How to optimise your agency roster and increase your budget value

The industry is talking about agency rosters, with companies like McDonald’s, consolidating their roster with one agency or holding company to create a single entity roster.

Other advertisers are choosing to move away from the Agency of Record (AoR) to a more collective roster of agencies (or a Village). This trend was so prevalent in the past 2 years that some industry commentators were calling the death of the Agency of Record.

But many advertisers are yet to significantly review their roster of agencies and marketing suppliers, even though for many their marketing strategy and plans and therefore their requirements have significantly changed in the past five to ten years.

What I am talking about here is not an agency review or a pitch to replace an under performing agency, but a total review of the roster to determine the ideal structure, composition and size. In our experience this process will deliver for most advertisers a significant increase in agency productivity, reduced costs and an increase in marketing performance.
Agency roster optimisation

1. Defining your agency roster

The first challenge often encountered is the limited way many marketers define their roster. For many will have a working roster consisting of perhaps up to half a dozen agencies that are top of mind either due to the high volume or work (and therefore spend) or the visibility of the agency work (usually the creative work). But in fact this is completely ignoring what often amounts to a long but important tail within the roster and one that hides significant inefficiencies and poor governance.

Often within this group are the market research companies, numerous design studios and production facilities, along with various shopper marketing, promotions companies, loyalty agencies, print companies, content creators and public relations firms. Often spend with each of these companies will be relatively small, but collectively it will amount to a significant proportion of the marketing budget.

Increasingly today there are also an increasing number of technology companies, software developers and platform suppliers being paid form the marketing budget.

Our approach to defining the true agency roster and to ensure nothing is overlooked is to analyse the spend information for all marketing cost codes and to classify the spend using our knowledge of the industry supplier base. Depending on the rigour of the spend management, we capture all of the marketing related spend and segment out the various suppliers and categorise them by their core capabilities. This process also highlights marketing spend that is not roster related and allow3 this to also be reviewed.

It has been interesting to see the incredulous response from marketing teams, especially in organisations with decentralised marketing functions, when we present the results. In one case the team believed the roster was less than twenty agencies and suppliers when in actual fact the spend analysis identified more than 400 companies were receiving payments from the marketing budget ranging from tens to hundreds of thousands of dollars.

In another case the process identified significant legacy payments to a number of agencies and suppliers that had been overlooked and not previously reconciled against the marketing budget. Plus, in companies where the application of the cost codes lacked true diligence we found significant spends in the hundreds of thousands of dollars that had been allocated to marketing but was not a marketing budget item. Subsequently we have found that is not uncommon and is often hidden from the budget owner.

Once the roster is defined by the spend data we can then start the process of reviewing the total spend, identifying opportunities to eliminate duplication, inefficiencies and optimise the roster to the strategic needs.

2. Reviewing investment levels

It is interesting how often relatively small spend amounts are overlooked in the budget, especially as collectively these spends accumulate to a significant component of the marketing spend. It is often confusing for people that this fragmented spend is actually incredibly inefficient. So while the marketers may think that they are getting a low price, the hidden costs of managing and maintaining this bloated roster of agencies eliminates those cost efficiencies.

A procurement approach would be to eliminate the fragmented spend by deleting all small spend suppliers from the roster. The problem with this is that many of these small spend suppliers are such because they provide emerging capabilities and have been added to the roster to test and possibly increase the spend with these suppliers depending on results.

Another procurement approach would be to create buckets of capabilities and have the existing suppliers and possibly other competitive suppliers tender to be either appointed as the preferred supplier or added to a panel.

Our recommendation is that before either of these approaches are taken there should be first an analysis of each category to determine the addressable and non-addressable spend in that category or supplier spend and second a calculation of size of the duplication and the cost efficiency to be delivered depending on the size of the reduction. The larger the reduction the greater the efficiency increase depending on the category of capabilities and the addressable spend.

3. Detailing capability requirements

Before you start pruning or hacking at the roster it is important to have a clear view of what you are trying to achieve. Defining a successful roster is ensuring that you have all of the capabilities you need in the smallest number of agencies and suppliers possible.

To do this you need to review the marketing strategy and the plan. This is why a total roster review is ideal to be undertaken immediately after any major change in the marketing strategy.

This is the first part of our Strategic Supplier Alignment process where we undertake one on one interviews with key marketing stakeholders to determine their strategic requirements both now and for the foreseeable future and discuss which agencies and suppliers are currently providing those capabilities and how well they deliver.

Once we have mapped the current state we then meet with the agencies and suppliers identified as core capability providers and explore what other capabilities they may bring to the roster that the marketers may be unaware of.

This is a delicate and important process as often agencies may overstate their capabilities or purport expertise that they would actually need to outsource. Therefore we carefully explore and use out industry knowledge and expertise to map a realistic view of the roster capabilities.

4. Designing a roster model

Roster design depends on the breadth of services required and the number of agencies and suppliers across the roster. Previously we provided a comprehensive review of the major agency roster models. But this is now more than six years old and in that time the model variants have become more numerous to the increasing complexity of the marketing plan.

Nevertheless the models detailed in the review are still excellent starting points in developing the ideal roster model for your needs. But the fact is there is no longer one model that suits all marketers and their strategic needs. Therefore it is a matter of reviewing the capabilities required, spend and strategic priorities, the agency mix and then applying this to each of the models to find the best fit.

Even then it is likely that the model will not fit perfectly as there are no longer any best practice roster models and most will still require customisation to suit the nuances of the specific requirements of the marketing plan. Often this model design finessing occurs during the next step, which is populating the selected model with agencies.

5. Appointing agencies into roles

This process needs careful consideration. There are a number of ways of approaching this, but we recommend using a strategically and financially tiered approach, meaning you identify the most important and valuable capabilities and populate these first and then continue through the process down the tiers. To visualise this we developed the City Model, with the brand or business as the CBD and then the inner suburbs and so on.

As you populate the various positions and capabilities into the model it will become clear if there are any gaps that need to be filled. But where possible you should look for solutions to fill these gaps within the existing roster rather then going to market, which is disruptive and time consuming.

The other consideration, in allocating positions in the roster model, is the capabilities that need to work together and collaborate directly to deliver the desired outcomes and performance.

A little like a coach placing their players on the field to make a team, you need to consider the strengths and capabilities and the way they work together. Increasingly data and market research, data and media need to be considered as a higher strategic importance than some of the more traditional priorities such as creative and media.

6. Allocating scopes of work

Once the roster has been populated with the agencies you require to deliver the capabilities it is then a matter of now allocating the scope of work for each agency. Scope of work is one of the most effective ways of defining the roles and responsibilities for each of the agencies. The reason it is so effective is the connection between the scope of an agency’s work and the resource required and more importantly the fee to be paid to the agency. 

It is important that the scope of work for each agency is as detailed and specific as possible. This will ensure that the agencies have a clear understanding of their role and responsibility within the roster. Defining scope of work needs to be specific enough that the agency will be able to carefully plan the resources they require and understand the level of remuneration they will receive to deliver the outcomes required.

One of the key reasons we have noted for roster failure post a restructuring process is that this step is either overlooked or the scope of work is so broad or vague that agencies’ immediately start trying to expand their remit and undermine each others scopes of work, leading to conflict and duplication, undermining all of the benefits of the roster review process.

Delivering roster value and performance

Executed correctly and completely this process delivers significant improvement in roster value with either reduced cost or increased outputs and productivity. You achieve this not by simply reducing agency costs, which is ultimately counterproductive. But you will achieve it by creating economies of scale across the roster and eliminating the waste, duplication and misalignment.

In the past ten years we have undertaken this process for advertisers across a wide range of categories including automotive, financial services, telecommunications, construction, higher education and more. We have also reviewed rosters over multiple markets including regional and global.

In almost every case, even after years of cost reductions, we have typically delivered productivity increases and savings that we reinvested into the marketing plan and lead to increased performance from the entire roster.

TrinityP3’s Strategic Supplier Alignment service helps you to untangle your supplier roster, understand its strengths and weaknesses, and develop an optimal structure to improve your performance.

Why do you need this service? Learn more here