By Greg Paull, Co-founder and Principal, R3
It had to happen. The industry consultant that helps marketers on Agency fees is going to complain about agency fees. The industry is mired now in complicated process, adding cost, time and complexity and making it more difficult for marketers and agencies to build profitable relationships.
What sorry road did we all walk down to get to this?
Well, for perspective, we need to re-wind twenty years to full-service agencies and 15% commission. In those days, any dollar a marketer spent outside the agency was a lost dollar. So agencies were very focused on TV campaigns (the easiest way to generate the maximum income for minimum time) and big brand ideas.
Then, with the advent of fees and integration, agencies had but one product to sell – time. And we thought this was an ideas business. As a time-based business, the agency became the natural enemy of time – the longer things took, the more they got paid. “I wish we could do the work in 500 hours, but it takes 1,000 hours” was the pre-recorded mantra of the fee-based relationship.
Now time is warped.
Time is one thing that we feel we have too much and too little of. With limited ability to travel and commune, the day stretches ahead (at peak lockdown you could practically feel the minutes go by) yet processes have sped up (campaigns being conceptualised and produced in a week!).
Being in the ideas business, marketers and agencies are both going to have to acknowledge that some changes need to be made.
Here are what some are doing:
Track process and incentivise efficiency. You can’t improve what you don’t measure. You have to track rounds of revisions, time wasted at different stages, time lost because of inefficiency. You have to create a new working dynamic to drive greater innovation, integration and efficiency.
Change the agency fee model. How do you set up powerful incentives for their agencies based on results? Do you pay your agencies on sales results, not on scope? Ever thought of experimenting with royalty-based models, where the agencies are paid more based on good ideas versus bad ones? Look for fresh ways forward.
Change your marketing team’s behaviour. Marketers must change their processes or continue to labour with longer development processes, shorter agency relationships, less knowledge sharing and more cost. One of the KPI’s of the marketing team needs to have a process efficiency metric built in.
Test . Learn. Deploy. The best marketers are sharing best practice now across boundaries and product groups. Coca-Cola, Unilever and P&G award the best marketing thinking. Others tap into Effectiveness Awards such as the Effie’s and others.
Pure time-based compensation of agencies is the enemy of efficiency. The experience of work has changed for everyone. The best marketers have declared war on this and are on the way to new victories and partnerships.
Greg Paull is principal and co-founder of R3, a global independent consultancy focused on driving transformation for marketers and their agencies. www.rthree.com