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How to Save the Troubled Agency-Marketer Relationship (Alan Cohen)

April 26, 2010

NEW YORK (AdAge.com) -- It hasn't been this bad for 66 years.

Our annual dive into agency revenue figures shows shops of nearly every stripe lost revenue last year. In total the agency industry tumbled 7.5% to $28.4 billion in revenue in 2009. That's the sharpest decline since we started this listing in 1944.

No doubt the economy has been the biggest culprit, but there's also a more troubling trend -- one that has little to do with a stock-market crash and consumer-spending decline. In our reportage from all areas -- the marketers, the agencies, the media companies -- we hear of cracks in the already-complex relationship between agencies and the marketers they service. Just last week, Chevrolet parted with Campbell-Ewald after 88 years.

Some blame the rise of social media, which has agencies rapidly trying to expand their offerings and sometimes promising capabilities they are unable to deliver, some blame even more agency partners at an already-crowded marketing table. At one point the No. 1 enemy was Google (no more) but today it's more commonly the procurement officer, often called a cost-cutting zealot who treats advertising like office supplies. We decided to get their side of the story and spoke to the chief procurement officers at Pfizer and Intel. Yes, they actually care about quality and creativity and no, to them shopping for an agency is not just like buying paper clips.

Make no mistake: Examples of successful longstanding relationships between clients and agencies, such as the one between Apple and TBWA/Media Arts Lab, still abound in many corners of Madison Avenue. But some of the things those types of relations are built on, such as the trusted keepers of the client-agency relationship, are becoming marginalized.

Meanwhile, everyone's getting into everyone else's business, which can be confusing for marketers and create new competitors for agencies. Take, for example, the kerfuffle around Home Depot's recent Hispanic agency review and the tension it's created between Hispanic agencies and general-market shops that are growing their multicultural practices. Or the media companies that have started to tread on traditional-agency territory. Want to create an integrated campaign for your latest luxury launch? Condé Nast is open for business -- and you don't even have to buy ads in Vogue.

In all, it's leading to an unprecedented strain for the agency community and the marketers it services -- and we hope in Ad Age's first Agency Issue to diagnose some of the problems and help point the way toward solutions.

Yes, there are solutions. To find them, we canvassed people across the industry to get a feel for what's prompting the problems in the first place -- Kimberly-Clark CMO Tony Palmer flagged five areas keeping him up at night -- and what sorts of actions can be taken to remedy the relationship.

What's straining the agency-marketer relationship today?

"Too many agencies are wondering, 'Am I going to have a job six months from now? What does my client really think?' When the agency doesn't know where it stands or if the client believes in it, it becomes dysfunctional. That's the biggest thing that's missing. If the client's not happy, get on with it. Tell them what's wrong and what they need to do. Marketers also shouldn't be afraid to challenge their agencies. The best teams ask outrageous questions of their agencies. And agencies love that. And when you answer those, you get great work."

 

"There is a bottom-line issue that is affecting all of us, not just agencies -- clients are being asked to deliver more. When I started in this business in 1985, the production budgets then felt like they were higher than they are today. Some of it makes sense, because you can do a lot more for less with technology. I just hope we don't sacrifice quality. We're treating ideas as commodities, and sometimes the worst idea is funded the same as the best idea."

 

"Design and creative agencies are better than media agencies at convincing brands that they have the brands' interests at heart. That may explain some of the pressure media agencies feel from clients, and some of the reason clients seem to view media as a commodity more than certain other crucial areas."

 

"Huge tension exists as marketers and agencies strive to globalize. What's the domain of global marketing teams and their agency counterparts? What's the purview of local teams and their agency counterparts? Often today the desire to take advantage of opportunities and the need to get to market first are so great that less thought is given to how that should be done -- inside the marketer, as well as inside its agencies."

 

"It's very hard to figure out what's appropriate compensation. You go back 10, 15 years ago, and people knew how to pay a traditional agency. But now it's very hard. What do you pay somebody when they're setting up a Facebook page? That gets very confusing. That's why you get some of these purchasing departments getting involved. And that creates tension because there's no generally accepted formula."

 

"It's probably the same dynamic that has played out for a few years now: Clients want better, faster, cheaper. If you as an agency can do that you're in a good space. Most clients today want to pay less for doing the same job they would have five years ago."

 

"What you saw in the past was a much tighter collaborative relationship between agencies and clients. There are still a lot of questions in corporate America about the power of advertising. There is also procurement -- which we should support as a discipline -- but not everyone in America is using it as a strategic discipline, they are using it as a cost-cutting discipline. Agencies continue to struggle to demonstrate their value."

 

"[There's] impatience for efficiency and effectiveness with little or no compromise toward delivering either. There are higher expectations of accountability from clients driving the need for more rigorous and relevant creativity. This is an enormous force for change in marketer-agency relations because of its impact on the way both do business."

 

"One of our biggest challenges as an industry is that as the consumer has faced millions of media choices, the agency landscape has fragmented as well. We are challenged by some clients that have upward of 10 or 15 agencies and, while [they are] all "microspecialists," sometimes that hurts our ability to develop a cohesive strategy. We all know that the same consumer is online and offline -- sometimes at the same time!"

 

"This contradictory tension [is] between someone who can solve my business problem but who also can be price-competitive. Once you deliver real value to the client you deflect that focus on price. The conversation should be about value."

How can the relationship be improved?

"Those relationships that allow for change as culture and climate evolve should be fine. I am a firm believer in flexibility in this economic environment and in this consumer-led environment. The agency-marketer relationships that build in flexibility have a greater chance for success."

 

"Have senior, seasoned impact players on the front line (who are experts doing what the client can't do vs. what the client doesn't have time to do) focused on deploying their creativity on ideas that drive client's business. Be focused on value creation, embrace and use data and analytics to elevate work, and be collaborative."

 

"We have got to be more comfortable experimenting with different models. So maybe a client just needs execution people or a lot of young people who are great with social media. We don't always have to give them the pyramidal structure of senior VP and account supervisor. We're doing models that suit us, and I'm not sure that's so smart. We also have to take the risk of saying our media mix has changed, and here's a better strategy. We shouldn't stay in our little boxes of execution. ... We have to be brave enough to take that risk."

 

"The opportunity for improvement centers on an ability to find new models that link price, performance and value. Within that, agencies must have the ability to track, measure and synthesize, and this must be synchronized with client objectives. The best discussions occur when the marketing and procurement functions are unified and seeking value in all areas."

 

"You really need clear alignment on goals between agency and client. And people need to think about, what are the deliverables? And what are the expectations? Often where you see trouble is when there's confusion as to what somebody is thinking they're getting and what somebody thinks they're delivering. Eventually what marketers will need to get to is an understanding that this all takes real resources and real money to do great work on the agency's part. Clearly, there's an onus on both sides. As we learn more about how to evaluate some of the new