations of marketing and marketing strategy are still essential, there are new challenges arising in the implementation because of the increased complexity and constant change. In the face of these new challenges and complexity, many of the old tried and true solutions no longer work. Yet it is human nature to stick with what you know or what has been tried and tested, rather than trying something new. Continue reading

Posted in agency remuneration / compensation, agency search & selection, Evalu8ing - Relationship Performance Monitoring, interesting observations, marketing procurement | Comments Off on The danger of confusing best practice with common practice

Who’s Guilty and Who’s Innocent in the Industry’s Transparency Wars?

Bill Duggan recently penned a piece in MediaVillage.com continuing the ANA’s attack on ad agencies – this time over production transparency, which is the code name for unethical and possibly illegal bid-rigging activities conducted by some agencies to secure production contracts at favourable rates. A previous transparency issue, media transparency, was investigated by ANA in 2016, and it confirmed instances of media agencies enriching themselves at client expense through rebates, kickbacks and other “non-transparent” practices, many of them not forbidden by existing contracts. Continue reading

Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing process optimisation | Comments Off on Who’s Guilty and Who’s Innocent in the Industry’s Transparency Wars?

ANA and 4As Duke It Out in a Complete Mismatch

ANA, ever-faithful and aggressive on behalf of its advertiser members, struck a second blow to 4As recently — a right uppercut to the chin — with a new ANA study of advertising production practices. The report detailed “a range of improper behaviour, including allegations that some agencies have steered production contracts to their in-house production and post-production outfits by urging other companies to inflate their prices during the bidding process,” as reported in WSJ. Continue reading

Posted in agency remuneration / compensation, agency solutions, industry news & trends | Comments Off on ANA and 4As Duke It Out in a Complete Mismatch

Managing Marketing: The importance of an insightful and robust agency search & selection process

Kylie Ridler-Dutton is a Senior Consultant at TrinityP3 and a specialist in agency search and selection. Here she chats with Darren regarding the agency search and selection process and the considerations required when planning and managing a successful pitch process for a wide range of agency types including creative, media, digital, social, PR, technology suppliers and more. Continue reading

Posted in agency remuneration / compensation, agency search & selection, interesting observations, marketing procurement, Podcasts, strategic management | Comments Off on Managing Marketing: The importance of an insightful and robust agency search & selection process

Ad Agencies: Prisoners of a Creative Past

Who needed “hands-on management” when revenues were high and automatic, workloads modest, TV dominant, creativity celebrated, brands growing, agencies respected, employees well-paid, parties outrageous and clients long-lasting? Creativity was the foundation of agency success, and to nourish creativity, management got out of the way, lest its intervention destroy the magic. “A creative agency needs to operate like an ant colony,” declared Kevin Roberts, former CEO of Saatchi & Saatchi, “where every ant knows its job and has the freedom to do it. As long as we hire and inspire the right people, to do the right thing … our agency should grow and our creativity should flourish.” Continue reading

Posted in agency remuneration / compensation, agency solutions, interesting observations, marketing process optimisation | Comments Off on Ad Agencies: Prisoners of a Creative Past