Peter Levitan is an agency whisperer with experience managing the world’s largest advertising agency, building his own agency, founding two Internet companies, and consulting with over 100 ad agency clients. He can help you build a happy, healthy, unignorable, successful lead generation agency.
In a world where some argue there is already a glut of advertising agencies, Peter argues there is still room for a kick-ass agency to thrive. His first book was The Levitan Pitch. Buy this book. Win more pitches. He has followed this up with his latest tome, which champions this idea. Titled How to Build a Kick-ass Advertising Agency, the book provides everything you need to build all sizes of agencies, from one person to multinationals.
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My general advice, I start with, know how you make money and what margin you want out of your business.
Transcription:
Darren:
Hi, I’m Darren Woolley, founder and CEO of TrinityP3 Marketing Management Consultancy, and welcome to Managing Marketing, a weekly podcast where we discuss the issues and opportunities facing marketing, media, and advertising with industry thought leaders and practitioners.
In a world where some may argue that there is already a glut of advertising agencies, one man argues that there’s still room for a kickass agency to thrive.
His first book was The Levitan Pitch. Buy This Book. Win More Pitches. And now, has been followed up with his latest one that champions this idea titled, How to Build a Kickass Advertising Agency. The book provides everything you need to build all sizes of agencies from one person to multinationals.
His experience in managing the world’s largest advertising agency, building his own agency, founding two internet companies, and consulting with hundreds of ad agency clients to help build a happy, healthy, unignorable, successful lead generation agency. Please welcome to manage your marketing, a man I call the agency whisperer, Peter Levitan.
Peter, welcome to the podcast.
Peter:
Yes, I’m whispering today.
Darren:
Well, I love that idea of the agency whispering. You get up in the CEO’s ear and you go, “You know what? You’ve got to do better.”
Peter:
Well, do something.
Darren:
Well, it’s true. Look, I have to tell you, I really do believe sometimes we have a glut of advertising agencies because as a pitch consultant, we like to, in any market get to know the full breadth of the agencies in that market so that we can make a really informed recommendation to our clients.
But there are so many agencies, it’s virtually humanly impossible. I’m waiting for AI to help me do it, to stay across the number of agencies.
Peter:
Yes. I don’t know what the number is. I read something this morning — I always use the number 4,000 because it sounds reasonable, but I just read from another wonderful advertising agency, search consultancy that there are 40,000. Now, who knows what the number is?
The reality today is that we now have multinational agencies with thousands of employees. I assume they still have thousands of employees. I don’t know, it might be much less than that right now. And then we have single individual purveyors who might be an expert in SEO or guess what, artificial intelligence.
So, when you add it all up, I’m betting the single guy in Chiang Mai and the multinational in London, you name it, maybe it is 40,000. And that’s a lot.
Darren:
I wouldn’t be surprised. And then, as you say, when we talk about advertising agencies, we’re not just talking about creative agencies. It’s media, there’s sales activation or shopper activation, PR, often weasels their way into it with services that were traditionally done by agencies. It’s amazing how broad the category has become.
Peter:
Well, I came up in the first chapter of the book, I asked the question: what the hell is advertising? And I did it for a couple of reasons because sometimes I don’t know what the word advertising agency means. Is it a marketing agency? Let’s fill in the blank, and I’m sure you see this every day. People try to describe what they do or maybe don’t do a very good job of that.
And I came up with 31 types of agencies, design agency, digital agency, SEO agency. I mean, you could figure out there at least 31. And I’m not sure when I finished writing the book if I actually added in artificial intelligence agency, which frankly, if I had a blank sheet of paper today, I might make that my agency. It would certainly get attention.
Darren:
Well, anything with AI attached to it seems to get everyone’s attention this week. I mean, last week it was, I think the Metaverse and the week before that, it was D&I. So, we are an industry that loves the new or loves to grab hold of the latest to try and get attention.
Peter:
Yes. This new is going to stick. This will be interesting. I think I’ll be long gone or fishing in Bermuda when somebody really figures this stuff out. But I view artificial intelligence as a major positive.
Darren:
Now, one of the things I’ve noticed about this new book is it seems to be the perfect companion piece to your first book, which was about how to win pitches. This is much more about how to build a really successful agency that gets growth, not necessarily just through pitching, isn’t it?
Peter:
One day I woke up and I said, “I know a lot of stuff, I talk to a lot of agencies. I’ve been in the business forever. I started in New York. I worked at Saatchi in London.” I mean, I’ve got all that kind of stuff. Plus, I probably coached, I don’t know, pick a hundred agencies in terms of a number.
And I thought, alright, let’s just do (I don’t know if this is the best word) a brain dump. I’m just going to say everything I ever learned that I think works in advertising. And I tried to create a book that works for a WPP agency CEO, although let me put an asterisk there, and I’ll come back to that in a second, as well as the individual person starting an agency somewhere.
Now, why the asterisk? I get incoming, “Can you help us? Can you help us figure out our marketing, our positioning yada-yada, how do we handle our remote staff?” I get those questions. I never, ever get them from multinationals. And I think a core reason is either they’re so deep into their own head, or they won’t admit that they’re heading down a road to failure.
So, I’ve never really figured out why the type of incoming I get for my business. And I’m sure you have a similar question periodically, why this type of company? Why not that type of company?
Darren:
Well, I have noticed, and it’s been written about a lot in the trade media, about the rise of the indie agency, the independent agency. And we’ve noticed that marketers, who in the past … what’s the elephant screws elephants? Big clients choose big agencies.
But now, they’re becoming much more open to, “Well, we are not really just interested in the big agencies. We’re actually more interested and we’re willing to take a perceived risk with the indies” because they’re actually seeing the benefits of the owner of the agency with skin in the game, actually running the agency, and they see the benefits.
And I think COVID and the global pandemic where suddenly this idea of face-to-face account management moved to the virtual world, really changed their perceptions of that. Have you seen a similar sort of pattern?
Peter:
Yes. I can go both ways when it comes to large agencies. I’ll tell you a little story. So, once upon a time, and this was a while ago when I ran business development at Saatchi & Saatchi, and I always like to say the original Saatchi & Saatchi — that one. And I would get asked a question, we’d be setting up a pitch for a client, and one of the things we would hear is, “Well, you guys are too big. Okay, we’ll get lost.”
So, one pitch I did where I was actually going to run the business; not only pitch it, but run it, which is always a mistake for a business development person, lose sight of the objective.
Anyway, so we invented an agency, Levitan, Keshan and Johnson and I didn’t pitch Saatchi & Saatchi. I mean, they obviously knew who we were, but we pitched this little, tiny group. And we didn’t happen to win that pitch, but I thought it was a brilliant idea, they should have hired us.
So, yes, there are a lot of clients that feel the need for a large, they still want lots of dots on the map: can you sell us into Australia, New Zealand, South Africa and France? And they may need that.
However, and I’ll give a pitch out to one of my friends, an agency called London, which is a great name for an agency. And their pitch is essentially, one big idea can travel the world.
Darren:
They’re a good agency, aren’t they?
Peter:
They’re very good. As you know, I’m willing to admit some ex-Saatchi guys. So, we all learned very well many years ago. I probably forgot most of what I learned anyway, by now.
Darren:
The other thing that’s happened though to that point, is the rise of the Indies is now the indie networks. We’ve now got (I’ve lost count) about nine that I know of, of these networks or collectives that are picking up indies in each of the marketplaces and cobbling it together as a network for those clients.
Peter:
Well, I was looking this morning at agency names. And again, I don’t want to do the boring inside my book deal, but I’m going to say that I have a chapter on how to buy and sell agencies. And within that chapter, a lot of information on how do you name an agency. And so, there are different types of agencies.
So, I was looking at a name today called The Monkeys. It might even be an Australian agency, is it?
Darren:
It is. They got bought by Accenture.
Peter:
Alright. So, here’s the deal; so I thought, “Oh, The Monkeys, I’ll go check them out. Maybe they have a funny website. It’s a cute name.” But when you look at their name, “The Monkeys” under it in a tiny font, it says an Accenture agency, which completely mitigates, takes away any coolness from the name monkeys — it’s like sorry guys.
Darren:
But it’s funny you should bring that up because the original name was the Three Drunk Monkeys. And we ran a pitch that they won, and I won’t say which alcoholic Beverages Company.
And part of the deal was they could only be appointed if they dropped the “drunk” from their name, because the client said, “For responsible serving of alcohol, we can’t have an agency that encourages excessive consumption.”
Peter:
Well, here to that point, again, I was thinking about something earlier today for a client, so I was making some notes. You’re well aware of the agency Zulu Alpha Kilo?
Darren:
Yeah, I love ZAK.
Peter:
Alright. And so, I was looking, they’re brilliant in many ways. One is their website, which has been consistent for a long time has just a couple of fabulous videos on it, funny videos. And one of the things it says somewhere on the website, “Why are we an advertising agency? And the agency says to write off alcohol as a business expense.”
Peter:
And I went, “Oh, okay. Alright. I get it.”
Darren:
Well, look, and one of the things I really admire is the consistent way they’ve addressed industry issues and being able to share their perspective on everything from RFPs to awards, and being acquired by mergers and acquisitions in a very humorous way that really strongly makes the point.
And there’s not a lot of agencies that are willing to take that position, but also execute it with some humor. And it’s funny, isn’t it, that agencies are great at giving their clients advice on the power of humor, the power of creativity, and yet so few actually use those tools to promote themselves.
Peter:
There’s a fear of alienating a future client because you’re doing something that’s a bit too edgy. And of course, any sound marketer, if you put them in the room, would say, “Well, we want to be distinctive and if we can find a way to be distinctive, that’s good for us.”
On the other hand, agencies as we’ve discussed that have a capabilities list that says, “We can do 40 things for you,” dilutes any sense of distinction. Humor is one way and its certainly Zula Alpha Kilo, and another agency up there in Canada, I point to all the time (John Street), whose premise is that “We will make your brand unignorable,” is in fact or has been an unignorable agency.
So, these are guys that are carving out a space and not worrying about if there’s any alienation — how do you say that word?
Darren:
Alienation.
Peter:
Yeah, thank you.
Darren:
Here’s the weird thing, and that is, you will never get a hundred percent of the market. With so many competitors, no agency could ever become a monopoly.
So, why are they trying to be everything to everyone and not alienating anyone when all the evidence says that the balance is often done well. You can alienate 50%, but the other 50% become lovers, or 20%, and the other 20% become lovers.
This idea of alienation, the only time it doesn’t work is when you actually manage to offend everyone. And even that’s quite difficult. I know, I’ve tried.
Peter:
I enjoy offending (I’m being cautious here). I’m trying to be a nice human. But I think sometimes being slightly offensive actually does in fact, work. Now, again it doesn’t work — how do you define offensive? That’s a tough one.
One thing I’ll say is agencies, I think too often do not actually understand the mindset and the persona of the Chief Marketing Officer or the CEO or whoever’s going to be their client. I’ve had conversations with — and you have many more conversations with client types than I do; where they say, “The agency just doesn’t seem to act like a businessperson. They don’t understand that we want an ‘Advertising agency’” but we need (this sounds hackneyed) a business partner.
And many agencies that are run by a certain type of human being just are not coming out of the business world, and therefore, cannot have that cogent, meaningful conversation. So, that’s a failure that I see sometimes. Do you see that in the marketplace?
Darren:
Absolutely. And just to go back, I don’t think it’s about being offensive. I think it’s being provocative. What we should do, we may offend people, but the purpose is not to offend. The purpose is to provoke a reaction or provoke a thought or provoke a point of view.
So, just to cover that off, I think we both strolled into, as you say, cautious territory. But I think it’s good to provoke a reaction. In fact, that’s what we want from advertising, is to provoke some sort of reaction.
Secondly, yes, the number of marketers that have said, “We want a business partner,” but when I’ve delved into that conversation, what they really mean is they want a commercial partner. And let me explain from my perspective the way I interpret that differently, I know it’s a little nuanced.
But a business partner sounds like someone that’s in this and got the same skin in the game when that really happens. Clients are rarely willing to share profits with their agency, they still want to pay them a fee because sharing their profits is a slippery slope. So, they don’t really want a true business partnership, they want a partner that is commercially cognizant of the realities of the business.
So, someone that’s not going to come to them with a really expensive idea to solve a very small problem. They want that sort of commercial reality, and that commercial thinking in helping them align the advertising and the advice that they’re giving to the commercial realities of business.
Peter:
I’ll agree. I think it’s one of the reasons why we see companies like Accenture and the other consulting companies actually being invited into the C-suite, which used to be what happened in the advertising world. I mean, I actually had been for a couple of clients invited to board meetings and pointed to in the meeting where they said, “So, Peter, tell us about our consumers.”
I’m not sure that that happens very much anymore. It might happen with an Accenture company and name the other giant consulting firms because they are in fact, invited to the C-suite. So, I haven’t really seen much writing about that problem, issue, opportunity in the past few years. You may come across it certainly more than I do.
I’ll turn it around to you: why are agencies not invited into the boardroom anymore?
Darren:
I think the answer to that is the fact that particularly the big holding company network agencies. The types of people that end up country managers or regional managers are often the really good account management person.
But they’re not someone that’s necessarily run a business or had that commercial experience of running a business. Because most of the holding companies really get their country managers to look after clients, drive revenue, and they’re told how to control costs. You’ll hear about recruitment freezes, salary freezes.
So, it’s really some regional finance person telling them how to run their business without them having the reality of their commercial experience.
And the reason I say that is the number of independent agencies that I’ve worked with or been involved with, that have been working in the holding companies or the network agencies go off and start their own business.
And you notice within two to three years, their attitude towards business fundamentally changes. Because when you’re running your own business, you suddenly get a much more broader understanding of all the commercial realities of what business means, which you don’t get when you’re working in an advertising agency.
And I think that’s a lesson because one of my personal things, Peter, is, when I started, it was called account service, then it evolved into account management. I think we’re in an era where we should be thinking about it as account leadership.
And what I mean by that is training our account people to be able to offer commercial leadership to their clients, help the CMOs with how to navigate the commercial realities of the business from an advertising marketing perspective.
Whether we train them with MBAs or recruit people that have got that commercial experience into the agency, rather than just finding the best account servant to promote to a senior role.
Peter:
Well, when I went to the UK, there were a couple of things happened. I had never met an account planner before. We used to have research departments in New York, but this was an account planner, so that was fabulous. And the other term that I thought was fabulous, I loved it, was that I became an account handler.
Darren:
You’re handling the account.
Peter:
I tried to imagine what kind of handling I was supposed to do. But again, back to my book, because I try to make a major point about this. I have two chapters, client management and the savvy account manager.
And so, I talk about why clients leave a good agency, and they often leave because of poor service. Because agency A, agency B could probably do the job, service is often the differential between a client being happy and not being happy.
The problem we have today is there are virtually no training programs. So, you have an account manager that is not even being trained in learning how to listen. I was trained in something called active listening. Even though I talk a lot, I can shut up and listen.
It’s like I’ve told my kids when they were younger, “You know what you know, but you don’t know what they know.” So, you don’t have to be the person with the drink at the cocktail party that has to be talking endlessly. Or the worst thing is waiting for that second so that you can dive into the conversation. Just shut up and listen.
That’s not taught to account managers right now, as well as something that’s not taught, and this is a terrible term, but I’ll use it: “upselling” or saying, “Oh, we have a new idea for you.” I mean, there are some agencies (let’s just use AI again) that have been ahead of the curve. So, when the client wakes up in the morning and says, “What the heck is this?” They have a white paper, or they have an answer.
If you go on LinkedIn and you look at who’s generating the most views and comments right now, it’s for people that have carousels, which is a new thing on LinkedIn. Carousels that say, “Here are 10 new AI tools that’ll make your life better.”
I don’t see agencies doing that, I see individuals doing it. It’s quite interesting.
Darren:
And yet this is where I talk about account leadership, is getting on top of these issues and providing a leadership perspective, a thought leadership to help clients navigate these issues because there’s so many of them.
As we said earlier, AI is the big topic of the month. And virtually, every session apparently had AI somewhere in the title. But there are so many other issues that marketers are dealing with. Data privacy is a big issue, diversity, equity and inclusion and how that works from a marketing perspective.
In the environmental issues around contribution, the sort of counterintuitive, we work in an industry that drives demand and consumption. And at the same time, taking on a responsibility for reducing greenhouse gas effects, and contributing to climate change.
There’s so many issues marketers are dealing with at the moment. Agencies should be stepping up and offering thought leadership in those areas.
Peter:
Frankly, I’m going to say I’m a pretty good thought leader. I have almost 900 blog posts, I’ve written white papers when I had my agencies. I’ve had two or three different versions of podcasts. I like to be a podcast guest (by the way. Thank you). There are many ways to get the word out, it’s not that difficult. And a great tool right now is AI.
I’ll go on Chat GPT and I’ll ask a question. So, I’m going to soon start writing a book about the baby boom generation, and I ask the question, “What are the major issues confronting the baby boom?” And then I’ll follow up with another question and it spits out what is ultimately going to be the basis of thought leadership of a new book I’ll write.
There are so many ways today to use AI as an information generation tool. Not the best words, but GPT, that won’t go anywhere. So, it’s a really good tool, if you have an automobile client and then they have a problem, ask Bard, Google’s Bard to talk about it.
Now, I’m not saying you’re going to copy this and paste it into a blog post (that’s nightmarish and silly), but it can at least set you up with some of the issues and it’s a time saving tool.
Darren:
But don’t you find your best thought leadership pieces are the ones where you take a particular position, or you have a particular point of view on something?
Because I’ve shared that, like you, I produce quite a significant amount of content around the things that we learn doing the work we do. But when agencies ask me about it, they go, “Oh, we couldn’t do that because we may upset someone.” There’s this fear that they have about actually sharing their perspectives and points of view, even if they have them; the fear of upsetting people.
Peter:
I mean, come on. One of my clients right now is a TV video production company. And so, they’ve shared with me … so this is not an advertising agency, but they’ve shared with me their 30 competitors that all sound alike.
We were talking yesterday about how can they jump ahead of thought leadership, and they’ll listen to this podcast hopefully, they will call me up and slap me around for sharing an idea I shared with them yesterday. I said, “Why don’t you do an interview series, one-minute interviews with the best TV commercial directors in the business?” I said, “Okay.”
Darren:
Great idea.
Peter:
“You don’t even have to do very much. These guys want to talk and do a one-minute interviews, split screen.” Of course, then they get crazy because it has to look good because they’re a video production company. I said, “Don’t worry about that.” You don’t have to work that hard to be smart.
Look, you’re doing thought leadership right now, and I’m benefiting because I’m spewing out my stuff. And you’re getting to look highly intelligent because you chose me to be your guest. This is not hard.
Darren:
That’s true, it’s not hard. But one of the things that I worry about the industry is somewhere along the line, and you mentioned Saatchi’s. Saatchi’s in London had swagger. And I don’t mean that in a toxic masculinity. I mean, when anyone from Saatchi walked into the room, there was the sense of self-confidence and purpose that they didn’t have to explain why they were there. Everyone knew what they did.
I think the industry’s lost that, because I find too often, the attitude that agencies take, particularly in pitches is a little bit like, “Oh, excuse me, thanks for inviting us. It’s good to be here.” And I think clients are looking for someone that has confidence.
I noticed that the CMO of Apple said, “If you want to get great ideas, you’ve got to create confidence in the great ideas to make them happen.” And I think we’ve forgotten how to have that swagger.
Peter:
Well, the Saatchi strapline, tagline (I don’t know which term you want to use) was, “Nothing is impossible.” So, I would-
Darren:
Still is by the way.
Peter:
Good, although M&C Saatchi, where the brothers are, says other things. Oh, they had a great one, this was a couple years ago: “The brutal simplicity of thought.”
Darren:
Brutal simplicity.
Peter:
Yes. Wasn’t that fabulous? I think they walked away from it, but it’s like, we’re going to-
Darren:
Well, they did because that has a sense of, you’re going to punch the hell out of me. Just brutal is-
Peter:
So, those are no guys, and unfortunately, there are a lot of younger people in the business. Of course, there are no older people in the business, they’re all younger people who’ve not experienced that.
We’ll go back to London and Michael Moszynski, who runs London advertising, came out of Saatchi. And he had a case … I don’t know if they use it anymore, anymore a case history system that were three words, and the case histories were in total, probably 25 words. It was like here’s the problem, here’s the solution, here’s the result.
I don’t need, “Oh God …” So, I think we had a nice culture, I learned a lot from it. Whether it works in today’s world is a different story, but yes, swagger is a good … people asked us to talk to them because we were (I can’t say this word) — it starts with mother and it ends with an “ER.” But we were good.
Now, I just saw I don’t know what her title is, somebody from Mischief, the agency Mischief. And it’s a video that’s up on LinkedIn and she talked about how many accounts they have to turn down and why. So, really, agencies should look at a Mischief and say, “What are they doing right?”
Darren:
And look, I’ve actually seen agencies turn down a request to tender and have the client suddenly switch into fear of missing out. They’re saying, “Hang on, what do we need to do to make this agency want a pitch for our business?”
And that’s a power shift. It’s gone from, “We’re giving you a chance maybe to win our business.” To, “Okay, what do we need to do? What’s the conversation that makes us an interesting or attractive client for you?”
Peter:
Are you seeing any agencies sending some form of a questionnaire to a client before they say yes to a participating in an RFP?
Darren:
Not a formal questionnaire, but a lot of agencies increasingly. And they’re the high demand, they’re top of mind. They’re the types of agencies that in any market, I will get marketers requesting that we consider them as part of the consideration list.
As going through a series of questions, what’s this worth? Why is the client pitching? What is the process? How many agencies will be invited to participate? They’re asking those perfectly reasonable commercial questions and then evaluating whether they will participate or not based on the responses.
And some of them have told me, particularly when tenders are being run by procurement, and they get told the answer to those questions is, “We can’t tell you.” Then they’ll obviously refuse to participate.
Peter:
How do you develop your A list of agencies?
Darren:
Consideration list; we spend a long time quizzing and discussing with the client what success looks like in absolute detail. What is it that’s working at the moment or not working? What would success? What are the attributes of the agency? We’re also getting a sense of the culture of the client through those conversations.
And then we have a database that we then go to and get a long list. And we’ve got thousands of agencies on that database. It’s free for the agencies, they can update it. But then, we also go and just do research on top of that to make sure we’re not missing any potential agencies.
Now, we apply some factual things around size, because we had a very large tender, and putting an agency of two or three people to handle or a client that’s now may require 50 people, it’s too much of a risk.
But we also make sure we include some outliers, some ones that’d be interesting just to see how they perform in that process. So, we try and challenge the client’s thinking a bit by putting some agencies hopefully, that they haven’t necessarily considered or even know of.
Peter:
How does an agency get your attention?
Darren:
Well, one is that, lots of agencies come to us because we’re pitch consultants and we ask them to give us that profile. Really, we try and keep across them by doing a lot of research.
Peter:
Okay. I’ll here just-
Darren:
Which is one of the … sorry, Peter. It’s one of the points because here, one of the things that drives me crazy and one of the topics in your book is about the optimal agency website. And I have to say, most agency websites I find from a buyer’s perspective or a buyer influencer perspective, are really poor. What’s an optimal website from your perspective?
Peter:
I dive into each of the elements. So, number one of course, is the homepage. What is the one thing you’re going to tell me when I get to your website that is going to make me want to pay more attention to you?
Because I have some statistics, people spend 6 to 10 seconds on a website and make a decision should I stay here or not. And that’s why, you and I have discussed this, starting out with a sizzle reel of past work, it’s too amorphous, a lot of clients don’t want to spend time.
So, tell me right away what it is that you do and I will use my judgment as a visitor to determine if this is something useful for me.
I mean, Saatchi didn’t have a website in the days when there were no websites but at least, the statement “Nothing is impossible” resonated. So, certainly the homepage can be a problem. No personality.
Most agency websites are bereft of personality and character, which is as you know, is one of the ways that a client chooses an agency if they wind up with four agencies and finalists to three, and they’re all pretty good. It often comes down to chemistry. Well, you can deliver that chemistry up front.
It’s like the production company I’m working with; the way they conduct their interview will also deliver their own personality. So, there’s very little video on websites. We talked about Zula Alpha Kilo, they lead with a video. I mean, it’s pretty good.
So, there’s that, there’s the contact page that doesn’t ask for … there’s no CTA, there’s no call to action. I probably cover 6 to 8 types of sections of these websites that any one of which can create a point of difference for the agency.
I mean, how do you do a case history? One of my favorite websites had videos of clients talking to the perspective, whoever the visitor to the website was. And they didn’t say this agency’s great, they said that … I don’t know how to put it in perspective; the agency heard their clients saying, “I get calls from other agencies all the time, I don’t even talk to them.” They didn’t say, “Oh, they sold our candy bar.” They said, “We won’t even have a conversation with another agency.” Which I thought was, I think, compelling in a way.
Darren:
Well, that’s what I say to agencies, is that I want to get a sense of what’s your philosophy and what’s your attitude. I’ve got a sense of who you are. So, the big mistake is the ones that try and tell me what they do: “Oh, you do advertising? That’s really interesting.” “Oh, you’re a media agency, you do media?”
And then there’s the ones that just use it as a showreel. So, you end up waiting for videos to load because almost all their examples are videos and even then, I’ve heard agencies say, “Well, we can’t put our client list because then other agencies will use it as a stalking and poaching,” a huge amount of insecurity happening in the advertising world.
Peter:
And frankly, not enough creativity. So, I’ll just say it’s two things. It’s demonstrating creative thinking and asking for the order in a way that somebody says, “Oh, I have to talk to these guys.”
Darren:
Absolutely. One of the other chapters you put in there is, “Show Me the Money.” How deep do you go into … because that’s for me, a personal interest because a lot of the work we do is about benchmarking and developing remuneration agency fee structures and negotiating those. So, what’s the advice you have for agencies on fees?
Peter:
My general advice, I start with know how you make money and what margin that you want out of your business. And that’s back to do you have a business plan? And it can be a one-page business plan, it doesn’t have to be a book. Understand how you make money and how you have to charge.
And unfortunately, a lot of agencies don’t do that because these days, a lot of agencies are just trying to pay the bills. They’re just trying to catch up and cover their costs. And you see that all the time.
I had a kid send me a message on LinkedIn, which I respond to everybody. And he didn’t quite understand (I don’t know why my mind is blanking) like a monthly fee for the business.
Darren:
Like a retainer.
Peter:
A retainer. And he said, “So, does the retainer include just my cost?” This was a high school kid. Fabulous. I thought, wow, okay: “Is that an agency’s cost or does that include the media spend?” And I said, “No, that’s the agency’s cost. The media spend will be all over the place.”
So, he’s just an indication of a kid that didn’t get it. I can tell you, I talk to a lot of agencies that don’t understand how they should make money. You mentioned something earlier — I think you mentioned this. Can you get paid for excellence? We often see a great campaign and the idea could have happened within five minutes. Well, you can’t get paid by the hour for a business driving idea.
Now, this is a problem has not yet ever been solved in the agency business; how do you get paid for big ideas? I remember having conversations with CPG companies and I would say, “Well, how do we judge this? I mean, is your distribution good? Are your salespeople in the field good? Is your packaging good? Why am I responsible for that?” Because you could fail, there’s so many failure points.
So, I’ll turn it around. Is there a best way to charge a client?
Darren:
Well, look, the thing that I’m excited about is seeing the number of agencies moving to output-based pricing, while it underpins it. They’re moving away from the time and labor cost to a, here’s a fee for service. And that fee is related to the size of the client or the brand, the value of the brand, as well as the underlying cost. It’s an interesting model, and it’s one that more and more agencies are at least engaging in.
But then I find, again, the big network agencies are still hooked on the cost recovery model. I know what my costs are, I know approximately what my overheads are. I have that profit margin, therefore, I need to bill each person 1800 hours a year or whatever their number is at this rate to actually make margin.
The problem with that continues to be that, it’s the unpaid overtime that drives the behaviors of people working 60 hours a week so that the agency makes pure profit on that 20 hours because they’ve discounted the rate overall and they’re not making profit the other 40 working hours a week.
I think there’s a lot of problems with the fee model, but I think we’re starting to get some new approaches. People are buying into these models that were put forward 10 years ago or more. And now, we’re getting more and more agencies, and we’re very happy.
We’re happy to consider any type of fee model, because ultimately, it comes down to, does it deliver value for the client? Not is it the cheapest?
Peter:
One of the things I’ve written about is, can you, how would you productize your service? And this might work better for a smaller agency where a client comes and says, “I need a social media campaign.” Or “I need a certain type of media campaign.”
And the agency can actually wrap it up in a box and say, “Okay, this is what we’re going to deliver to you. This is our solution and this is what we believe is going to be the outcome, and we’re going to charge X for it.”
And there’s no discussion of time. The agency has figured out that in order to supply this, that this is how they’re going to cover their costs and how they’re going to generate a positive margin. And many times, I’ve heard clients say, “If you just gave me the package, I don’t want to have these conversations about how many people,” and it goes on and on and on, and “Put it in a box.”
Darren:
And very similar to the output-based pricing.
Peter:
Yes, absolutely.
Darren:
In that the size of the box will vary depending on the complexity of the deliverables, what’s actually required that will define the box.
In fact, I think the agency Huge, originally out of New York, Brooklyn, has just pivoted to a productized model using a consultancy firm out of the UK to help them actually define those products. And I think any innovation has to be better than the flawed approach that we have at the moment. Because the current model, it’s the race to zero in many cases.
Peter:
I’m going to bet that you’ve had Michael Farmer on your podcast?
Darren:
Yes, I have, I know Michael. Well, he just launched a book on the on the Huge, it’s called the Madison Avenue Makeover.
Peter:
Well, his book from a couple years ago, which I thought was a brilliant title, was Madison Avenue Manslaughter.
Darren:
Yeah, exactly.
Peter:
So, I’m familiar with the Huge thing and I probably need to study it, and if Michael listens to this, yes, I’ll buy the book. Michael, you buy my book, I’ll review your book and vice versa. By the way, getting reviews for books is very interesting or not getting them. Anyway, that’s a whole another deal, book marketing.
Darren:
It’s all part of book marketing, author marketing.
Peter:
Yes, exactly.
Darren:
Peter, it’s been great having this conversation. Unfortunately, we’ve run out of time. I just really want to thank you.
The book is called, How to Build a Kickass Advertising Agency. And if it’s half as good as your previous book, I think anyone that’s running an agency, big or small, multinational or single person operator, should be looking to get their hands on a copy. Congratulations on putting it together.
Peter:
Thanks for the nice words.
Darren:
No, it’s my pleasure.
Oh, look, before you go, I have got a question for you, and that is have you ever had an agency that you’ve consulted with that just never takes your advice?