September 09, 2009

3 Ways for Agencies to Cope with Recessionary Pressures Ad agencies have always been at the mercy of client anxieties. Now that it's 2010 planning season, agencies are getting hammered on process, productivity and price. Agencies have always been the whipping boys for all manner of brand or product performance issues. Everyone understands that agencies exist so they can be fired. Everyone also realizes that the core agency value proposition is either “we know or can do something you cannot” or “we have arms and legs to get things done faster, better and/or cheaper than you can do it yourself.” But during this recession agencies have had even more tenuous relationships with their clients. The list of clients that broom agencies quickly seems to be growing. The research indicates that clients change agencies, on average, every 2.5 years, twice as frequently as before. There are all kinds of reasons but the bottom line is that few clients believe that agencies are long-term partners. You can’t be a partner if they don’t know you well. Rarely are agency chieftains, part of a client’s inner circle. It is unusual for agency heads to be considered the CEO’s or even the VP Marketing’s consigliore or to even have a voice in crafting client strategy. Instead agencies and their leaders have become receivers of strategic output and implementers of tactical plans. Very few clients believe that their agencies actually know the fundamentals of their business, their category or the critical processes within their enterprise. Agency expertise is understood as generic, plain vanilla project management and content creation. Agency outputs are commodities that can be priced and negotiated by purchasing agents. And even that role, too, has a built-in trap. Aggressive cost controls and benchmarking have given savvy clients unusual leverage. Many specify upfront the time, cost and staff to produce a postcard, a website, an e-mail campaign or a #10 mail package. Few are willing to pay for anything but minimal staffing. Even fewer are willing to pay for senior people who allegedly bring added value, insight or experience to their accounts. Yet agencies, from the 2-person shops to the global conglomerates, seem to be impotent to affect the size, timing or sequence of client spending. Agencies are output. It is a sobering thought, which fundamentally changes the game. Yet changing these circumstances requires changing the way agencies do business. Consider three areas to creative an opening for agencies to have a greater impact on their own fate. Leadership. Clients hire agencies that have a point of view. If you don’t have a POV you are just another vendor cranking out pretty pictures or punchy copy. Unfortunately too many agencies either haven’t developed or articulated a distinguishing POV or are unwilling to expose their POVs for fear of rejection. In a corporate and financial environment that risk averse, having a POV is a point of distinction, which must be leveraged to an agency’s benefit Agencies often have practical knowledge not only about a client’s strategy but generally understand the distribution channels, the media, contact centers, customer service, fulfillment, retail traffic patterns and nuts and bolts operational reality. Agencies are often in a position to traffic information, data and ideas among and between different business units and to infuse grand schemes with a healthy dose of reality. Leadership requires agencies to get out ahead of their clients by thinking through and anticipating events, sketching out likely competitive scenarios and contingency plans, understanding the personalities and power dynamics within client organizations and presenting “crazy” ideas or trial balloons for client consideration. Doing this requires proactive thinking and investment spending. It also requires that use senior, seasoned people to get top-level access and to put this stuff across persuasively. Account people who take reasonable risks, get beyond the day-to-day and become trusted, memorable or effective on the basis of their personalities play a critical role in offering clients the leadership they crave. Efficiency & Transparency. Developing tools to train, manage, deploy and effectively use agency resources is critical to maintain margins and grow profitable businesses. Clients routinely ask skeptical questions about rates, billing and productivity. Though most agencies have adopted the professional services fee model, they haven’t used professional services norms to maximize the value, productivity and utilization of their people. This is not a software problem. It is a matter of understanding who is working and what they can do and mapping these resources transparently against client needs in real time. Improved real-time resource planning in-tandem with clients is a necessity. Agencies have not parsed...

Danny Flamberg

I am a veteran marketing consultant working with leading and emerging brands

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