Why is the client/ad agency relationship so complicated and fraught with drama on both sides?
The business relationship between clients and their marketing agencies seem to have ever-shorter life spans. True enough, the marketing game is a tough business for all concerned. Lately things seem to be more cantankerous between clients and their agencies. Both are behaving badly these days.
If you’re on the client-side, have you been subjected to these poor ad agency behaviors?
- The agency won your business with principals and senior talent then turned the real work over to junior-level (more-profitable) people.
- In pitching your business, the agency presented creative work produced by creatives who no longer work at the agency.
- In pitching your business the agency claimed expertise they didn’t have.
- The agency intentionally low-balled fees to win your business, then made up for it in future ‘out-of-scope’ or “mission-creep” billings.
- Account planning made recommendations weighted to those marketing channels driven by profit to the agency rather than results for you.
Or perhaps you’re the Principal of an ad agency, have you ever experienced these soul-sucking client moves?
- Your agency was invited to participate in a Request For Proposal process — it was never a contest, the prospect knew full well who would be awarded the work (not your agency)– but there had to be a review to meet their internal policies, politics.
- The prospect demanded ownership of the ideas you presented in the new business pitch with no intention of paying for those ideas.
- The prospect did not give you the courtesy of notifying you were not selected when their RFP process concluded.
- The client took advantage of your relationship by requesting you perform work outside the scope of the current project then disputed paying for the extra work.
- The client used an RFP process to pressure you to lower your fees.
- The client routinely asks for discounts — does not want to pay you what you are worth.
Whichever side you’re on; there’s enough bad behavior to go around. It’s interesting to me – in no other professional discipline do the parties operate at such low levels of behavior and disservice to each other. Architecture, engineering, accounting, research and management– consultant firms and their client side colleagues in these disciplines seem to garner much higher levels of mutual respect than those in the marketing and advertising professions.
I think the reason for the growing strain in agency/client relationships is two-fold:
1) The barrier to get into the ad game is low and getting lower.
2) Clients have abundant choice in the marketplace.
The wisdom of the crowd in the idea economy.
Unlike the other aforementioned disciplines, marketing and advertising is easy to get into. You just need somebody to like your idea, pay you to implement it and you’re in business. In an era of crowd sourcing, ideas can come from anywhere, anytime and at faster speed. The wisdom of the crowd is pushing advertising and everything that comes with it further down the value chain and away from where the client’s are making the big decisions. Business leaders don’t crowd source for engineering or finance ideas.
With social media driving this trend, big brands no longer view their big ad agencies as the only place for innovation and transformative ideas. Seemingly, clients just want their agencies to make low value marketing stuff and manage process. Advertising is a production business now. Clients will continue to be pressured to get stuff made for cheaper and cheaper. Agencies stuck in this side of the game will be low profit enterprises.
It’s simple economics.
Anywhere there is an abundant supply of goods and services, buyers will set the price. And in markets that are commoditized, any price is too high. This is high school economics.
There is simply an over abundance of marketing, advertising, PR, brand strategy, design and communications firms. Clients have abundant choice. If you’re an agency of any size and discipline, your clients can easily replace you. No doubt, you know there is a long line of competitors just waiting their turn to take over from where you left off when the client takes their business into review.
Clients have all the power in the buying cycle. Consequently, agencies are left to compete with each other by giving their ideas away for next to nothing. McKinsey doesn’t create business chasing RFPs. Clients go to them.
To change client behavior, agency executives must change their behavior first.
Let’s not forget, it’s always the client’s money! The customer is king! You don’t have a business unless you have customers. In my view, agencies need to remember their purpose is to serve the client, not the other way around. Advertising executives have two alternatives in how they serve their clients:
1) They can be order-takers focusing their business on responding to client need to simply get stuff done– the cheaper the better.
2) They can be value-creators first focused on contributing useful insights, strategies and ideas that enable clients to see over the horizon, helping them gain more clarity and confidence to make the right decisions that impact their business success.
Of these alternatives, which one do you think will earn and deserve the trust and loyalty of the client over the long haul? Which alternative will enable you to provide more use value to your client than you are paid in cash value–thus enhancing your ability to move up the value chain and command premium fees? Which method will enable you to create unparalleled competitive advantage for your firm? Which alternative will clients love to share with others? Which one do you want to be?
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