Is the Agency Model Broken?

By Mike Drexler

Bill Koenigsberg, CEO of Horizon Media, is probably right when he recently pointed out that the old agency model is broken. But it has happened for many reasons that are not only associated with approximately $30 billion in client billings now in review.

As a media review consultant, Drexler/Fajen Partners is also involved with a review at this time. And in the many reviews that we have previously conducted, the least rewarded agencies are those that come in with presentations covering the kitchen sink, with an overabundance of general agency credentials and teams that appear as though they have never worked together before  (I see the client’s eyes roll and the bodies fidget).

What many agencies don’t do particularly well is this:  They try to show that they understand the clients’ businesses, their market segments and competitive industry. And they often neglect to demonstrate innovative problem solving approaches.  When they do, they don’t offer unique insights and opportunities for the particular client prospect. Agencies like to show off how successfully they have built the agency and its resources instead of showing how good a strategic, innovative, problem solving partner they can be.

Formerly, over the years, all eyes were focused on who could get better rates and charge the lowest fee or commission. In other words making the agency business a commodity. So clients got used to thinking that way: That agencies are virtually interchangeable. With the advent of digital technology and increased pressure on both client and agency costs, the whole ball game began to change.  Everyone ran to build their digital resources, bring in the required expertise and look for ways to add new revenue streams, sometimes without the appropriate client disclosure practices in place.  So the model continues to need fixing. Not patching, fixing.

The agency model may be broken, but it has not been destroyed. Here are some observations:

-Real agency integration, not profit center siloes, continues to be an issue. Media integration and creative integration that enhances the communication process to produce a better marketing result and measuring that result with appropriate methods and benchmarks.

-Strategic insight and plan development in concert with the client marketing staff, including a view towards client future goals and objectives to demonstrate agency leadership including trend data and talent that brings new agency thinking into the equation.

-Cohesive staffing with the proper disciplines to solve specific client problems and the essential people to form a core client team, not an agency group consistently on board that primarily adds to overhead.

-Compensation formulas that are reasonable and acceptable to all parties and are negotiated into the contract, without agency concealment and hidden revenue streams that  leverage client media investments for the sole benefit of the agency.

-Holding company structures, where they exist, to add real value to each client’s individual businesses and enhance operating efficiency.

-Committed relationships that share client concerns and help to expand long term business opportunities.

-Digital media platforms, exchanges and trading desks that represent the best interests of the client with full operating transparency.

These are just some of the important steps that need to be taken if agencies are to continue to grow and thrive with their clients. The rapidly changing media world  has become increasingly complex on many levels. It requires a better client understanding of how an agency functions today and what clients believe is lacking.

In my opinion, agencies must begin to think more like consultants or the consultants will take over the agencies.

Originally published at Media Village