Better Client/Agency Relationships - One Benchmark at a Time...

Is my relationship with the agency strong? Am I getting what I paid for?

At any point in a client/agency partnership, a client should be able to ask these two questions and quickly ascertain the state and health of their relationship. Seems simple enough. The caveat, of course, is that answering these questions requires goals and objectives. Goals and objectives established at the start of the relationship, and then actively managed after the pitch is over.

In our work with clients and agencies on agency search and performance evaluation, we’ve found that the absence of clear, mutually agreed upon benchmarks is often at the center of strained partnerships. Because in the thick of the day-to-day business, questions arise:

  • Is the agency team overstaffed or understaffed?
  • Is the creative fresh?
  • What constitutes a campaign “win?”
  • How is the agency being measured relative to our corporate goals?
  • Are we productive and efficient?

And without clearly defined objectives, these questions can yield a variety of answers depending on whom you ask, or perhaps even worse, remain unanswered.

With today’s marketing pressures and the rise of procurement’s role in agency management, confirming objectives for both the relationship and investment sides of your client/agency partnership is critical. Great relationships are built on trust—trust that is earned by delivering against your promises. So instead of being stumped by the questions above, consider the following:

  • Alignment of agency compensation with client business goals
  • Creative briefing best practices to avoid multiple changes due to lack of understanding around assignments
  • A sound contact strategy to quell frustration and confusion around client/agency communication

These are just a few examples. Expectations around brand metrics, sales metrics, media value delivery and market share can also be in the mix. Specific measures will vary from one partnership to another. The larger point is that no one should assume both parties understand where they need to go, how they are being measured and what success looks like without a roadmap. And if procurement is involved, tap them early. Engaging procurement after an agency has been chosen can lead to retrofitted solutions, and disputes between clients and agencies that didn’t need to occur.

The tenure of client/agency partnerships is shrinking. Agency reviews, while at times necessary, are costly and disruptive. Taking the time to solidify relationship and investment goals from the start, and benchmarking against them once the agency is selected, avoids unnecessary reviews, motivates teams on both sides and fosters longer, more valuable partnerships.

This post is co-authored by Judy Neer and Dan Jeffries.

Judy is President and CEO of Pile and Company. Dan is a Senior Commercial Consultant in the marketing and advertising space and a Pile and Company partner.

Visit www.pileandcompany.com to learn more about how we help clients in the areas of agency search and performance evaluation.

Changing the Conversation...

For many of us, the economic conditions we work within have been improving markedly over the last three years. Consumers are spending more, western economies are out of recession, banks are lending again (although not as riskily) and, perhaps more importantly, marketers are being given more budget to invest in achieving their brand goals.

As a result of this, procurement is at a critical juncture…. irrelevance is a very real threat that many CPOs will see as their main challenge for the next 18 months and beyond.

The spotlight that was put on procurement during the lean years enabled many of us to engage at a much deeper level within our organizations but that engagement is now under threat as businesses move into growth strategies. Savings are becoming less of a headline.

This is our chance to take a lead in changing the conversation and, in doing so; redefining what procurement is about for the businesses we work within. CPOs are increasingly being asked for more than savings and some of those CPOs do not know where to look for the ‘next big thing’….

Marketing investment has long been an easy target for corporate procurement departments looking to deliver savings to the business. It is often in the top couple of indirect spend areas and, to the uninformed, it can seem like a happy hunting ground for savings opportunities.

One of the main challenges is the poor job many marketing departments do in highlighting the difference they are making for the business through their marketing dollars. I still shudder at the memory of a CFO in a very large client who turned to me and said “what does it really matter if we cut £10m from the marketing budget – its all discretionary spend anyway…” – this is a classic case of the business not appreciating the value created from their marketing investment.

Another challenge to overcome is that of measurement…it has been said that you manage what you measure and never is that more apparent than in the world of marketing procurement.

For a long time, input costs have been the focus of many procurement practitioners. How many times have you seen a ‘saving’ claimed through a reduction in rate card pricing? – far too many for my liking and here’s why…

Agencies have figured it out!

Rate cards have become a tool used by agencies to bamboozle procurement. The use of ‘blended’ rates is just one of the tools in their arsenal. What about the promotion of team members at a pace that seems a bit unlikely?

I worked with an agency in London a few years ago that had a young Account Manager who did a great job on client A – 'very personable but a bit wet behind the ears'... a year later, I came across the same Account Manager on a different client only this time she was an Account Director on Client B’s account – the agency had overcome the ‘price’ discussion by uprating a staff member to fit the rate card – I have no issue with promoting staff, but having the same staff member being charged out at very different rates for two different clients is a bit ‘shifty’ to say the least.

The problem is, agencies will always find ways to play the rate card game if procurement force them to focus on it.

Our goal should be changing the conversation to VALUE…if we understand (and can demonstrate) the value being created by the agency we can pay them based on the creation of that value.

I don’t for a minute think that this is an easy transition but it can work. When agencies are given the opportunity to directly impact their compensation by increasing the value they create the impact is astonishing…

  • You get the right people on your account all the time – not just when you’re watching
  • Problems with other agencies get resolved without the client’s intervention
  • Plans get challenged based on the true likelihood of success
  • The agency becomes a business partner
  • The work gets better

So, how can you make this change?

First thing to do is understand what ‘value’ means for your CMO. Set up a session with them to talk about value – my guess is that your CMO may be surprised by this approach but persevere – its worth it!

Once you’ve clarified what value means for your organization set up a working session with your key agencies and ask them what they think – explore what they see as value creation and see if the two match up…

All that’s left is to find the right agency to try this approach with and work your magic – if you’ve got this far, it should be a

Good luck and enjoy – I’d love to hear about your successes.

Paying for Success...

A great number of column inches have been dedicated to agency compensation over the last year and this blog seeks to bring some clarity to the area of discussion for clients and agencies alike.

As a marketing procurement consultant, my aim when I work with clients is to help them achieve the maximum value for their marketing investment.  This does not mean the cheapest cost!  In fact, more often than not, paying slightly more can deliver a significant increase in the value delivered by the service being provided.

The key is to look at the money spent on these services as an investment rather than a cost – when we take this view it changes the whole picture for the client AND the agency.  If the client is willing to invest a little bit more in order to secure a greater level of performance from the agency then both parties win in the long run.

In a recent article on agency compensation from AdAge there was a lot of negativity written about the use of Incentive Based Compensation for agencies in the US.  This was particularly disappointing as it came from the 4As' Tom Finneran who is in a position that commands significant influence in the US advertising market.  The statistics shared by Tom Finneran at the ANA conference in May highlighted many negative aspects about Performance Based Compensation without highlighting any positives – of which there are many examples.

Interestingly, the IPA (the UK’s version of the 4A’s) was recently involved in a conference in which their top man, Ian Priest, was taking a totally opposite stance.  By highlighting the opportunities that exist through the use of Performance Based Compensation, the IPA is actively encouraging clients and agencies to evolve their commercial agreements. This article in Marketing highlights some of the positive approaches that are being taken in the UK by leading advertisers and their agencies, which is very encouraging.

The evidence that Performance Based Compensation is on the rise is demonstrated in the recent study carried out by the WFA with 66% of survey respondents stating that they intend to link agency compensation more closely to their own performance in the coming year.

In my view, clients that use Performance Based Compensation benefit from a competitive advantage that will deliver significant benefits and help create a sense of partnership that every client strives for with their strategic agency partners.

A few key points to bear in mind when exploring this with your agencies:

§  Investment not Cost – by having this mindset from the start you are much more likely to create a successful relationship with your agency

§  Be clear on the goals of the investment – shared understanding of exactly what you are expecting the agency to contribute to will help you define measures of success.  If you don’t know this you shouldn’t be spending the money!

§  Incentivize from Day One! – Starting the relationship with a clear agenda of rewarding excellence will set you both up for success.  Waiting until year two will likely result in it never happening

§  You want the agency to earn it all - the objective of these models is to see the agency earn all of the available compensation because, if they do, that means you have both achieved the goals of the relationship

§  Budget for 100% - it is imperative that the client budgets for 100% success.  When this is not done it undermines the relationship and the commercial structure that underpins it

§  Keep it Simple – Use three/four key pillars of performance that can be easily measured and reported on throughout the year

§  Consistency – Aim to have shared goals across your key strategic agencies.  If your media agency and creative agency have a shared goal they are much more likely to achieve it together rather than point the finger of blame when it gets tough

 

The reality is, traditional agency agreements that are based on the payment of a retained fee are still very popular for many reasons.  The problem with these agreements is that they do not incentivize the agency to over perform on your account. 

Under these agreements, the agency’s biggest concern is not losing the account, which can have the perverse impact of making them more conservative and ‘playing it safe’.  When you are looking for innovation and a way to win in your category, surely you want an agency that is aligned with those goals.

Incentive Based Compensation can be a tool that gives you an advantage – isn’t it about time you talked to your agency about it?

I’d love to hear your views on this topic – feel free to comment here or reach out to me directly at dan@jeffriesconsulting.com

Continue the conversation on Twitter @DJMediabuy

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