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A Key to Rebuilding Client – Agency Relationships

28 Jul

Bias and ObjectivityThe state of client-agency relationships has been on the decline for several years. Whether measured in terms of longevity, the increase in project-based work versus retained relationship commitments or the waning level of advertiser trust in their agency partners, all of these important partnerships are under pressure.

Regardless of the reasons behind the current situation, this is not a healthy dynamic for either advertisers or agencies. The result has been shorter, more volatile relationships, higher levels of agency personnel turnover and some would argue less effective, less efficient advertising outputs. Reason enough for both sets of stakeholders to thoughtfully assess the current situation and seek corrective action.

There is, we believe, a clear starting point for improving client-agency relationships. It involves a return to the tried and true “principal-agent” business model that once formed the basis for relationships between advertisers and agencies. The woes currently besetting these partnerships and driving advertiser concerns over transparency and trust are direct outcomes of the industry’s deviation from this important principle and the resulting practices that are averse to this model.

A basic tenet of principal-agent relationships is that the agent is bound to make decisions and to take actions that are in the best interest of the principal…always. This, in turn, guides interactions between the parties in a manner that achieves the highest possible degree of accountability and ultimately trust.

It wasn’t long ago that all client-agency agreements contained language establishing the principal-agent relationship, the need for agencies to provide unbiased counsel and the resulting fiduciary obligations of both parties.

Sadly, agency compliance with and commitment to this framework began to wane within the agency community. Some may remember the controversial comments by Irwin Gotlieb, once CEO of WPP’s Group M who opined at the 2015 “Agency Financial Management” Conference hosted by the ANA: Those relationships, rightly or wrongly, don’t exist anymore” he said, adding that “You cease to be an agent the moment someone puts a gun to your head and says these are the CPMs you need to deliver.” Blaming advertisers for the bad practices adopted by some agencies was inappropriate at best.

Even with contractual safeguards in place, problems occur when “agents” have hidden agendas or substitute their interests over those of the principal. This is why the topic of “media rebates” secured and retained by media agencies, without client knowledge or approval proved to be such a lightning rod topic when it initially surfaced.

Fast forward to the present and certain revenue-generating practices that are pursued by many agencies such as principal or inventory buys (media arbitrage), acceptance of incentives from third parties (i.e. rebates, value pots, EPI’s, etc.), agencies awarding work to their holding company affiliates without a competitive review or client authorization, and the application of non-disclosed, unauthorized mark-ups.

Whose interests are being served by such practices…certainly not the advertisers. To paraphrase Shep Gordon, Hollywood producer and talent manager:

“I think a problem for most people in a fiduciary capacity is to eliminate self and greed and all those things so that they can actually be in a fiduciary capacity where the client comes first, whoever the client happens to be.”

Advertisers must protect their legal and financial interests by crafting contract language and implementing the appropriate controls, including performing periodic audits. How else can they ensure that they have the transparency they seek in the context of their agency partners’ financial stewardship of their advertising investment and the confidence that their agencies are acting in their best interest?

On the topic of principal-based buying specifically, we have a contrarian perspective and don’t believe that it is ever appropriate for an agency to purchase media inventory in its name, mark it up by some undisclosed amount and re-sell that to its clients. Yet, these non-disclosed buys have proliferated as programmatic digital media buying has exploded. While the 4A’s issued guidelines to address this practice including documentation including client opt-in, explanation of an advertiser’s audit rights (if any) and access to the underlying costs, oftentimes agreement language is silent on these recommendations or are simply not followed in actual practice.

Thus, if both parties want to establish trust and rebuild the client-agency relationship, begin by eliminating the risk of bias in an agency’s recommendations and or actions and reinforce the principal-agent framework in agreement language.

Risks Related to Ad Agency Staff Reductions

23 Feb

LayoffsAdvertisers cut budgets; ad agencies reduce headcount. This is a causal relationship and always has been.

No one can fault an ad agency for making prudent fiscal decisions when revenues decrease.

That said, advertisers need to take precautions in this situation to mitigate their risks, particularly when there are significant downsizings as there were in 2020.

It was recently announced that Omnicom and Interpublic had eliminated “10,000 roles” between the two organizations in 2020, citing the pandemic as the primary reason. This represented an 8.4% reduction in staff for Omnicom and 7.6% for Interpublic. Significant by any measure… and they will not be alone, the other holding companies simply haven’t yet disclosed annual headcount data.

Like with most professional fee-for-service providers, involuntary staff reductions tend to have a disproportionate impact on longer-term, more highly compensated individuals and personnel working in shared services functions such as finance, human resources, legal, procurement, traffic, etc.

Advertisers that have reduced their budgets obviously need to collaborate with their agency partners on revised scopes of work and remuneration programs that reflect new spend levels. Clients that have maintained or increased spending will need to implement safeguards to ensure that their accounts are adequately staffed and supported.

This includes making sure that the mix of agency personnel working on their business is reflective of the need for strategic insights, breakthrough creative and executional excellence in all facets of the business.

Items such as tightening up creative and media briefing and approval processes, specifying media planning procedures and desired outputs, identifying media management guidelines for in-flight stewardship and post-campaign performance reporting and being overt about financial management expectations and reporting (i.e. project tracking, job closure and reconciliation, third-party vendor payments, etc.) are necessary steps for advertisers to take.

In our experience, as long as both client and agency are aligned, working through these situations to mitigate the risks associated with involuntary staff reductions can be effectively addressed.

As Josh Billings, the 19th century writer and humorist advised: “Caution, though very often wasted is a good risk to take.”

Keys for Optimizing Agency/ Client Relationships

29 Jul

Abstract concept, fingers are touching padlock symbol, With protThe Agency/ Client relationship has been under duress for a couple of decades. The “Procurement Phenomenon” at the dawn of the new millennium has morphed squarely into the Procurement Era for Marketing Services adding stress to these important relationships. This has been further compounded by the erosion of trust resulting from media rebate and transparency issues that have beset the industry, and even more so as a result of the current socio-economic turmoil.

Join J. Francisco Escobar, a leading industry “marriage counselor” and Procurement consultant for a webinar that will cover current trends, compensation practices, a Procurement primer, and negotiation tips that will guide agencies and advertisers in optimizing their relationships. Key takeaways include the followingView Webinar

  • Key trends impacting ALL Marketing Communications Services
  • Top 10 ways to Demonstrate Value to Procurement
  • Practical negotiating  tips and best practices
  • Actionable keys to optimizing Client relationship

The Cost of Feedback is Nominal, the Value Significant.

30 Jun

do advertisers get what they pay for“I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better.” ~ Elon Musk

Chances are, most will agree with Mr. Musk’s sentiments regarding feedback and its link to driving improvements.

What organization wouldn’t aspire to successes achieved by one of the 21st century’s most prolific thinkers? Consider the fact that Tesla, with a market cap of $160 billion, is larger than GM, Ford and Fiat Chrysler combined. Or that his fledgling SpaceX organization has been valued at $36 billion after its first successful manned space flight.

As such, it was somewhat of a surprise to read the results of a recent World Federation of Advertisers (WFA) study. Conducted by Decideware, the study surveyed 60 global agency leaders on client-agency performance evaluation practices. Below are some key findings:

  • 7 out of 10 advertisers provide their agencies with feedback on at least an annual basis
  • Only 4 out of 10 advertisers allow for agency feedback as part of the evaluation process
  • 3 out of 10 clients conduct face-to-face meetings to discuss evaluation results
  • Agencies aren’t comfortable providing “honest feedback”
  • 43% cited the lack of honest feedback as the “biggest barrier” to effective evaluations

That so few marketers would invite their ad agencies to provide formal feedback on topics dealing with team performance, workflow, process and the overall relationship is a bit of a mystery; particularly given that anecdotally it has long been believed that strong client-agency relationships yield superior performance.

In our experience, we have found numerous examples of successful marketers that believe in and are utilizing a 360-degree evaluation process with their agency partners. Importantly, that process  incorporates candid, two-way dialog, which serves as a fundamental building block for their agency relationship management efforts.

It would be helpful to understand “why” some marketers have chosen not to invite agency feedback or to review performance evaluation results in face-to-face meetings. Are they simply not interested in what their agencies have to say? Are they too understaffed and time strapped to invest in a robust evaluation process? Are they of the belief that if their agency partners had a point-of-view that they would share their insights, without prompting?

Regardless of the reasons for eschewing this fundamental practice, there are compelling benefits to be gained for marketers by course correcting in this area by implementing two-way evaluation frameworks. At a minimum, eliciting agency feedback on day-to-day workflows, briefings and approval processes, in market results and client-agency relationship management can yield efficiencies that are beneficial to stakeholders on both sides.

Beyond near-term improvements in operations and performance, established communications programs, that encourage ongoing candid feedback, help to build trust and strengthen relationships. It is incumbent upon CMOs and agency CEOs to collaborate on putting the appropriate protocols in place to encourage, understand and act upon the perspective each party generates throughout the year.

 

Compliance Programs Can Transform Marketing

24 Jun

compliance-rulesCompliance is a cost of doing business, and companies invest appropriately in compliance and risk management programs and policies. Many have even been successful at elevating compliance to “cultural ethic” status.

That said, few organizations have risk-management frameworks in place for their marketing and advertising spend. Why?

Consider that the marketing and advertising expenses are material to the financial statements. Further, marketing represents a critical link to building brands and driving revenue. If not managed properly, dollars invested are lost to fraud and non-transparent advertising supply-chain practices, lowering working dollars and leading to declines in marketing efficiency. These factors help to underscore the necessity for compliance risk mitigation coverage in this area.

Allaying risks aside, we have been fortunate enough to witness the transformative power of compliance audit work and financial management oversight programs for advertisers. Benefits have included financial recoveries, cost reductions, improved efficiencies and enhanced revenue generation.

Best of all, technology advancements combined with sound compliance frameworks and proven audit work processes afford organizations the opportunity to efficiently conduct comprehensive, periodic reviews of their marketing services agency network. In our experience this is readily achieved without disruption to client-agency workflows or performance.

Aside from the financial benefits, a structured marketing and advertising compliance program can instill a sense of confidence among all stakeholders that advertising related risks are being monitored and continuously mitigated. Additionally, concerns, questions and the unknown regarding a marketer’s ad agency network, are replaced with a sense of trust and confidence. This is a compelling outcome given the important role that an advertiser’s agency partners play.

In the wake of the COVID-19 crisis, marketers will face a myriad of challenges in meeting their organization’s performance expectations. The combination of an uncertain future regarding the consumers’ return to “normal” consumption patterns and behaviors and budget reductions will require a disciplined approach to planning and resource allocation efforts… not to mention the need for flawless execution.

Embracing compliance and extending enterprise initiatives in this area to include marketing and advertising will mitigate risks and boost the return on marketing investment. In the words of former U.S. Navy Seal and NY Times bestselling author, Brandon Webb:

“Being a Navy SEAL and sniper taught me all about risk management. Take away all the risk variables under your control and reduce it to an acceptable level. The same fundamentals apply in business.”

 

Budget Reductions Create Opportunity to Fine-Tune Agency Network

28 May

 

Advertising concept: Ad Agency on digital background

For marketers seeking to generate efficiency gains, looking internally to rethink the processes used to manage planning and creative development workflows can yield significant benefit.

As importantly, looking externally at “how” and “where” work is being performed across an organization’s network of marketing services agencies is extremely important. This involves an objective assessment of the current network of agency partners, their resource offerings, capabilities, performance, and the roles and responsibilities assigned to each.

Without periodic assessment, agency networks can become bloated beyond a marketing team’s ability to effectively manage these vital resources. This risk can be compounded in companies where marketing positions are vacant or have been eliminated as a result of a budget reduction decisions – leaving fewer client-side personnel to manage dispersed agency activities.

Reviewing and creating an inventory of roster agency capabilities and the roles assigned is never a bad thing when it comes to identifying unnecessary expenses or opportunities to consolidate resources and protect against redundancy. Amongst other benefits, since the work necessitates a review of each agency agreement and remuneration program tenets, output should include a comparison of agreement terms, conditions, requirements, and bill rates to ensure consistency (where applicable) and reasonableness of agency bill rates and other costs.

This practice is even more apt when marketing budgets are being cut and agency scopes of work reduced. Such assessments form the objective basis for eliminating duplicative activities and or resources, paring specialty agencies that are not being fully utilized, and eliminating unnecessary fees that are putting downward pressure on working dollars.

Consider; How many agencies do you have that are managing influencers? Involved with social media or content production? How many different agencies are being utilized for studio services or broadcast production? How many agency trading desks are being utilized for the placement of programmatic media? Are you utilizing specialist firms that may no longer be required based on changes to the marketing budget (e.g. event management)? It is highly likely that there are opportunities to consolidate work among fewer partners to simplify workflows, improve communications and reduce costs.

If you are utilizing a “lead” agency to coordinate activities, briefings, production and trafficking across your agency network, it may be worthwhile to solicit their input on potential agency roster moves. Further, once a plan is formulated, collaborating with the lead agency’s account team to affect transitions can be critical to the success of consolidations and the reshuffling of assignments. If you do not employ a lead agency model, the time may be right to consider this approach.

Streamlining external agency networks will improve communication between marketer and agency, enhance business alignment and instill clarity on success metrics. In the wake of current crisis driven budgetary adjustments and uncertainty, companies may want to give serious consideration to such an approach.

“Whatever the dangers of the action we take, the dangers of inaction are far, far greater.”

                                                                                                                   ~ Tony Blair

Optimizing Client Relationships: Collaborating Effectively with Procurement

30 Apr

procurementThe “Procurement Phenomenon” at the dawn of the new millennium has morphed squarely into the Procurement Era for Marketing and Communications Services. Agency executives can no longer ignore this new marketplace reality and must now embrace, educate, and in some instances, emulate this very influential Client stakeholder.

Join J. Francisco Escobar, President & Founder of JFE International Consultants for an engaging, complimentary webinar that will take you through the evolution, definition, current trends, and best practices that will guide you and your team in optimizing relationships with client procurement teamsClick Here

Brand Suitability vs. Brand Safety

29 Nov

Many Brands One Unqiue Best Brand Sphere Top ChoiceAmused, yes. Concerned, potentially. Shocked, no longer when it comes to the cavalier attitude exhibited by some in the digital media supply chain when it comes to an advertiser’s digital media investment.

That said, I have been intrigued by the nuanced manner in which agencies, ad tech providers and publishers now address the topic of brand safety. Interestingly, many in the digital media supply chain have begun to differentiate between “brand safety” and “brand suitability.” Ultimately, marketers will have to weigh in on whether or not there is a difference and why they should give any provider relief when it comes to protecting the brands that they steward.

Recently, Integral Ad Science (IAS) released the results from a research study which they conducted that suggests that while approximately one-half of those surveyed understood that there was a difference between these two perspectives, 27% of the digital media buyers surveyed were unaware of the difference. To be fair, as defined, the differences are subtle to be sure. One deals with controls to mitigate potential damage to a brand’s reputation and the other with targeting parameters such as viewability and content adjacency.

Candidly, it is fair for marketers to ask the obvious question, “Why isn’t content adjacency considered a risk to brand safety? Why the need to segregate this important variable from overall brand safety efforts?” It would seem that the industry should view any threat to the integrity of a brand as a brand safety issue. The cynic in me can’t help but believe that parsing this issue, creating a sub-category for brand suitability is simply a way to mask the industry’s inability to determine where an advertiser’s digital ads are served and to maneuver around the enhanced controls and stricter guidelines that marketers have attempted to enact to protect their brands.

It should come as no surprise that industry participants cannot agree on whether or not the 4A’s Advertising Protection Bureau (APB) guidelines issued in 2018 are adequate or too restrictive… assuming they were even aware of the guidelines to begin with. This also helps to explain why only 9% of the IAS survey participants indicated that they were “very” satisfied with the digital ad industry’s overall efforts when it came to brand safety. 

For a marketer, there is nothing more important than the sanctity of a brand, the relationship it enjoys with its customer base and the long-term value, which that represents to the organization. Any attempt to subjugate the topic of brand safety for the convenience of being able to scale a campaign, extend campaign reach or to enhance supply chain participant revenues, is simply not appropriate.

Questioning the efficacy of or the need for brand safety policies, whitelists, blacklists and or the money being invested by brand marketers to monitor ad placements and adherence to these guidelines comes across as extremely self-serving and contrary to the notion of brand safety. Brand safety should not be an either or proposition.

While progress has been made, the digital ad industry must be pressed by its advertising base to remain vigilant to protect the sanctity of their brands. When it comes to the philosophy of brand safety and the industry’s commitment to it, marketers cannot allow their supply chain partners to relax their standards on this front for any reason. The industry should never forget that it is the brand marketer that bears all of the risk when it comes to challenges to brand safety.

Time for a Financial Review?

26 Jul

knowledge and ignorance puzzle pieces signdreamstime_xs_53502419

Really?

No triple bid.

No staffing plan.

No reconciliation.

Fixed fee

100% advanced billings.

Slow job cost reconciliation.

Poor Agreement language.

Old Agreement.

No examples / templates.

No breakout of retainer vs. out-of-scope fees.

No agency reporting of costs / hours.

Programmatic supply chain not understood.

Use of in-house agency services, no rate sheet.

Use of in-house agency services, not reconciled.

Freelance billed at full retainer rate.

Interns billed at full retainer rate.

Credits held.

Low Full Time Equivalent basis.

High Rate per hour.  No fee detail.  Non arms-length use of affiliate.

Mark-up applied.

Float.  Kick-back.  Favored expensive suppliers.

Duplicate charges.

Time reported doesn’t match time system.

Overpayments.

Luxurious Travel.

Gifts.

That’s the short list.

Don’t let this happen to your critical marketing dollars.

Update and lock down financial terms in Agreement.

Tighten up definitions.

Enhance Agency reporting required.

Perform routine spot checks.

Follow the money to the ultimate end user.

Vet Agreement with ANA template.

Ask the Experts.

Maintain consistence of control and visibility across the Marketing supplier network.

Maintain trust but validate Agency financial activity.

Strengthen the Agency relationship through understanding and alignment.

Really.

 

Never a Wrong Time to Do the Right Thing

27 Sep

DoTheRightThingDoing right by others is certainly a core value and one that many of us subscribe to. For me personally, as a former ad agency account director, I have always been fond of the quote by Victor Hugo, the nineteenth-century French author: “Initiative is doing the right thing, without being told.

In the professional services business sector this credo was once considered “cost of entry.” Today, however, having one’s advertising agency and or intermediaries “do the right thing” isn’t a given and, in the current environment, very likely will come at a cost.

As an example, Forrester recently interviewed thirty-four media agency clients and found that “transparency” was a key priority for marketers. However, many of the media agencies that they spoke with indicated that they “are only transparent if clients require it in their contracts.” Nice to know.

Perhaps you’ve been following the trend among influencer marketing agencies and their vendors who are now charging clients incremental fees for conducting content reviews or brand-safety checks to safeguard advertisers’ placements. For years, influencers have been paid largely based upon the number of followers that they had. Sadly, many influencers had engaged in buying followers to boost their appeal to advertisers and, in turn, their revenue. Now that advertisers are savvy to this practice and are looking for assurances on the influencers utilized and the nature of their followers, influencer agencies want to incorporate an upcharge to advertisers.

What about those instances where trading desks and DSPs are now charging premiums to access content from exchanges that will ensure proper placement, safeguarding brands and minimizing the incidence of media fraud? Whoever said that it was okay to purchase high-risk, low return inventory to begin with?

Maybe you’ve experienced abnormal delays with regard to your ad agency partners closing and reconciling projects to actual costs or in receiving post-campaign media performance recaps. Or perhaps you were expecting your agency to competitively bid your production work, only to find out that they were relying on the same vendor(s) that they’ve always used (maybe even an agency affiliate). Or, you were of the belief that your media campaigns were being monitored and that audience delivery guarantees were being negotiated in-flight, only to find out that there was no such stewardship of your media investment.

What is going on? What happened to doing the right thing? When you query your agency partners they suggest that the Scope of Work (SOW) didn’t specifically call for those activities nor did the agency Staffing Plan allow for providing that support at the frequency or within the time frame that you had come to expect. This obviously begs the question, “When did the agency stop providing the level of service and oversight support that it once did?”

The message is clear, advertisers can take nothing for granted and certainly cannot assume that their agency, adtech, production and media vendors have their back. Simply stated, we are operating in an era when advertisers must incorporate legal terms and conditions, which provide the requisite safeguards and controls that govern the behavior and service levels that they expect, into their agency agreements in order to have each vendor in the advertising supply-chain do the right thing.

As importantly, having solid contract language and tightly written scopes of work in and of themselves does not guarantee that agents and intermediaries will fall in line and comply with advertiser expectations. Experience suggests that adherence will typically only be achieved through performance and accountability monitoring. As the old adage goes; “What is inspected is respected.”

Please note, that we are not suggesting that an advertisers shouldn’t pay for the level of coverage and service that they expect to receive. That said, advertisers can no longer take it for granted that certain service standards, which historically have been part and parcel of agency standard operating procedures and hadn’t been necessary to be called out in an agreement or an SOW, are still being followed. If a service provider drops or alters the nature of a service being provided, it should be incumbent to at least communicate those decisions to the advertiser and engage in discussions to ascertain if the changes are acceptable or negotiate additional fees to cover the desired level of support.

In the end, successfully aligning advertiser expectations and supply-chain member service delivery standards comes down to all parties committing to a policy of open, honest, two-way dialog to ensure that there are no surprises and to incent an environment of initiative taking.

 

 

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