Delivering ad agency value and being paid for it.

May 28, 2009

ufo-masterlock-590x384I have often been challenged by other agency leaders about the apparent conflict between suggesting that agencies should provide value and be proactive at the same time as warning them about adequate resource management and cost control. In my experience it is possible to do both and do them well.

Most clients will pay for value if it is indeed value as defined or perceived by them. Too often agencies find themselves in a position where the client refuses to pay for work because they just do not see the value in what we are charging for. To us we have provided value and we deserve compensation. The bottom line is just because we put in the hours does not mean that we should be paid.

It all starts with listening. Listening to the client when they tell you about what they want, need and expect. Agencies are generally very poor listeners and overzealous talkers. We love to hear our own voices and opinions and quite often drink our own KoolAid. Take the time up front to listen to the client, ask questions and clarify anything that is not clear. Raise any concerns up front and agree on deliverables, timelines and outcomes.

Sometimes we are too eager to get started, do not ask questions for fear of hearing what we don’t want to hear, and think if we just go ahead and do it we will be fine. This is where the wheels start coming off. Here are some examples of how you can deliver value (as perceived by the client) and contain your costs:

  • Stick to the assigned budget. If the budget allows for 10 hours copywriting make sure the writer does the best they can within the time allowed. Not the best they possibly can, given no time limit.
  • Think first before assigning multiple creative teams to work on the assignment. Does it warrant it? Can you afford it? Would it not be better for both if you just assigned the team best suited through experience and talent to address it?
  • Take a close look at your client team. Do you have the right mix of junior and senior talent? I suggest you discuss expectations with your client, and point out cost implications if their expectations seem unreasonable. I have often politely said “okay, if that’s what you really want the cost implication is X. However, if we do it this way you will still get the same level of support and the cost is X-5”. Their response was to do it the suggested way.
  • Submit cost estimates ahead of the work not afterwards. Clients hate surprises and we seldom get paid for them.
  • Being proactive does not have to be costly. Here are a couple of approaches I have used successfully;
    • Each month assign a client to the agency and have everyone come up with proactive ideas for them. Invite them in for an afternoon and have selected people present their ideas.
    • Client CMO summit. Once a year get the senior marketing people from all your clients together for a day’s summit to share ideas etc.

Delivering agency value to clients and getting paid for it is not hard as you may think.

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Performance based compensation the new trend for ad agencies?

May 12, 2009

6a00d83451db4269e201156f632c16970c-200wiThe 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.

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.