Remuneration: A Loser’s Game

Is marketing getting something for nothing or is it playing a loser39s gameAdvertiseragency relationships have devolved over the past several decades What was once the strongest of strategic relationships during the golden age of the Creative Revolution has become lopsided and imbalanced It39s become a buyer39s market for advertisers who change agencies with regularity and drive down remuneration with every pitch Advertisers seek quotbest in classquot agencies who specialize by media and the definition of quotbest in classquot is a fluid one It cannot be based on quotwho delivers the best resultsquot because agencies do not hang around long enough to deliver improved results Their relationships with their clients last no longer than the tenure of the CMOs for whom they work and CMOs per research by Russell Reynolds have the highest turnover among executives in the CSuiteAdvertisers never made a conscious decision to marginalize agencies Marginalization was the outcome of the shift from media commissions to laborbased fees the rise of brand globalization the adoption of quotshareholder valuequot as the corporate mantra the empowerment of procurement to drive down costsamp160and the digital and social revolutions which fragmented agencies into specialized suppliers and led to astounding increases in marketing SOW workloadsThis sequence of market changes saw advertisers initiate change while their agencies reacted to change Their relationship was like a tennis match where one player charged the net and the other fell back on its heels A pattern of quotwinnerquot and quotloserquot developed early during this transition except that there were no real winners Agencies reacted to fee reductions by downsizing and quotjuniorizingquot reducing their strategic and creative capabilities at a time when their clients39 marketing problems were growing in complexity Everyone was a loserAdvertisers39 brands remain stagnant today contributing to CMO and agency turnover Many legacy brands have failed to manage the customer transition from baby boomers to Millennials or to deal successfully with rise of online commerce Their agency partners marginalized over the past decade are not able to helpMarketing is playing a loser39s game even though it looks like they are getting more agency output at lower costLooking ahead CMOs should rethink their priorities and instead of concentrating on marketing cost reduction as their way of delivering improved results they should step up to the greater challenge How to get their brands moving again Their portfolio of agencies should be simplified and reduced Their agencies should be encouraged to develop a full range of media capabilitiesamp160and most importantly to dedicate themselves to developing media and creative solutions that drive brand growthAdvertiseragency relationships built on a mutual commitment to drive brand growth might succeed and the CMOs who establish such relationships might last in their jobs longer than 34 years But this will require a different form of agency remuneration CMOs should consider paying agencies for the SOW deliverables that are agreed and carried out rather than continuing the laborbased fee formulas that have so clearly failed over the past two decadesAdvertisers and agencies have been playing a loser39s game It39s time to invent a new game where both parties can win and add genuine value for shareholdersCartoon Credit Arnie Levin The New Yorker The 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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Remuneration: A Loser’s Game

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Michael Farmer

We Are the Outliers - By Jack Myers

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Remuneration: A Loser’s Game

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