It’s the Relationship, Stupid!

Advertisers have to manage complex portfolios of specialized agenciesamp160who compete for a portion of the total fee amp160Advertisers have to take the responsibility for planning the detailed Scopes of Work and decide which agencies will be briefed for which deliverablesThese briefing decisions are now made project by project and individual agencies have to be prepared to bid project by project in order to secure their piece of the action amp160This competitive bidding pits client agency against client agency even though the portfolio of agencies is supposed to be working harmoniously on behalf of client brands across the media landscapeFurther complicating this picture is the overwhelming number of deliverables that now make up client Scopes of Work amp160Marketing departments experiment aggressively to see what kinds of digital and social deliverables will have a positive effect in the marketplace amp160They treat this kind of experimentation as costfree for their agencies so they load on the work without matching it with proportional fees amp160One agency office I worked with saw its 2015 workload increase from 3600 deliverables to over 11500 deliverables in 2016 amp160The fees for this work increased by only 25In todayamp8217s projectbased relationships individual agencies have less voice and less influence over their clientsamp8217 brand strategies and not very surprisingly agencies are putting fewer seasoned account management and planning resources on their accounts amp160Poor fee economics drive this decision along with the ongoing need to deliver profits to their holding company owners amp160Agencies are becoming more junior and transactional rather than experienced and strategicIn the meantime their clientsamp8217 legacy brands languish in the marketplace and CMOs are replaced regularly as a result of their failure to deliver improved resultsThis relationship pattern has weakened the branded agencies and increased the logic for holding company relationships where WPP Omnicom Publicis Groupe and Interpublic organize their companywide portfolio of resources in an effort to reestablish exclusive AOR relationships with large clientsPublicis Groupe in particular under CEO Arthur Sadoun has been aggressive about this transition amp8220I am committed to breaking the siloamp8221 Sadoun told Campaign last September noting that this integrated way of working was the future and that the group had to remove any barriers such as financial silos quotItamp8217s the only way to bring the best of our services to our clientsquot he saidamp160The other holding companies are more protective of their agencies amp160Within WPP for example Ogilvy ampamp Mather CEO John Seifert is reorganizing and strengthening OampampM by consolidating the global array of Ogilvy brands into quota single branded integrated operating companyamp8221 that will give OampampM the capability to offer integrated services on an AOR basis once again as he explained in an interview last month also with CampaignIf Seifert succeeds in this he will be able to compete on an AOR basis and even compete for new business with WPPThis move is a very smart one but it comes late in the game amp160Damage to agencyclient relationships is already widespreadThe question now is whether advertisers will take advantage of these initiatives and reinstate agencies or holding companies as strategic partners rather than as commodity suppliers of commoditypriced projectsSmart clients will turn the clock back and embrace the new AOR possibilities with one important caveat They must require their integrated AOR agencies to amp8220deliver improved resultsamp8221 and treat performance improvement as the foundation of the redefined relationshipsamp160This will require agencies to enhance their capabilities and figure out why brands are underperforming todayamp160and what to do about it through improved ways of defining media spend media mix and recommended Scopes of WorkNot insignificantly as well agencies will have to figure out how to be better paid for their work amp160Tying their remuneration to the work they do rather than to forecasted hours and overhead costs amp160would be a good place to startBruce Eric Kaplan The New Yorker CollectionThe Cartoon Bank With permissionClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this article are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated bloggers

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It’s the Relationship, Stupid!

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Michael Farmer

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