The Ad-Agency Magicians of Madison Ave Have Become Obsolete!

July 21, 2009

madison ave 2

Adweek recently published an article titled “The Changing Role of Rainmakers”. In the article they quote Michael Zuna, MD of Saatchi & Saatchi NY as saying “The Mad Men rainmaker days – – that doesn’t happen anymore. It’s a tough job.”

Why, because client reviews in recent years have become more complicated, given the expanded client needs, increased presence of search consultants, holding company led contests and participation of procurement executives.

The new business role has traditionally been an onerous one that was not suited for the feint at heart. Only the most confident and brave ventured to take on the role knowing that they would live or die by the question, “So what have you done for me today?”

In fact only a week or so ago I received an email in response to one of my posts from a new business professional at a leading interactive agency. In the email he said and I quote, “I would like to believe that working on new business in an agency no longer carries the stigma of, your days at the agency are numbered.”

I believe that his words may in fact be prophetic. Today, a knowledgeable and accomplished new business professional today is worth their weight in gold. (And that’s significant, especially at the current price per ounce) In addition, they are few in number and relatively hard to find. The Adweek article describes situations where large agency groups have been searching for the right person for twelve months or more.

What makes these individuals so special and so hard to find? These are my thoughts on what those reasons might be.

The successful new business professional of today has to be skilled at:

  • Leveraging all channels and new media to target the right prospects and start an ongoing dialogue that could ultimately convert to a new client. Everything from social media to SEO/M to network relationships.
  • Building relationships with all levels within the client company. Given the complex client marketing structures, seldom is there one key decision maker any more.
  • Demonstrating broad business knowledge and especially a keen understanding of the target client’s category and business. The slick presentation approach devoid of any real insights no longer works.
  • Listening, reading people and presentingThe ability to ask the right questions and then listen to answers is paramount. So much information is provided by most clients in the early stages however, agency people are usually too busy looking for the next opportunity to talk, versus listening to the answers.
  • Utilizing sales management software and sharing information. It’s no longer about an individual’s personal Rolodex. It’s about efficient targeting and tracking of communications and, involving the right talent from the broader agency team, to help provide relevant fresh thinking.

In summary, the new business professional of today is in fact a hybrid. Someone who is able to combine a selection of skills that you would expect to find in other roles including those of the CEO, business analyst, sales professional, marketing strategist and media/technology expert. This allows them to talk intelligently about the client’s business, across all levels of the organization, and establish a positive perception of agency value.

Share

Advertisements

Of course our agency can do that, we are a fully integrated full service agency!

June 6, 2009

agencyThis is most commonly given answer by most agencies to their client when asked, “Does your agency have XXXX capability. It’s often said with a modicum of disdain and surprise that the client would even ask such a question. After all, do they not know that we are experts at everything?

I often wonder if we would have the same reaction to our general practitioner if he/she told us that, although we have a heart condition that needs specialist treatment, there is no need to refer us to a specialist as he/she are quite capable of handling the situation? I believe that we all know the answer.

But, is it really in the clients’ interest to tell them that we can handle the work if, in fact, we do not have at least a competitive capability in that discipline? Just because you have one person in that department, or a couple of people on the team, who have had similar experience at another agency, does that make your agency the right solution?

Of course, if we look at the question purely from an agency financial perspective, I can understand the perspective that we need all the revenue we can get to make our numbers. I can also understand the fear of allowing another agency into the equation that might end up usurping your current agency relationship and revenue. All such concerns are valid…if you only look at it from a partisan agency perspective.

If we covet those clients who see us and treat us as “strategic partners” then we need to behave in similar way. If the client requires best in class capability in that specific expertise, we need to ask ourselves if in fact we can deliver it through internal resources. If the answer is honestly “yes” – then go right ahead.

If the answer is honestly “no”, then you have two choices.

The first is to find a suitable company or resource that you can partner with on the assignment. This way all coordination and responsibility remains with your agency and you are accountable to the client. Try to negotiate a discounted partner fee that will allow you to cover your coordination and strategic support costs. My suggestion is to avoid marking their fees up when billing the client.

The second is to either partner with another client roster agency that has the required capability or partner with the client to source a new agency resource. Remember that the strength of your agency relationship is often tightly linked to the work and results you produce for that client. Why risk the whole relationship and all that revenue for the sake of chasing after something that may reflect badly on you. IT MAY JUST BE MORE PROFITABLE TO LET THAT PORTION GO OR AT LEAST MAKE A LITTLE LESS MARGIN ON IT.

Share


Delivering profitable ad agency growth … a client’s perspective

June 1, 2009

As agency leaders we know that we must be effective at profitably growing our agencies if we are to continue to be successful and retain our positions… Clients are motivated to partner with agencies that add value to their business and can help them succeed. While they want the reassurance of an agency that is stable most are not concerned with our profitability. In fact most see us as too expensive and over paid for the perceived value we offer.

The current poor economy has exacerbated the situation and put our client colleagues under even more pressure than usual. Management expectations are even higher for them to cut costs, be more effective with less and produce sales. Yes sales, not just positive brand awareness. Add to this the fact that a poor decision on their part could cost them their bonus, a possible promotion or even worse their job. It should therefore be no surprise that most clients are more conservative than ever and want to operate as far as possible under the radar screen.

A recent AAAA CMO survey highlighted some interesting client perspectives that I feel you should be aware of when planning your current agency growth strategy.

  • 93% of CMO’s  have identified cost savings with over 37% of those planning to reduce marketing costs by over 21%
  • 49% said that within the next 6 months their Ad Budget would be lower
  • 68% of the CMO’s  who responded had already identified agency cost reductions
  • 48% intended to achieve their cost reductions through reduced agency compensation
  • 58% intended delaying or eliminating currently planned projects
  • 44% planned on altering their channel mix.

I am not sure about you, but my reaction was initially one of doom and gloom. That of course does not help as our growth targets remain the same notwithstanding the economic environment.

Here are my suggestions about how to succeed in the current economy.:

  • Add value versus battening down the hatches. You cannot save your way out of this situation. Whether its existing clients or new business opportunities, find where you can add value. Proactivity and agility are imperatives.
  • Solve business issues: Bring them ideas and work that will help them solve real business issues. Show that you know their business, you share their concerns, and that you have been listening to them.
  • Ground your ideas/work on actionable insights. Analysis alone is useless, you need to go the extra mile and find those key insights that can help support your suggested actions
  • Recommendations with proven ROI. Only present ideas and recommendations that have a clear and as proven as possible ROI. Demonstrate that you have researched the idea, and done your homework and that the risk is limited and success is most likely. Demonstrate how you will DRIVE SALES.
  • Consider all available channels. 44% are planning on altering their channel mix. Look at what they are doing now and consider alternative channels that may be cheaper and more effective. Social media is hot topic right now however, measurement and associated sales are difficult to track.
  • Innovation within boundaries. Yes, they are looking for innovation, however, risk tolerance is low. Make sure that you strike the right balance. For most this is no time for courageous risky ideas.
  • Build measurement and metrics into all you do. If you can measure it you can probably sell it.

Mid Year is upon us and my agency is not making its numbers! Should I panic now?

May 29, 2009

Help ButtonThe first half of 2009 is almost over. You are behind on your numbers with only 6 months to make them up. If you are going to have any chance of making them you are going to need to act decisively now.

Depending on how far you are behind or should I rather say, how optimistic your original forecast was it may already be too late. However, if you act decisively now you still have the opportunity to deliver the best year possible given the current circumstances.

My suggestion is that you adopt a strategy of both resource optimization and revenue growth. Neither one on their own is likely to help save you now.

Reduce variable costs. When it comes to looking for cost savings you can only do so much with your variable costs. Yes it makes sense to reduce travel costs, limit conference attendance etc. and every penny counts. Go ahead and do what you can but just know it will not be the silver bullet to solve the crisis.

 Review fixed costs/compensation. To make a significant difference in fixed cost overheads usually means having to cut at the most senior level in order to achieve any significant savings. Removing 4 junior positions usually just does not cut it. And, in most instances, they are probably the individuals who are most billable and actually getting the work out the door. Consider what you need to have versus what is nice to have. Can you outsource it cheaper when needed, or is it core to the agency? Look at each individual’s billable rate and consider the balance between billable and un-billable. Be honest with yourself.

Look at both agency profitability and separate client profitability. In many instances I am sure that you will find that you have a client or two that you make no money on. They suck up resources and in some instances decimate the morale within the team that services them. What would it look like without them? I personally have had a couple of instances where we made more money without them. This is the time for those tough decisions.

Optimize agency resource allocation. In line with looking at client profitability reassess your internal process and resource allocation. Can you afford three creative teams tackling one assignment? When you brief a writer do you give them a specific number of hours to do the job in? Meetings burn up an incredible amount of time, are you using them effectively? Are you letting the urgent overwhelm the important? This is a time to optimize in every area of the agency.

Existing client focus. In this situation existing clients are in essence your “Holy Grail”. You cannot afford to lose them or have a reduction in revenue, so make sure you are focused on both keeping them and growing their account. Proactivity, agility and focus are what are required. New revenue from them is easier to get and less expensive to develop.

Strategic new business prospecting. If by June you still do not have a robust new business prospect pipeline you are unlikely to benefit from the revenue of any new business wins this year. It takes at least 6 months to fill the pipeline and most pitches take about three months to complete all the stages. Wins are likely to come late in the year. 

Also keep in mind the effect of new business Strain! Taking too aggressive a new business approach in this year will further exacerbate your current year’s numbers. It may help set up 2010 for you; the question is if you do not make this year’s numbers will you survive to 2010? The irony is that it is in this type of situation that I see many agencies panic and chase any new business that comes through the door. Avoid the temptation!

Be selective, make sure you have a good chance of winning, pitch against a budget, allocate the team to win not the one available, and pitch to win. That requires that you pitch less to win more.

 


Performance based compensation agreements for ad agencies … Aligning goals and measuring outcomes.

May 26, 2009

cokeThe trade press is all a buzz about the new trend towards to pay for performance compensation. The recent article on Coke and their approach seems to have everyone watching to see what happens next. The reality is that this is nothing new and both clients and agencies alike have been wrestling with concept for as long as I can remember.

While many clients feel that they should pay only for results, and many agencies lament the fact that they are not compensated anywhere near where they should be for those brand building ideas, there is an old adage that comes to mind. “Be careful what you wish for because you might just get it!”

While the concept appears to have a lot of merit, the success or failure of such an approach relies on the ability of the two parties to align the goals and most importantly measure outcomes. The best scenario is one where both agency and client alike get bonused on the same outcomes or results.

My experience has taught me that a balanced compensation program that provides a measure of ongoing funding on a monthly basis combined with an incremental bonus program based on results is the best way to go. Almost none of our client marketing leaders are remunerated on results only so in my opinion it follows that why should we? That said, how do you go about agreeing on the goals and adequately measuring them?

Aligning Goals:

The first change that needs to happen is that the setting and aligning of goals must become a collaborative process and not an edict from the client. This often requires a big change in mindset, especially with large client companies who have been used to calling the shots.

With aligned goals comes aligned strategy and shared risk, which is accomplished once again through a collaborative process. This is often another big change for many client/agency relationships. The agency needs to have the ability to debate the go to market strategy and a certain amount of influence in the final outcome and implementation.

Measuring Outcomes:

One of the most difficult areas of agreement is the measurement of outcomes. In many instances the agency’s ability to impact final sales or results, diminishes fairly early on in the marketing/sales process. How can they be accountable for issues like; product out of stock, poor distribution, product quality issues, pricing, sales force inadequacies etc.

Add to the above measurement issues and verification of them, and you find yourselves with a complex matrix that is often hard to implement, and can cause unnecessary aggravation and strain on the relationship.

I am a big proponent of a balanced performance based compensation approach- however I am also cognizant of the problems that can result from it. My advice is:

  • Go in with a positive attitude
  • Be pragmatic, ask the tough questions up front
  • Make sure you are aligned on the shared goals and shared risk
  • Agree on the agency’s role and ability to influence strategic go to market decisions
  • Define expected results and how they will be measured. Benchmark current numbers whenever possible
  • Achieve bonus together or lose it together. Do not bet the whole farm on it.

12 Ad Agency Compensation Agreement Tips

May 22, 2009

sa_practice_area_home

Negotiating agency compensation agreements … how you start out is how you finish!

Unprofitable client accounts usually start out that way as a result of the initial agency compensation negotiations. We are usually so excited about the new client opportunity and so overly anxious about alienating the client in the negotiation process, that we tend to give away the farm at the outset!

This is without doubt the most critical time in this new client/agency relationship. It is during this period you have the opportunity to define whether this is a client relationship that will be profitable and add value to the agency or whether you are going to set yourself up for what is commonly referred to as a “nightmare client!”.

If you ignore the warning signs and hope they will solve themselves, believe me when I tell you they will not. In fact that will only escalate into larger issues that will ultimately help cause the demise of the relationship. You have to have the hard conversations at this point rather than even more onerous one’s a few months down the line.

Now there may be some clients that your agency covets so much that you make a conscious decision to lose money just to have them on your agency roster. If that’s the case remember why you made the decision, especially a few months down the line when you are reviewing client profitability reports. No need to execute the account team.

On the other hand, if your intention is to make a fair profit on this piece of businesses, then make that a priority from the start and negotiate accordingly. If your financial projections assume a certain level of profitability this is the time to set yourself up to make those numbers.

 Here are 12 tips agency compensation agreement tips to help you through the process:

  1. Establish the real spend/budgets. That way you can budget and resource accurately
  2. Discuss client expectations. During these discussions you will soon know what you are in for and if you are going to be able to make it work.
  3. Define the Scope of work expected:
    • Client service levels
    • Suitable blend of resources to adequately support the account
    • Timing, seasonality, continuity of work, planning cycles etc
    • Metrics, measurement and anticipated results. (Cost per lead, cost per customer, cost per sale etc.)
  4. Briefing procedures. Documentation, process, sign offs etc
  5. On boarding costs. What is the on-boarding process and who will cover the costs of that? How much is the agency expected to contribute to get up to speed?
  6. Agency review schedule and approach. How often, what format and who will attend? Will there also be a client review portion of that review?
  7. Blended rate? Rate card? Assumptions and triggers for change. What fee basis are you going to be working against? What work does it cover? When might additional work revert to rate card etc?
  8. Fee plus bonus? Are you able to negotiate a retainer fee to cover your costs plus an agreed profit level, and will there be a performance bonus too?
  9. Travel & out of pocket costs. What are acceptable, approvals, claim procedures, disputes? etc.
  10. Errors and omissions. In the case of an error or omission how will it be handled? What compensation is reasonable and how do you both determine what’s reasonable?
  11. Liability insurance. What level of cover is required and are there any specific risks that need to be addressed? Running sweepstakes and games is a perfect example of this.
  12. Regional, franchisee support etc. Is this required, how it is coordinated, who approves the costs incurred and how are they billed?

These are just a few of the questions and issues you need to address at the outset of a new client relationship. Failing to do so, or worse still, avoiding them will only lead to a self fulfilling prophecy. You are setting your agency up to fail!


Clients don’t really want to fire their ad agency

May 10, 2009

bobs…unless you give them reason to.

I have been in this business now for well over 20 years, and I am still amazed at how paranoid we agency people are about being fired by our clients. After having this discussion with many clients during the course of my career, I can tell you that the last thing they want to do is fire the agency. That is of course unless you have given them a reason or most often many reasons to consider doing so.

Most clients invest an incredible amount of time and effort not only choosing their agency partners, but more importantly educating them about the business, the product, the company and its policies and procedures. The last thing they want to do is go through that process all over again.

If you then add to this the fact that the procurement department is becoming more and more involved in the selection/negotiation process, many clients will tell you that they would prefer root canal treatment. In fact, during a recent discussion with the CMO of a very large client, she told me that she was currently putting up with sub-par client service from her agency to avoid a review.

So why all the paranoia? It seems like we both want the same outcome – that being a long term stable relationship. Yet the current research shows that over 50% of new client relationships do last past the 2 year, mark and 75% do not make it past 4 years.

One reason is that CMO’s have never been under more pressure to produce results in such a limited amount of time. With an average CMO tenure of 18 months right now, most of them know that they have 9-12 months at most to move the needle, or they are out. Sales are mandatory and excuses are seldom acceptable. It’s never been more about results.

I thought it might be helpful to give you two quick checklists. One covering tips on what to do to keep clients longer, and the other listing indications of when you should anticipate being headed for trouble.

Tips to help you keep clients longer:

  • Clarify expectations, deliverables, compensation and measurement at the outset
  • Staff the account with the resources that are both covered by the fee and provide client value at the same time (as determined by the client)
  • Present work that is innovative within boundaries, yet has the best chance of producing results. Support all proposals with actionable insights
  • Continue to be proactive, looking for new ideas to help them succeed. Remember other agencies are approaching them all the time
  • Minimize client service churn, and make sure that you conduct 6 month client/agency reviews
  • Avoid surprises such as cost over runs, agency errors, poor execution etc.
  • Look for co-marketing or partnership opportunities whenever possible. OPM (other people’s money) helps make budgets go further and your agency more valuable

Indications that you are at risk of losing a client:

  • Change in CMO or company leadership. 75% of new CEO’s conduct a review
  • Constant churn in client service and other key agency team members.
  • Product underperforming in the marketplace with poor sales
  • A constant stream of agency errors, arguments over cost estimates, and a client team who tells you that they hate the client
  • Reactivity and no proactivity. An agency of order takers.
  • Little to no senior agency leadership involvement/relationship with client senior management.
  • Another client roster agency kicking butt on the account while your work continues to produce unremarkable results.
  • The coup de grace … the trade press says your work sucks and the client seems to lack direction.