Ad Agencies: Strategic Partners or Commodity Suppliers?

A commodity item is often defined as a good or service that is perceived to be of value, widely available, and bought / sold primarily based on price, with little to no difference made based on where it comes from.

I am wondering if advertising agency business has fallen squarely into this definition? Is "good creative" a commodity that can be bought on price along?

Used to be that ad agencies were viewed as important strategic partners and brand champions.They offered invaluable objective perspectives, were sources of business building ideas and advocates of their clients' business from front to back including customer service, distribution, pricing and new product development. They actually used the clients' products and understood them.

Working in both large and small agencies over the years I can recall making board level presentations on important branding and strategic direction issues, stepping in to act as a brand manager for new product launches and spending time in the field with sales people to better understand how our clients products went to market through various distribution channels. 

We spend countless hours analyzing data of all sorts and championed consumer-focused research to better understand our target audiences. Agencies also were experts in the competitive landscape and were excellent at spotting trends of all sorts that might impact our clients' businesses.

Seems these days lots of agencies just want to produce traditional and digital advertising. They have taken on a project management mentality, focused more on delivering the marketing communications programs on time and on budget and avoiding "scope creep."

Not long ago at a leading digital agency - I asked our account team to get on a plane with me to go visit our clients' office. The response I got was "Why should we do that?" They went on "We can just use Skype or set up an online meeting." During the interview process I was asked "Can you turn our client facing staff into real account people?" This turned out to be a significant challenge.

1990 United Spot: Still Relevant

 

 

 

Brings to mind a classic 1990 United Airlines Commercial "Speech" from Leo Burnett that showed a manager talking to his staff about a long-time client that had just fired them. He gives his team members airline tickets to go out and visit every one of their remaining clients.

I am all for new technology, but some of the old ways of doing business - face to face with vested concern in a positive strategic outcome still seem to make sense today.

Ad Agency Business: Is anyone putting client interest first?

I was thinking about the $ 35 billion merger deal between Omnicom and Publicis earlier this year as well as the roll up of a bunch of agencies by WPP including G2, Ogivly and JWT’s former “activation” operations into Geometry Global .

Maurice Levy and John Wren.

I fully understand why the big holding companies are doing this – to drive down back office costs by eliminating operations and management redundancies. In theory this should improve profitability and enhance shareholder value.

But which larger agencies / holding companies are committed to putting their clients’ interests first? Is anyone really thinking about the needs of the nice people who pay?

I went looking for a new financial adviser a while back and ended up selecting a person with the Chartered Financial Analyst credential or CFA. This is an elite group of global investment professionals whose code of ethics is grounded in their commitment to putting their clients’ interest first. I like the fact that my hard-earned money is being well managed by competent investment professionals, who will not do things like “churn” my account by making unnecessary trades.

However it does not appear that the same commitment to client interests is being followed in the ad agency business. I recall when I was a senior manager in several of the largest holding companies I spent lots of time arguing about money. In the morning I would discuss blended hourly rates and compensation reduction with client procurement departments. In the afternoon I would field calls from my agency CFO and President about growing my top-line revenue and improving my unit’s operating margins.

I got funny looks from both sets of people when I made the statement “So as the agency of record are we leading the charge for growing our clients’ business with our marketing and advertising programs?”

One holding company executive pulled me aside and said “Look – we all know we’ll lose this business within two years when the client CMO leaves and the new CMO holds an agency review, so why bother worrying about their business?”

Bill Duggan EVP of the Association of National Advertisers advised: Clients of Publicis and Omnicom should directly ask their agencies "What's in this for me?" and "How will this impact my business?

I've always viewed the most mutually beneficial agency-client relationships as being focused on building the client’s business. This usually produced long- term profitable growth for the client, a few Effie awards, and seldom resulted in arguments about compensation. The Agency simply delivered tangible value and it was rewarded accordingly.