Return on Relationship: Placing a value on improving a current media agency relationship

 

Drexler/Fajen & Partners (Media Review Consultants) offers a new service that enhances the value of a current client/media agency relationship.  The system carefully analyzes several critical aspects of the relationship, recommends specific steps to improve value and monetizes the results.  The system is called Diagnostic Media Analysis (DMA).

DMA is more holistic and thorough than a media audit.  It is a value barometer that goes beyond evaluating media delivery.  It assesses client/agency briefs, scopes of work, the depth and quality of agency staffing against the scope, benchmarks agency compensation, evaluates the power of the media strategy, benchmarks the efficiency of media buys, assesses the worth of incentives and supplies a monitoring system that ensures an enduring relationship.  It is the ultimate audit.

Five Cornerstone Questions

 

The process begins by asking five basic questions about each step in a process:

1. How much financial waste can be avoided because of mis-targeting?

2. How much money can be saved out-of-pocket in staff and resources?

3. How can media be bought more efficiently?

4. How can the advertiser and agency operate more efficiently?

5. How can the process increase marketing ROI?

The Agency Relationship as a Monetized Metaphor

 

Using well-established industry research and our proprietary benchmarks it is possible to monetize most of the DMA processes.  By monetizing the process, we can demonstrate how the client derives more value and achieves a high multiple of a modest consulting fee.  The estimates we make here are born of industry evidence and our own consulting experience.  They are averages. However, a primary reason for conducting an agency relationship review is to achieve more value and accountability from the agency.  This system sets the parameters for success.

Quantifying the Value Return on Relationship

Agency Briefing:
“On average, 30% of an agency’s effort is wasted due to poor briefing” – quote from Association of National Advertisers in the preface to the 2011 ANA Financial Management Conference May 2011.

Every client/agency relationship must begin with an understanding of the client’s business, marketing and media goals, as well as relevant insights into their business.  When properly briefed the agency can align their resources for maximum benefit.  If done correctly, the briefing has a positive effect on the power of the media strategy.

Agency Scope of Work (SOW):
“During a recent assignment, our SOW reduced agency staffing by six FTEs, each one worth roughly $200,000 with attendant overhead and profit.   While that result was unusual, some savings should almost always be anticipated.” – Steve Fajen 2011

A clear and granular scope of work allows an agency to build a sensible and efficient resource and staffing plan that fits the client’s needs, without waste.   Our five-dimensional SOW clearly identifies the priority, complexity, re-work, talent requirements and deadlines associated with every line item in the scope.  This avoids any misunderstanding and leads to a tighter and more productive resource and staffing plan.

Agency Staffing:
See quote for SOW above

A staffing plan is certainly not just about FTEs and associated detail.  It is mainly about the fit in terms of depth and quality of the people assigned to work on the business.  This means having the right mix of strategic and tactical talent, as well as the right selection of negotiating experience. This increases the chances of media effectiveness (less waste) and marketplace success (ROI).

Agency Compensation:
“63% of clients say incentives improve agency performance” – quote from Association of National Advertisers & Jones, Lundin, Beals.

We benchmark the salaries, overhead and profit against industry norms and our proprietary database from both our media recruiting and consulting experience. This often leads to substantial savings and accurate standards of compensation.

Incentive plans foster an atmosphere that can accelerate an agency’s most productive work.  Our incentive models always contain an element of marketplace results.  If the payout of the client’s media spend is not positive, there was little reason to advertise in the first place. we therefore like to see an agency rewarded in proportion to positive marketplace results and balance risk on the downside.

Strategy:
“The biggest cost of advertising is paying for ineffective campaigns. My estimate is that’s 35% of advertising dollars is wasted due to mis-targeted, mis-scheduled commercials.” – quote from Erwin Ephron: lifetime achievement award winner from Advertising Research Foundation.

We spend a lot of time with the client and agency on the subject of accountability and how strategic talent at the agency can unearth productive insights, help build brand growth and minimize waste.  If the strategy is misguided, no matter how efficiently media is purchased, it will constitute an enormous waste.  So we carefully assess the agency’s insight capability, as well as test the power of their strategies against customized norms for the client.

Activation:
“Right selection could save up to 15% on traditional media and 30% on digital “ – M-IQ and Double Verify

When we assess the buying prowess of agencies we go beyond media audits.  Generally speaking, when the media sells time, space or clicks to an agency they are very well aware of what the client has paid before.  That is their benchmark for pricing.  Sometimes an agency can use its negotiating prowess to push beyond simple efficiencies.  Program and vehicle quality and commercial positioning are important criteria in delivering communication value, along with added value elements.  Today’s evaluation of media execution goes beyond cost per thousand into the ability of the media to actually reach out and motivate consumers to engage the brand and measure results.

Monitoring Results:
“78% of major advertisers monitor their agency’s performance” – quote from ANA Survey 2010.  With an aggregated investment of over $1 billion: “37% of advertising budgets are wasted.” – What Sticks by Rex Briggs and Greg Stuart

Drexler/Fajen & Partners will monitor the results of the agency’s  recommendations over the course of a year to ensure success and an acceptable return on investment.  This diligence ensures that over time goals are met and the process is continuously improved.

Summing Up

As a handy reference guide we offer the table below which monetizes an example of how a well-run agency relationship review can increase efficiencies, avoid waste and improve ROI.  Because of overlapping efficiencies and specific client requirements the value points (savings, efficiencies, ROI) are not additive to the maximum amount as indicated in the example below.  However, it is intended to demonstrate that substantial value can be derived from a thorough relationship review.  Most clients should easily anticipate at least a return of even 1% of the maximum gross unduplicated value and could expect more.

To learn more about us or receive a free presentation on this subject, call 646-459-2325 or email mike@drexlerfajen.com or steve@drexlerfajen.com.