Too many mid-sized advertisers are failing to keep an on-going eye on their agency relationships, with predictable results. ID Comms’ Tom Denford explains.
In many areas of life, middle isn’t always seen as best; middle aged, middle child and middle management are just three examples.
In advertising too, the middle cohort of advertisers gets it rough; they are not big enough on their own to stand up to increasingly powerful agencies but they are large enough that value loss from media budgets can run into the millions.
This middle cohort of advertisers, those spending between €25-150m ($35-200m) each year on media across Europe for example, if combined are actually the biggest sector of the market. Collectively this mid-tier have more budget than the top 20 advertisers that agencies usually make their priority.
But while the top 20 advertisers get the cream from the agency table – the best value in terms of discount, talent and innovation – and pay the lowest agency fees, mid-sized advertisers are all too often gilding the lily of agency profits. They will usually get less but pay more.
The solution lies with a change of attitude. Too many of these mid-sized companies think that once they’ve held a pitch, looked at spreadsheets and sat in on media presentations, that it’s job done until the next review.
Even where there’s a strong procurement team, once the terms of the deal are agreed they often revert back to familiar KPIs like cost, commission and discount.
In many such companies there’s also a clear gap between marketing and procurement, where media expertise should sit.
All this allows them to be taken advantage of.
Without proper monitoring in place, such advertisers get offered less and less innovation, the experience of the team on the account slowly dwindles and the value delivered from their media investments declines.
Such advertisers need a new approach to media governance. They need to be much more proactive in ensuring on-going delivery of value, a term that needs to encompass everything from trading value to talent, management focus to access to process tools as well as the latest research and innovation opportunities.
They need to be tracking media deal delivery as a matter of course. That includes monitoring the agency’s service and strategy delivery as these have a huge influence on the effectiveness and value of an advertiser’s media budgets, perhaps even more so than negotiating cheaper costs.
Any brand outside the top 20 needs to make sure that their contract properly incentivises their agency to meet agreed standards of strategy and service and that there are measures in place to monitor this.
This is not a case of straight-out agency bashing. We fully recognise that agencies need to earn a good return that reflects their skills and expertise and the value they can create for their clients.
In fact, it might help agencies if their clients adopted better agency management processes and tools that encouraged the agency to work more productively in year two of the relationship and beyond.
It might prevent agencies overpromising on fees and rates in order to win accounts and then have to renege down the line because they can’t afford to maintain these service levels.
The result of on-going agency performance monitoring is a collaborative relationship based on clear deliverables that enable agencies to make a fair profit based on a good performance. It should help build long-term relationships rather than short-term churn.
This scenario will only change when all mid-sized advertisers focus much harder on on-going media governance and take more responsibility for measuring their agency’s delivery in service and strategy every three months not every three years.
This ID Comms Opinion article was originally posted on M&M Global on 24-Sep-13
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