For as long as anyone can remember in the world of marketers and agencies, the relationship between client and suit has been murky. Often based on personal relationships, disproportionately influenced by opinion, frequently held together by inertia and lack of understanding, the contract between supplier and commissioner is a fragile one. Despite its fragility, however, the rules of the game are clear.
The agency takes on any work it can, exploiting the need to reduce client head-count by fuelling the 'de-skilling' of marketing departments, thus making itself harder to defenestrate. Media agencies create ever-more complex trading arrangements which generate the backdoor income they need to supplement the uneconomic headline price they are charging.
Procurement departments pretend to be unaware of the value the agency brings, picking holes and driving the headline price down to a level they can showboat to the board, while aware that the agency lives off other revenues. Now and then they'll bring in an 'auditor' who will 'find' overcharging, about which procurement knew already, to show their rigour, before everyone gets back to business as usual.
Marketing folk must navigate these choppy waters, keeping everyone onside and seeking to get closer to the objectives they have set without falling victim to the local storms that brew up as the players strive to maintain their toehold. Changes are afoot, however, which could alter the balance of power. The way marketing departments engage with agencies will need to evolve if clients don't want to be at the mercy of agencies with the keys to their underwear drawer.
Across the industry, people are waking up to the strategic importance of data. Capturing, analysing and employing it to power decision-making is rapidly becoming a critical capability
Some agencies are moving faster than others. They pull together the data behind their media operations and create a centralised resource of performance data across the breadth of their digital activity that enables them to change their business model in several important ways.
It allows them to arbitrage media buying, moving down the value chain to absorb some of the margin enjoyed by networks such as Specific Media; buying low-cost media and using data to allocate individual impressions to the most profitable campaign. It also allows models to be created for the performance of media, search and social for each client's business. While lots of attention has gone into covering data ownership in contracts, little has gone into what is to be done with the model, which is where the value lies.
An example is how brands often underestimate the performance impact of changing search agency, where the configuration of the Google account remains property of the agency.
Finally, this detailed knowledge of how channels perform for individual products and campaigns, married with modelling that shows how they work together to generate value, create real barriers to exit from an agency relationship, with significant (and hard to measure in advance) transfer costs.
All this might appear to be a threat to the marketers' position, but it is also an opportunity. As manufacturers discovered when just-in-time inventory management was introduced, it demands integration of objectives, process and IT systems, which in turn requires a longer-term mindset to be applied to contracts and working relationships.
As the manufacturing sector found, the move from short-term combative interactions to more aligned supplier relationships, created more stable business, innovation and better quality of earnings for all. The opportunity is there; can marketing make the change?
- Andrew Walmsley is a digital pluralist
30 SECONDS ON ... SPECIFIC MEDIA
- Specific Media was founded in July 1999 by Tim Vanderhook and his brothers, Chris and Russell. It is an interactive media company that operates worldwide. Its headquarters is in California and it has offices across the US and Europe.
- Specific Media claims to be the first media company to integrate display, video, mobile and IPTV into a 'single unified platform'.
- The company hit the headlines in June when it bought MySpace from News Corp and announced that Justin Timberlake would be a stakeholder. Unconfirmed reports suggested the price was as low as $35m (£22.5m); News Corp paid $580m (£361m) for MySpace in 2005.
- This August, Specific Media underlined its reputation for innovation by launching an eye-tracking service, which uses webcams to track how consumers view online ads.
- It hasn't all been positive news for the company; in August this year it laid off about 8% of its staff, in addition to the 200 jobs it cut from MySpace.