Let’s be clear. What both clients and agencies want most is a mutually productive relationship that can endure throughout the inevitable changes and economic considerations inherent in a fast-paced, technologically challenging media world. What’s most disturbing is that the average client/agency relationship lasts only about 3 years. Something is definitely wrong.
Agencies can’t put themselves first and most agencies know this. When the client benefits so does the agency. Not because the client is always paying the lowest price but because the client is receiving full and accountable value for what they pay and the agency is making a reasonable and accountable profit. This is where the client procurement/marketing partnership becomes critical. Procurement people and their marketing colleagues must understand what media can accomplish and how a measurable return-on-investment is best achieved.
Emphasis on cost management has become increasingly important as advertisers pay closer attention to accountability. While client revenue and profits year after year have always been quantified the factors that specifically contribute to those goals remain difficult to measure. However, in this digital age, measureable metrics for producing positive financial results have evolved. And procurement working in conjunction with marketing now requires a better model from vendors and agencies that work with them.
Media pricing benchmarks and agency compensation methods are very important but often they are incomplete measures of accountability. For one thing, every advertiser has different needs and therefore different benchmarks. For another, there are a variety of ways for agencies to be compensated including commission rates (usually by medium), labor-based and value-based fees, or combinations thereof. Incentive programs are also now included in half of all client/agency contracts written.
When it comes to benchmarking, most of the data is historical and with the rapidly shifting, cross-platform media world, media pricing norms are unreliable and often inaccurate. Furthermore, today’s economic environment has dramatically altered agency salary, overhead and profit. We believe that the benchmarking process must be more current and comprehensive. Cost management is more than just media pricing and agency economics. It is just as necessary for financial control to understand scope of work, seniority and experience levels of the agency team, the media integration process, defined resources and analytics, accountability methods and monitoring procedures as well as real time measurement data.
All of these require the client and agency to agree upfront on the specific goals to be achieved and a monitoring system to continuously track their progress.