Marketing Management Update

16 September 2020

Welcome to the September edition of TrinityP3’s e-news

The US is the centre of the universe for C-Suite executives who seek to “maximize shareholder value.”

CEOs and CFOs are paid lavishly as long as their companies’ share prices continue to rise. Other senior executives are rewarded in the same way.

This is especially true for senior executives in holding company-owned advertising and media agencies.

You might think that executive actions to maximize share price have evolved in the last 30 years, given the massive changes in the media industry: the shift to labor-based fees, globalization of brands, the rise of procurement, the introduction of digital and social media, the abandonment of AOR relationships, and a host of other changes, like the migration to in-house agencies.

Not so, unfortunately. Advertising and media agencies simply reduce costs, downsize and minimize salary increases and bonuses to maximize profits and holding company share prices.

They’ve been doing this for 30 years, and they continue to do it today.

The only management metric needed to play this game is profit margin — a crude and unsophisticated metric that fails senior executives in fundamental ways.

The practice of cost reduction, and the use of profit margin as a metric (when fees are falling) is leading agencies to liquidate their most precious asset: their pool of talented people.

At TrinityP3 USA, we help agencies measure their operations in a more sophisticated and analytical way and focus on how to improve pricing and scopes of work as a way of improving financial performance in the long-term.

We believe that better agency metrics are needed for 2020 and the coming years.

TrinityP3 USA is the US operation of TrinityP3, a global marketing services consulting firm that works with agencies and their clients to improve the quality of their working relationships.

TrinityP3 USA is headed by Michael Farmer, Executive Chairman, who wrote the following pieces.

Read on! – and call us if you’d like to learn more about how we help C-Suite executives do a better job in these complex times.

Ad Agencies are Complex Businesses. New Metrics are Needed for Improved Management

Advertising agencies are exceptionally complex businesses, driven by digital / social media innovations, large and fragmented scopes of work, procurement-led fee reductions, holding company-led downsizings, and client pressures to get brands moving again.

Agencies have developed hyper-targeted digital executions and ROI tracking tools to help their clients. What they have not done is develop new and better metrics for managing their own businesses.

The shoemaker’s children always go barefoot, goes the proverb. Client-focused businesses, like advertising agencies, focus on their clients’ needs and often ignore their own.

When an industry goes from simple to complex, and from rich to poor, the past prevails over the present, and outdated metrics, designed for long-gone periods of simplicity and richness continue to be used. Read more on this here .

Want to read more on measuring and managing complexity?

Check out our White Papers on a range of these topic here .

Forget ‘The Agency of the Future.’ Fix ‘The Agency of Today’

‘The Agency of the Future’ gets a lot of attention in the press and at industry conferences. ‘The Agency of the Future’ partners with its clients, solves brand problems through enhanced creativity, provides digital/integrated solutions, attracts the best industry talent, and competes with consulting firms. It is a wonderful dream that will be realised only if ‘The Agency of Today’ is fixed. This is not happening.

The Agency of the Future remains a perpetual possibility only in a world of speculation. The hard facts of the present argue that it cannot be achieved. Not enough is being done to fix The Agency of Today. Instead, The Agency of the Future will emerge as a weakened version of The Agency of Today – even more underpaid, understaffed with junior people, relegated to execution rather than partnership, developing too many non-strategic deliverables, competing with in-house agencies, trying to prop up holding company margins, and downsizing whenever income or profits are threatened. Read more on this here .

Want a confidential discussion on managing complexity in your business?

Just reply to this email or connect with me here .

The Next Big Thing in Media & Advertising: Simplification

It has been 16 years since Facebook’s founding and Google’s IPO in 2004. Marketing, media, and creative players rushed in to master the new digital and social innovations across all viewing platforms. Complexity replaced simplicity and has grown without bounds. Excess complexity is a disaster. It’s time to eliminate it.

Agencies and clients need to sit down and develop simplification action plans that lead to value creation, improved brand performance, and cuts in unnecessary and wasteful activities. Senior agency executives need to engage in this dialog, armed with data that documents the extreme complexity of today’s agency operations.

Procurement, for its part, needs to abandon its fee-cutting obsession and focus, as it should, on the elimination of non-value-added activities. SOW pruning across media channels is an obvious first step.

“Order and simplification are the first steps towards mastery of a subject,” wrote German novelist Thomas Mann. In this industry, simplification needs to be the second step — the embrace of complexity got there first, with too many devastating consequences. Read more on this here .

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