Agency of the Year 2007: How to manage your relationship

A lack of glittering prizes does not mean that you have backed a loser. Libby Child, chief executive of Aprais UK, analyses the trends that are shaping the business dynamics between marketers and communications agencies.

Are any of your agencies among Marketing's 2007 Agency of the Year winners? Have they been plucky runners-up? And if not, should you care? Backing winners brings a buzz, confirming that you are getting something right. I will check through this supplement to see whether any of 'my' agencies and clients have made it. But if they haven't, does it mean you are working with a rubbish agency? Of course not.

There are thousands of agencies out there doing outstanding, effective work - from creative and PR to direct and media - that have not had a look-in. What sets the winners apart is usually the consistency with which they have been creating strong communications across a wide range of disparate advertisers, categories and target audiences.

If you know that your chosen agencies are delivering to your objectives, building your business, working cost-effectively and efficiently as true partners, then give them, and yourself, your own award. You all deserve it, because the industry trends are making such achievements ever tougher. But what are those trends, and what impact are they having?

More fluid relationships with more agencies

Multiple agencies are needed to answer clients' 360 degs communication demands. The integrated one-stop shop is still the exception, not the rule. Marketing teams have to manage more agencies, with the same or decreasing resources, both in terms of budgets and personnel. So they have a more extensive roster and can assign projects across a wider pool, which means that agencies have a smaller slice of the total budget and feel less secure.

This has led to the death of the creative agency's divine right to lead. The disparate teams are meant to collaborate, but without strong leadership in place they will jostle for supremacy. Yes, there is more competition and innovation, but there is also less in-depth brand and business knowledge within the agencies, which leads to more tactical solutions. Marketing teams start to wonder, rather in the manner of a paranoid king, who among their advisers really has their interests at heart. Who exactly can they trust?

The rise and rise of communications planning

Answering this need for media-neutral, non-implementation-biased advice is communications planning. This is usually housed within the media agencies, although it is also found within dedicated specialist companies including Naked, or being brought back into ad agencies such as Lowe. We have data illustrating that strategic planning within media relationships is now about 50% more important to advertisers than it was seven years ago.

Are more and more media agencies offering a valuable and well-priced service compared to the ad networks? Are they the true global networks of the future? It is beginning to look that way as the global brands continue to recognise that it is far more important to have a single worldwide media agency than one worldwide advertising shop.

More frequent use of bonus schemes

Bonuses have become a command-and-control tactic, a means of rewarding excellence or penalising below-par performance. According to ISBA data, more than 50% of UK contracts have some type of bonus criteria. It can be a thorny topic, leading to a reduced, rather than enhanced, spirit of business partnership. Agencies see them as a poorly disguised attempt to drive down fees, while advertisers refuse to pay 15% plus margin for average work and service.

There is little common ground as to what constitutes risk and reward, although some general terms and criteria have become established. Acceptance will happen when there are more robust, consistent and industry-wide ways of measuring return on communication spend. There also needs to be a willingness to take a longer-term view about the effectiveness of communications, meaning that bonuses may be paid over more than a single financial year. Both advertisers and agencies need to demonstrate that bonuses can be discussed and agreed in a spirit of professional respect and trust.

Procurement power

In many companies, procurement has the right to interrogate the financial competence of marketing. It continues to challenge both marketing teams and their agencies, upsetting previously accepted ways of working. Procurement can be criticised for ignoring the importance of chemistry, not understanding the difference between cost and value, and for coming between marketing and agency teams. But it is now a fact of life, and has revolutionised fee and compensation negotiations within the industry. Procurement has forced both teams to be more financially aware and disciplined, which has to be a good thing. But is it still somewhat biased toward a 'never mind the quality, feel the width' view?

Separating strategy and implementation

Strategy is ever more centralised and controlled in client/agency hubs, be it globally, regionally or at a national level, depending on the scale and geography of the brand and business. These hubs are multi-disciplined, strategic and creative powerhouses, often highly valued. But the implementation of their output becomes a debate about efficiency, consistency and cost-effectiveness, so advertisers are choosing to source this separately. Nokia appointed Wieden & Kennedy as its lead strategic force in the summer, with JWT as its worldwide network. An increasingly popular choice is a digital asset management company such as Tag, which has harnessed technology to distribute ad material around the world. Alternatively, the media network may be the multinational glue.

Be good, be green, be seen

There is a need for ethical and transparent business practices. It is no longer enough to do a good job; both marketers and their agencies are learning the language and behaviour of ethical business. This manifests itself in myriad ways, having a clear impact on what is being said in external communications, but also affecting the nature of the internal day-to-day business relationship. From the impact of the Sarbanes-Oxley Act to the stated application of the best principles of supplier relationship management, less is now left to chance and individual style.

These trends are definitely influencing the way in which marketing evaluates its agencies. There will always be a marked difference in the way that awards such as these are judged, or how a pitch is conducted - you are on the outside looking in - compared to how advertisers measure the worth of their incumbent agencies. As we all know from our personal relationships, the traits that are initially attractive, such as exuberant, quirky creativity, may become an irritant quicker than you can say 'AAR'.

In response to these trends, agency-advertiser evaluations are becoming more frequent and formal, with more focus being placed on financial and operational measures and metrics. But these reviews do not necessarily lead to improved performance, despite the assessment often being linked to a bonus. The findings can fall victim to a variety of issues: they might not be trusted; they will not address any client performance issues; and those involved might fail to shape findings into a simple action plan. It is even possible that these findings are never communicated to the wider team.

In our experience, despite the tough environment in which they are operating, agencies all over the world continue to be optimistic, assessing their own performance usually much higher than do their clients (see graphs, right). Marketing teams appear to be more burdened by the reality and complexity of managing their brands and agencies, so they are relatively tough when rating their own performance as clients. And, just maybe, the agencies are also diplomatically kind to their clients/paymasters, so there are smaller perception gaps.

Sadly, in the UK, our scores are a little lower than those in other countries. We either have high standards or we are miserable - your opinion will depend on whether you are from an agency or are an advertiser. But metrics such as these are, of course, only an indication of performance, and cannot replace the open and frequent exchange of views.

If you do not have an award-winning agency don't rush to draw up your pitch list. Every marketing team can make its agencies better (see checklist, page 5). Relationships requires communication, respect and a little effort. Advertisers are from Mars - often over-rational and prone to hiding in their sheds. Agencies are from Venus - rather emotional, but very receptive to compliments and a metaphorical bouquet of flowers.

CHECKLIST

Assessing your agency

- Does it deliver what it says, and is this in line with what was agreed? Absolute quality of delivery and impact in the market is still key, but it is now much more rigorously assessed against prior definitions. On pre-agreed criteria, does the agency achieve against these objectives? Does it create communication activity that demonstrably builds the business? Does it keep within specified timelines, and is it hitting the agreed fee and budget parameters?

- Does the agency have accepted practices that ensures it works productively? Can your agency prove that it actively manages itself and the business relationship in a stable and professional way? Has it adopted technology that will help to drive down costs? Are there tools to aid both marketing teams and the agency itself? Is the agency transparent financially?

- Does the agency have the right attitude as well as ability? Does it push boundaries when appropriate? Working collaboratively with other roster agencies could be key - is this formally assessed? Is the agency flexible and open-minded, working with ideas from other sources and venturing outside its narrow remit? Does it contribute to fresh thinking in its sector?

- Have we done all we can to get the best results? Are your agencies paid and incentivised appropriately? Ensure that you are sharing objectives and giving sales updates. Are the briefs clear and approval processes efficient? Be realistic and consistent about timelines and what budgets can achieve. Is the effect of communication monitored so that everyone can learn together? Are you open and honest, giving and taking regular feedback?

OPINION

Marc Lawn, head of marketing services, Britvic

Clients outsource non-core competencies - they are looking for the agency to be a thought leader. However, the landscape is changing. Procurement has a greater say in marketing spend and TUPE is changing employee rights. Agency/advertiser relationships must become true partnerships, so formal planning and evaluation of both parties is key.

Advertisers demonstrating this commitment to agencies will have more engaged partners that are prepared to challenge the status quo and create the work that makes this industry great. Marriages made in heaven need working on. Embracing that challenge drives sustainability and is ethically the right thing to do. It is all about balance.

BRIAN JACOBS - founder, Brian Jacobs and Associates

I have worked in media agencies for more than 30 years, and the relationship with clients has changed. The media department used to be subservient. Clients were not interested, and we overcomplicated the concept so it wasn't easy for advertisers to get involved. Then media independents came along offering to do it for less money, with value-added services.

In the past 15 years media agencies have taken centre-stage, reinforced by media fragmentation that has made planning and buying media complex.

Evaluation has led to softer service measures. At Carat we encouraged advertisers to assess us, but the smart ones, such as Coca-Cola and Procter & Gamble, have been doing it for years.

ANDREW CARTER, global brand director, Bombay Sapphire

I don't think the fundamentals have changed in terms of what advertisers are looking for. What has changed is the 360 degs planning communications mindset. A lot of client/agency relationships are global now, with a local component, and while you can have a strong relationship at a global contact level, you are reliant upon local networks to make sure they can deliver to the market. You have to work harder at the relationships and must rely on the media agency to bring it all together.

On the evaluation side, I would look to do it every six months, against a set of criteria and deliverables that are made much clearer up front in the contract with the client.

TINA FEGENT, independent procurement consultant

Procurement used to be a dirty word, but agencies now understand the need for it, and those involved in purchasing are bothering to understand what they are buying. The one stumbling block is the marketing function. It is easy for it to be absolved of total responsibility for purchasing, but it has to be involved. This should be a three-way relationship.

It is a similar story with agency evaluation. Good purchasing people want to invest in it, not just in terms of getting the right fee up front but also investing in the ongoing relationship, with regular audits. It should be a 360 degs approach, where the agency appraises the client too, because clients are not always perfect.

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