In a recent Ad Age article, some agencies cried foul with marketer led reviews. That’s absurd. There’s nothing “foul” about a marketer led review because even when a consultant is involved, the advertiser leads the review while the consultant sets the guidelines and establishes the appropriate value based parameters from unique knowledge, understanding and experience with agency/advertiser relationships. Of course when those elements are missing the review suffers. So what is difficult to deal with is the way some advertisers choose to conduct a review and the role procurement and their marketing colleague may play in the review.
In another article, a few weeks ago, a reporter from Ad Age quoted a consultant as saying, “it’s not about savings” whereby the consultant shifted the focus and put the emphasis on digital growth and expertise. Clearly there’s a need for digital knowledge and integration in most marketing plans. But, it is also very definitely about savings that can be produced in the right way. Why else would procurement have a front row seat at the table? The consultant had it wrong and the reporter brought the article to the wrong conclusion.
There certainly are reviews that are not conducted properly in order to create, develop and sustain an efficient and enduring relationship between the advertiser and the agency. And, some of the quotes from agencies do support the benefit of a knowledgeable and experienced consultant.
There are several ways for savings and value to be achieved where the advertiser will receive full benefit. Agency operating efficiency is a key element to any review. What resources are brought to the client’s business? How does the staffing plan match the necessary scope of work? How are salaries, overhead and profit benchmarked? What monitoring procedures are in place to measure media effectiveness and efficiency? What metrics are used to establish ROI? And, how is the agency being compensated? Value can come from savings on agency compensation, and operating efficiency, but also from the larger pies of media efficiency and marketplace return on investment. An experienced review consultant has their eye on all four elements.
Let’s get back to agencies crying foul to marketer led reviews. First of all, agency work is not a commodity. They are not all the same. You might think so when you look at the way agencies have been compensated over the years, however. It’s an industry where agency compensation has gone down, not up (unlike lawyers, doctors or accountant fees). It’s an industry where agencies are all pretty much compensated in the same way whether the work is good, bad or indifferent. That’s one of the reasons incentive plans are in favor with nearly half the contracts that are written today.
Agency reviews certainly do need improvement. Response time to prepare an RFI should be reasonable. The RFI should pertain specifically to the client’s business with relevant questions and answers. Not a data base encyclopedia.
Transparency is always necessary. It leads to trust.
Should an agency be paid for its work during a review? Here’s my take on it. If a client will not pay for any work it should be known upfront and the agency needs to make a decision. Simple as that. Also, I don’t believe an agency should be paid for time spent on a review. But, I do believe that it is not unreasonable for a client to pay for a creative asset that could be used going forward if the agency is not chosen.
And finally, agency compensation needs further review. Commissions or fees should be more thoroughly thought out. Media budget, applied resources, scope of work, agency performance is a consideration. Labor is not an outcome, but an output.
Value and accountability are important measures to help guide the compensation arrangement, which may create new incentives.