Copyright © 2017 Darren Woolley

ISBN: 978-1-925681-29-1 (eBook)

Published by Vivid Publishing
P.O. Box 948, Fremantle Western Australia 6959
www.vividpublishing.com.au

eBook conversion and distribution by Fontaine Publishing Group, Australia
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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright owner: TrinityP3 Pty Ltd 702 / 53 Walker Street North Sydney, NSW, Australia, 2060 www.trinityp3.com

Subjects include: marketing management, strategic management, marketing and advertising, digital marketing, marketing strategy

What the world is saying about the Top 50 Marketing Management Posts:

 

The thought-provoking insights from Darren and the team at TrinityP3 always give me reason to consider alternative approaches to marketing procurement and agency management. In a world full of competing theories, their input stands out for those who want to make their marketing more effective, while incentivising agency partners to go the extra mile to cut through cluttered consumer marketplaces to make challenger brands famous.

Killian O’Sullivan, Chief Executive Officer, The London Distillery Company

Darren’s insatiable interest in the mechanics of the industry has resulted in a coming together of a remarkable amount of knowledge on how stuff works, or in many cases, how stuff doesn’t work.

Mark Holden, Worldwide Strategy and Planning Director, PHD Media

Darren has his finger on the pulse of the industry and is a ‘go to’ source to get to the real questions that matter. Separating the facts and realities from the smoke and mirrors that abound in this industry is Darren’s key strength.

John Broome, Chief Executive Officer, Australian Association of National Advertisers

Darren brings real insight and great clarity to complex marketing challenges. He has a real empathy for the issues facing clients and agencies and a deep knowledge of brand and technology. The Top 50 Marketing Management Posts are a reflection of this thinking, providing concise, relevant and challenging views on a discipline which is moving rapidly.

Julian Dunne, Head of Marketing and Insights, Australian Football League

As an industry, marketing is too easily attracted to the latest buzz. Yes, we need to challenge the status quo, but we need to do so via careful thought, using evidence and insight. For that reason, Darren is an essential voice of reason amidst the industry hype that marketers should listen to regularly.

Lindsay Mouat, Chief Executive Officer, Association of New Zealand Advertisers Inc.

The authors

Michael Farmer1 is the Executive Chairman of TrinityP3 USA and author of Madison Avenue Manslaughter: an Inside View of Fee-cutting Clients, Profit-hungry Owners and Declining Ad Agencies, which won the Axiom Gold Business Book Award for the best marketing/advertising book of 2016. He currently serves as Adjunct Associate Professor of Branding and Integrated Communications at The City College of New York (CCNY) and is at work on a new book about the challenges facing chief marketing officers.

David Angell2 is the General Manager of the fast-growing Melbourne market, and the national Head of Media at TrinityP3. In these roles, David brings his media-specific, broader commercial and relationship expertise to bear on a diverse range of projects, with one core objective – achieving beneficial results for our clients. David has been a media agency practitioner for 15 years, holding several senior positions in the UK and Australia. During this time he has worked with a number of blue-chip organisations.

Darren Woolley3 is the founder and Global CEO of TrinityP34. With his background as an analytical scientist and creative problem-solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought-leader on all aspects of marketing management. Darren is a negotiator, author and founding member of the Marketing FIRST Forum5. He is also a past Chair of the Australian Marketing Institute6, an ex-medical scientist and an ex-creative director. And in his spare time, he sleeps.

Anton Buchner7 is a Senior Consultant with TrinityP3. He is one of Australia’s leading customer engagement consultants, with an eye for discovering greater marketing value and a love of listening to what customers are really saying about a brand. Anton has helped take local and global businesses to the next level, including Microsoft, Nestlé, P&G, Gloria Jean’s, Foxtel and American Express, among others. Anton is an innovative lateral thinker with a passion for refocusing business teams and strategies, creating visionary data-driven communication plans, and making sense of a more complex digital marketing environment.

Kylie Ridler-Dutton8 is a discipline neutral specialist with consulting and implementation experience spanning retail, alcohol, utilities and telecommunications, to name a few areas. Over the past 18 years, Kylie has worked in various agencies in both Melbourne and Sydney as a Client Services Director, managing the development and implementation of a wide range of global brands.

Erik Ingvoldstad9 is one of a new breed of management consultants who sees the full picture, from business strategy to creative execution and innovation. His leadership experience from working on global brands, in regional roles and in local markets across many continents, provides him with the know-how, the drive and the courage to lead through disruption and innovation, leveraging culture and technology to create new business opportunities. He runs Acoustic10, an independent digital transformation and innovation consultancy in Singapore.

Lyndon Brill11 has worked at the highest level of the advertising industry for over 10 years, with major global finance roles at Publicis Dialog and Allied Domecq before returning to Australia as CFO at Lowe Sydney. Lyndon joined TrinityP3 in 2013 and is ideally suited and experienced to assist clients in managing various services including agency remuneration and benchmarking, contract review and negotiation, and overall strategic agency roster alignment.

Christopher Sewell12 is a TrinityP3 Business Director with wide-ranging knowledge of all areas of the advertising and procurement world. He specialises in helping companies understand the environmental impact of their marketing spend. Chris is also the CEO of The Gaia Partnership13, which is building the online ‘CO2counter’ application to measure carbon emissions in all forms of marketing communications.

‘The Buyer’ is an anonymous former senior manager in the procurement profession who offers an occasional perspective to the world from a procurement-driven point of view. Formerly, The Buyer posted weekly blogs on the premier news site for the procurement profession throughout Australasia: PP Online. Over 400 postings of The Buyer’s Blog are still listed online, covering all sorts of procurement-related topics.

Bill Merrick14 has more than 20 years’ experience in international business, gained in marketing, advertising and PR – from packaged goods to infrastructure. His role has been that of a business and communications leader and strategist. Having successfully operated in markets all over the globe, he is now, from London, partnering with Darren Woolley to launch TrinityP3 UK, to bring their combined experience and insights to clients in Europe.

Mike Morgan15 is a founder and Director of High Profile Enterprises16, an agency which specialises in improving business performance online using a range of search engine optimisation, content marketing and social media strategies. High Profile Enterprises was the first New Zealand agency to appear on the Content Marketing Institute’s (US) Content Marketing Agency list. Mike has been included on lists of the ‘Top 100 most followed SEO experts on Twitter’ and ‘41 rising stars in SEO you should follow’.

 

Footnotes

CONTENTS

Introduction

1Ignorance of pricing is ruining ad agencies

2Eight ‘less obvious’ reasons why agencies lose pitches

3Managing Marketing – the challenges facing the advertising agency business model

4The most important quality in client–agency relationships (and no, it’s not trust)

5How much time do you waste in meetings per week?

6Communicating with consumers in the technology-driven environment

7Advertisers with performance problems turn to management consultants

8Why working and non-working spend analysis does not work anymore

9Has the future of the media agency just been shown to us?

10 The problem with digital transformation

11 Agency remuneration – a loser’s game

12 Is there any difference between an agency and a marketing supplier?

13 Managing Marketing – the challenges of marketing and advertising in the financial services category

14 Why are you still paying production mark-ups to your agency?

15 What are the biggest challenges facing marketing today?

16 Losing pitches, part 2 – a further seven ‘less obvious’ reasons why agencies lose pitches

17 Organisational mishmash – the ad agency’s unaccountable structure

18 What is the best agency remuneration model for every advertiser?

19 The negative impact of overworked agency staff on agency remuneration

20 The secret to transitioning from print to digital media

21 How to define an agency scope of work to deliver increased value

22 How procurement is becoming customer-focused

23 If collaboration is causing you pain, here are five ways you are doing it wrong

24 Managing Marketing – the increasing role of science in marketing and advertising

25 A new approach to segmenting marketing and advertising agencies and suppliers

26 Why the difference between political and government advertising matters

27 What are we to make of the holding companies in 2017?

28 Which comes first, the media plan or the creative?

29 What is going on with advertising creative awards?

30 12 reasons why brainstorming does not work

31 Managing Marketing – dealing with the rapidly increasing complexity of the media market

32 Why cost benchmarking is the waterboarding of the advertising industry

33 The importance of financial analysis in determining marketing priorities

34 How many brief types does an advertiser need to brief their agency?

35 Who should really be paying for advertising agency pitches?

36 The 10 most common traps for marketing directors

37 An email of support from an equally concerned member of the media industry

38 Drowning in market deliverables

39 Heaven and Hell in advertising

40 Managing Marketing – the expanding role of the media agency in marketing

41 A prototype model for the marketing communications process

42 Managing Marketing – public sector marketing and the impact of digital

43 Agencies struggle with declining prices

44 Managing Marketing – the changing economics of the advertising agency business

45 The important differences between collaboration, relationship and performance benchmarking

46 The importance of relationship management from day one of a new agency appointment

47 Managing Marketing – the importance of social media making the CEO the public face of business

48 The transition from one agency to the next is becoming more complex

49 Seven essential considerations when moving from agency retainer to project fees

50 How TrinityP3 achieved 200,000 website visitors (and how you can too)

Next steps

Introduction

TrinityP3 has recently gone through some major development and growth. In the past 18 months we have established an office in London in a joint venture with industry veteran Bill Merrick, and then more recently in New York with Michael Farmer, award-winning author of Madison Avenue Manslaughter: an Inside View of Fee-cutting Clients, Profit-hungry Owners and Declining Ad Agencies.

But the growth has not just seen TrinityP3 expand globally. The consulting business and our offerings have also developed and matured, with projects now more focused on strategy management consulting, including restructuring the marketing function across a range of client categories.

With Michael and Bill joining TrinityP3 came an opportunity to pause and reflect on how the company has developed in recent times, including the realisation that by responding to the needs of our clients we have initiated new and innovative solutions to many of the major challenges facing these clients today. We call these solutions the big six and here they are, in no particular order:

1. improving marketing performance, and especially driving growth at a time when many businesses are struggling to deliver top-line growth

2. assisting in the digital transformation of marketing through technology that allows organisations to become customer-centric at scale

3. improving media transparency and maximising media value and investment performance in the face of a murky media supply chain

4. optimising the performance of marketing agencies and suppliers to eliminate waste and duplication and deliver improved results

5. becoming more agile and nimble in marketing implementation and being more responsive more quickly to the market and customers

6. reducing waste and delivering environmentally sustainable marketing solutions against the United Nations’ sustainability initiatives.

This has brought a renewed focus to our clients in ensuring we deliver the maximum results in addressing their most pressing marketing challenges.

In analysing the blog post results for 2017, it was great to see both of my joint-venture partners, Michael Farmer in the USA and Bill Merrick in the UK, represented in this year’s book – particularly Michael, who had nine articles make it into the top 50 this year.

Also gratifying is the number of posts in the top 50 written by the TrinityP3 consultants David Angell, Anton Buchner, Kylie Ridler-Dutton, Lyndon Brill and Christopher Sewell.

This 2017 edition also includes contributions from guests Erik Ingvoldstad, CEO of Acoustic; the anonymous ‘The Buyer’; and Mike Morgan, Director of High Profile Enterprises.

Of course, without Mike and his team at High Profile Enterprises, who manage our SEO, social media and content, this would be a much smaller publication read by a much smaller audience.

I also want to acknowledge all of those people – marketers, advertisers, procurement professionals and agency personnel – who took the time to provide feedback on our first four books of Top 50 Marketing Management Posts.

Looking back across the collection, this book is definitely becoming a compendium of the top issues and topics that have caught our attention in the past 12 months, and those that have prompted interest and engagement from you – the marketing, advertising, media and procurement professionals around the globe.

Today, the TrinityP3 blog has more than 1200 posts covering a wide range of marketing management topics and is read by more than 200,000 people each year, a number that continues to grow. We are grateful to everyone who participates and engages in the conversation, either by commenting on our posts or sharing our content with their colleagues and friends.

Again, when we reviewed the blog posts with the highest readership during 2017 to prepare this new edition, we were pleasantly surprised to find that 83 posts had been published in the four previous editions – 2013, 2014, 2015 and 2016 – and continue to enjoy huge popularity. These evergreen articles are listed on the following pages so that if there is a post you are interested in, you can either read it in one of the books, which are available from most online bookstores, or on the TrinityP3 blog.

Thank you again to Paul Smitz for editing and proofing to make us all seem a little more coherent and intelligent. Thank you to Lyndell Correll for the layout, finished art and design to make it all look great, and Christopher Sewell for the production management to make it all happen with a minimum of fuss. Thank you also to our printer, 17print.

And a big thank you to our ever-expanding group of clients at TrinityP3, especially those who have continued to work with us over the years. It is through your engagement and support that we are able to develop and provide greater insights and share the trends, to help in some small way to improve the advertising, media, digital, data and marketing process for all.

Thank you also to all of our readers and commentators, and those who share our content with others.

This is the best of our 17th year. We look forward to writing and sharing more with you in the coming year.

Thank you.

Darren Woolley, founder and CEO
TrinityP3 Marketing Management Consultants

 

Evergreen marketing management posts of 2013

1. How many billable hours are there in a year? – Darren Woolley, 22 March 2007

2. Of the three types of collaboration, which type do you need? – Shawn Callahan, 5 October 2012

3. Defining the scope of advertising agency services to determine agency compensation – Darren Woolley, 7 September 2011

4. 12 innovative media options you may not see proposed by your media agency – Darren Woolley, 18 June 2012

5. How to build effective marketing workshops – Andrew Armour, 8 February 2013

6. A step-by-step approach to calculating ad agency resource rates and head-hour costs – Darren Woolley, 22 October 2012

7. Two different ways to assess and evaluate agency performance – Darren Woolley, 1 February 2013

8. Some of the differences between traditional and digital media planning and buying – Darren Woolley, 1 June 2012

9. What is included in your advertising agency overhead cost and what is not? – Esther Selvanayagam, 31 August 2012

10. The importance of chemistry meetings in the advertising agency selection process – Darren Woolley, 7 December 2011

11. The importance of overhead in agency compensation – Darren Woolley, 14 July 2011

12. How to calculate your agency head-hour rates – Darren Woolley, 13 April 2011

13. Media negotiations and media buying benchmarking – Darren Woolley, 9 December 2011

14. Replacing ‘above the line’ (ATL) and ‘below the line’ (BTL) with content and channel – Darren Woolley, 1 July 2010

15. When should an advertiser pay pitch fees when selecting a new advertising agency? – Darren Woolley, 9 January 2012

16. Do you want a digital agency or a technology partner? – Darren Woolley, 22 February 2013

17. Nine kinds of agency pitch process and counting – Nathan Hodges, 29 July 2013

18. How the scientific method can be used to ‘test and learn’ marketing strategy – Darren Woolley, 16 December 2011

19. Three ways to make sure that social media expert is really an expert – Darren Woolley, 7 December 2012

20. Why in-house advertising services work … and why they don’t – Darren Woolley, 25 February 2013

21. The world’s worst advertising agency scope of work defined by a marketer – Darren Woolley, 14 May 2012

 

Evergreen marketing management posts of 2014

1. Top-down or bottom-up budgeting: Which approach is best? – Darren Woolley, 21 February 2014

2. The role of marketing procurement: a procurement leader perspective – Darren Woolley, 13 June 2012

3. The important differences between scope of work and schedule of work – Darren Woolley, 4 December 2013

4. Five top trends for call centres and the pricing model dilemma – Anton Buchner, 18 September 2013

5. Five brands that have successfully reinvented themselves in the digital age – Anton Buchner, 24 February 2014

6. 10 ways marketing and procurement can work together for better results – David Little, 17 March 2014

7. Why service-level agreements (SLAs) are not relevant to marketing services contracts – Darren Woolley, 24 August 2008

8. How many KPIs are optimal to drive agency performance? – Darren Woolley, 2 September 2013

9. 10 sponsorship principles that procurement must consider – David Little, 17 February 2014

10. How to avoid the 10 classic strategic decision-making traps – The Buyer, 12 February 2014

11. 10 brands that have successfully reinvented themselves – Stephan Argent, 6 November 2013

12. Six things every marketer should know about great pitch consulting – Anita Zanesco, 9 September 2013

13. The important differences between scope of work and schedule of work – Darren Woolley, 4 December 2013

14. Top 10 considerations when selecting a new media agency – Darren Woolley, 23 November 2011

15. A simple way to check your advertising agency fees – Darren Woolley, 16 April 2014

16. Five ways agency account management can become indispensable again – Anita Zanesco, 30 September 2013

17. 10 things procurement needs to know about digital marketing – David Little, 7 February 2014

18. Defining the changing role of the advertising agency – Stephan Argent, 31 May 2013

19. The hidden flaws in agency timesheets and retainers – Darren Woolley, 23 May 2014

20. Did you want collaboration, cooperation or coordination with that marketing process? – Darren Woolley, 27 August 2012

21. How procurement grades marketing expenditure strategically – The Buyer, 25 October 2013

22. Who does your media agency really work for? – Stephen Wright, 18 October 2013

 

Evergreen marketing management posts of 2015

1. What’s the role of today’s advertising agency? – Stephan Argent, 24 April 2015

2. How to provide fact-based feedback to unsuccessful agencies in a pitch – Darren Woolley, 15 April 2013

3. Measuring the 4Cs in selecting agencies and managing agency relationships – Darren Woolley, 14 October 2013

4. Top 10 ways to avoid trouble when using music in advertising – Darren Woolley, 7 November 2011

5. How do you manage a successful transition to a new agency? – Darren Woolley, 5 November 2014

6. The difference between paying consultants on percentage of savings and success fees – Darren Woolley, 25 February 2009

7. Agency websites: Who’s your target audience? – Stephan Argent, 4 January 2013

8. Why advertising agencies can no longer ignore conflicts of interest – Darren Woolley, 1 September 2014

9. Reasons why performance-based remuneration or payment by results often fail – Darren Woolley, 4 September 2010

10. The best producer model for TV advertising production – Clive Duncan, 5 July 2013

11. 10 tips that are the answer to a winning pitch chemistry meeting – Anita Zanesco, 21 May 2014

12. How fees are calculated for agency compensation – Darren Woolley, 16 August 2011

13. Marketers should set production budgets or pay the consequences – Clive Duncan, 24 May 2013

14. Challenging the payment terms for television commercial production services – Clive Duncan, 22 June 2012

15. Trading desks, demand-side platforms and programmatic buying explained – Darren Woolley, 8 September 2014

16. What type of marketing management consulting do you need? – Darren Woolley, 23 December 2013

17. Top 10 questions to ask a strategic marketing consultant before you engage them – Darren Woolley, 21 November 2011

18. How neuromarketing provides richer insights into the customer journey – Beate Duesterwald, 25 May 2015

19. Things to consider when selecting a new advertising agency – Darren Woolley, 13 February 2012

 

Evergreen marketing management posts of 2016

1. Client–agency relationships in advertising: four problems that cause breakdowns – Zena Churchill, 3 February 2016

2. The latest trends in agency remuneration – Darren Woolley, 4 January 2016

3. Three more brands that have successfully reinvented themselves in the digital age – Anton Buchner, 18 April 2016

4. Five common business email mistakes that will derail your relationships – Anita Zanesco, 9 December 2013

5. How digital marketing fits into the marketing mix – Anton Buchner, 14 November 2014

6. 10 programmatic questions to ask your prospective media agency – Stephan Argent, 30 September 2015

7. What is included in the overhead when calculating the agency retainer? – Darren Woolley, 31 March 2010

8. Are your agencies agents or independent contractors? – Darren Woolley, 9 September 2015

9. Strategic ways to use media added value – Darren Woolley, 22 February 2011

10. 10 essential principles of agency remuneration – Stephan Argent, 22 July 2013

11. The role of procurement in marketing from a brand marketer’s perspective – Darren Woolley, 20 June 2012

12. How the best of the best approach digital marketing – Anton Buchner, 19 November 2014

13. Defining value-based agency compensation – Darren Woolley, 5 October 2011

14. Risk vs reward in value and performance-based agency compensation – Darren Woolley, 25 November 2013

15. Four thoughts on advertiser–agency relationships: Colgate-Palmolive and GPY&R – Darren Woolley, 21 January 2015

16. 25 client and agency personality types that will influence relationships – Darren Woolley, 18 January 2016

17. Top 10 ways to ensure transparency and accountability in all your print productions – Darren Woolley, 28 November 2011

18. Top five client accounting demands that make agencies feel unvalued – Nick Hand, 12 December 2012

19. The five universal principles of successful pitch management – Nathan Hodges, 17 July 2013

20. Client–agency relationships: confessions of an ex-client – Bruno Gralpois, 22 June 2016

21. The importance of business ethics: Goodbye to corporate greed? – Jeremy Richman, 6 November 2015

POST 1

Ignorance of pricing is ruining ad agencies

Posted 28 June 2017 by Michael Farmer

All companies sell products or services at a price, and managing price is a major responsibility of top management. Car companies sell cars, and sticker prices are marked on side windows. Coca-Cola sells concentrate to its bottlers, setting price per gallon to match market circumstances. Pizza Hut sells pizzas in restaurants, and pizza prices are marked on the menus. Bain sells consulting studies to corporations and prices them by study length and complexity.

Agencies, though, are confused about what they sell and how to price it. Their ignorance of pricing is ruining agency operations and destroying agency value for clients, employees and holding company owners. The advertising industry is the only industry in the world without a concept of pricing.

Let’s keep it simple. Creative agencies do not sell Big Ideas, creativity, Cannes award wins or brand-building any more than General Motors sells transportation, Apple sells communications or Bain sells analytics. Creative agencies sell ads, or more broadly, content in the form of deliverables.

Bundled with the deliverables are strategic insights, of course, just as iPhones are bundled with high-value functionality. Agencies are in the deliverables business. The business is expected to deliver results, and prices should be high enough to reflect anticipated results. Price is income divided by deliverables – price per deliverable (with deliverables normalised by size) is the relevant pricing metric.

Research for my book Madison Avenue Manslaughter1 showed that deliverables have been growing and fees have been falling for decades. Consequently, price has fallen dramatically, and there is nothing in management’s toolbox to manage or stop it.

Price (in constant dollars) is now 70% below what it was in 1992. Since 2004, which was the last year that price and deliverables were in balance, price has fallen by 42% and has been below the level required for appropriate agency staffing. Falling prices stretch agency resources, reduce quality, create client dissatisfaction and limit holding company growth.

Agency CEOs are on the hook for this adverse performance. They’ve responded, wrongly, by focusing on cost reductions, downsizing since 2004 and cutting out creative, analytical and senior muscle, instead of seeking better and more logical prices for their growing deliverable workloads. Worse, they blame procurement for their predicament.

 

Agencies confuse ‘how they are paid’ with ‘what they are selling’. Just because agency costs are the basis for calculating fees does not mean that agencies are selling costs or that clients are buying man hours.

A hot-dog seller in Yankee Stadium could calculate prices on daily attendance: $2 on ‘low-capacity days’ (below 30,000 fans), $3 on ‘average-capacity days’ (30,000–35,000 fans) and $4 on ‘high-capacity days’ (above 35,000 fans), just like the airlines. The vendor is still selling hot dogs, whatever the price, not the day’s attendance level. Get ’em while they’re hot!

Agencies act as if they have no control over income. They’ve abdicated pricing to their clients, who determine what the agency costs are (through benchmarking), what the fee levels will be (through ZBB, or zero-based budgeting) and what the scopes of work will involve (more work than last year).

Agencies do not systematically use scope-of-work deliverables to establish their prices and calculate their fees, even though deliverables are the foundation of what they sell. Deliverables are not documented, tracked or negotiated in a consistent way. This is crazy because deliverables are growing, and remuneration based on deliverables could grow rather than decline.

There is a gap between how much agencies are being paid and how much work they are doing. How big is the gap? It is now about 24%, I estimate. This gap could be viewed as ‘unrealised income’ for agencies and their holding company owners, or as 24% too much work, with agency staff stretched to carry it out.

If half of this surplus work is unnecessary for the brands and can be cut out, then the agency fee gap is 12% or so – still a considerable amount. The fee gap represents ‘agency underperformance’ from an income and profitability standpoint.

Agencies are not realising all the income that they could.

Agencies need to take control of pricing. First, they need to acknowledge that they have a price problem, not a cost problem. (Since they do not measure their deliverables or work, though, they cannot measure price, so this is a separate problem that needs to be solved.)

Second, they need to recognise that future pricing must be handled on a per-deliverable basis.

Third, they need to ensure that the work they plan and carry out adds value, enhancing client brand growth and profitability. Otherwise, their efforts to improve pricing will fail, since they will remain in a commodity business, competing against other commodity-like agencies.

Agency CEOs need to take control of pricing as their most important strategic priority. What could be more critical to the long-term success of their clients, their employees and their owners?

 

Footnotes

POST 2

Eight ‘less obvious’ reasons why agencies lose pitches

Posted 26 May 2017 by David Angell

Pitches can be capricious. The blend of human intuition, rhetoric, substance and circumstance can make even the best agency lose over the course of a pitch process. No-one says that it’s perfect. But there’s a world of difference between a well-run pitch process and a bad one.

Some mistakes are clichés … some are not. There are some pitch mistakes, made by agencies, which are obvious although often repeated (chest-thumping attitude, not listening, not bringing the right people, banging on about oneself, profound gender skews in meeting rooms etc.). But there are others that may go unnoticed by many.

The agencies who have pitched and lost on projects I’ve run with my team at TrinityP3 may be familiar with some of what follows, as I tend to try and provide as much feedback as I can – something more insightful than the blasé, meaningless platitude of ‘You were a close second’ and that may even be used by said agency at a later date. We want you to succeed, not fail.

My approach is this: I want every fundamentally decent agency I work with in a pitch project to eventually get a win ‘with TrinityP3’ (this excludes arseholes, which I think is fair enough). I want all agencies to be in a position to put their best foot forward at every step. The best problem for me in a pitch is having a group of finalists who are all so good that the client has trouble choosing between them.

In that spirit, I am happy to share these experience-based thoughts with you – eight not-so-obvious mistakes that agencies often make in pitches. Have a read and see what you think.

1. The MD or CEO does too much talking

Few things are more off-putting to clients than an overbearing CEO. Finding the right balance of style and amount of contribution can be hard, but it’s necessary. To a client, an overbearing CEO can demonstrate anything from rhetoric over substance or an autocratic culture, to a lack of confidence in his or her own team.

2. The balance between the demonstration of core requirements and other services is skewed

Media agencies have developed creative capability. Advertising agencies now do data and media. The client gets that. But it is becoming more common for agencies to talk up or build their diversified services in a pitch response, to the point where it becomes confusing, irritating, or – worst of all – generates suspicion in the client’s mind that if this agency is appointed, it will be off on a land grab from day one.

3. The GAD or business director is not given enough of a role

It is easy, in the excitement surrounding strategy, creative, implementation and execution, to neglect the input and role of the business lead. It is very common for this to happen. Make no mistake: the GAD (group account director) or business director, as the central pivot and glue that holds things together, is a critical person for almost all clients to get a proper feel for through a process. He or she must be given a role that demonstrates the generally T-shaped skills required in this role.

4. The agency promise, positioning or vision sets itself up for failure

If the positioning of the agency or the stated promise at the start of a pitch process is too grand, the agency gives itself a very limited chance of being able to demonstrate true delivery of such a promise in a pitch scenario, via strategy, creative or implementation. Be careful of rhetoric that does not translate to substance.

5. The quantity of produced work is too great

Many agencies ask me, at the pointy end of a pitch process, about how much they should deliver in a presentation – how many concepts, how many articulations, or similar. My answer invariably is: do what you feel is right, prioritise your best idea, and know that I won’t be marking you down or up based on the number of concepts you provide.

I’ve seen agencies completely undo themselves by presenting too much. The client can see the effort and passion, but they are so buried under an avalanche of slides or boards that the wood and the trees become completely interchangeable.

6. The agency asks lots of questions but does nothing with the answers

We generally run a Q&A between the agency and client, in-between receipt of the brief and the workshop or presentation day. This is in recognition of the fact that a real-life process would include such sessions. It’s also an opportunity for an agency working from a base of zero to get a bit more face time.

A common mistake here is for agencies to ask lots of clever questions, the answers to which don’t then see the light of day in the actual solution. To the client, this just talks to an agency trying too hard to be clever, without the follow-through. It is also irritating because (as some agency people tend to forget) the client is having to produce responses, data and documentation for three sets of questions, not just theirs. Again, you’re not marked down if you ask fewer questions. Just ask good ones that translate into solutions.

7. The agency goes the extra mile but without properly checking the terrain

If you run on unfamiliar terrain without properly looking down, you’ll likely trip up. Some agencies can be prone to answering a pitch brief and then extending their answer into unrequired or unasked-for areas, common ones being customer journey mapping or CRM (customer relationship management) strategies.

The agency wants to demonstrate their breadth of thinking, capability and passion. But without a brief or a clear understanding of the client at that point, what gets presented can become meaningless or simply off-beam and unexecutable in client-land.

8. The agency undersells itself financially

This last one is obviously contentious. I can only speak for myself, and for TrinityP3. When we consider agency fee submissions and present back our assessment to our clients, we do so in the context of two things. One: Does it represent fair value in the market? Two: Is it mutually sustainable and beneficial?

I’m proud to say that never, in all the pitches I’ve run, has the cheapest agency been chosen on the basis of cheapness. In many cases, the more expensive option on paper becomes the winner. Price is important, sure, and I’m not suggesting that you inflate your numbers. But it is a component of value, not the other way around.

In fact, if we see a proposal that appears unsustainable for whatever reason, we will flag it as a bad thing, not a good thing. Price yourselves with confidence and fairness. If the consultant and/or client is switched on, they will recognise the right balance.

POST 3

Managing Marketing – the challenges facing the advertising agency business model

Posted 21 April 2017 by Darren Woolley

Managing Marketing is a podcast hosted by TrinityP3 founder and global CEO Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on issues, insights and opportunities in the marketing management category – ideal for marketers, advertisers, and media and commercial communications professionals. Follow Managing Marketing on SoundCloud1.

Andrew Reeves2 is the founder and CEO of ARC Limited3 and has a lifetime of experience as an agency CFO. Here he chats with Darren about current agency remuneration and business models, and the challenges facing agencies in finding ways to make this work in rewarding agencies for the value they create.

 

Podcast transcript

Darren:

Welcome to Managing Marketing. Today we’re coming from downtown Shoreditch in London where I’m spending some time with Andrew Reeves, who is the founder and CEO of ARC Consulting. Andrew’s a long-time agency CFO and CEO. Welcome, Andrew.

Andrew:

Thank you very much, Darren. It’s a pleasure to be here.

Darren:

It’s interesting being here in what feels like the new hub of London creativity: Shoreditch.

Andrew:

Yeah, it used to be Soho and I think in the last five years it moved spectacularly towards Shoreditch, which is where all the best gigs are from an advertising perspective these days.

Darren:

Well, probably also because of the real estate cost, isn’t it? Soho became quite expensive.

Andrew:

Yeah, it certainly did. I think Shoreditch, at one stage, was one of the cheapest parts in town. But as soon as the marketing folk moved in here they did it all up to suit the market and it’s gone literally through the roof, from about £34 per square foot to £60 in the last year.

The role of finance in the creative industries

Darren:

Look, the reason I bring that up is because one of the things I want to discuss today is the role of finance in accounting in the creative industries, because it’s one of those areas that people have really quite diverse views on.

Andrew:

Absolutely. I’ve been in the industry for about 20 years now and it’s funny because even working for some of the big brands like WPP, which is headed by some of the most astute financial people in the industry, finance and operations always seems to come way down the chain in terms of priorities for owner-managed creative businesses.

Darren:

That’s one of the issues, isn’t it. Where does the balance get struck between running a sound business and investing in things like creativity? If you listen to some people, it’s impossible to manage the creative process. But they’re still businesses, aren’t they?

Andrew:

It’s funny the amount of times that I’ve gone into agencies and they talk about it being a creative business, but the business element of it is the weaker part. As an industry we pride ourselves on the creativity, but we’re not very good at the business side. And I think that comes from both how we look at our clients’ businesses, which is why we’re in business in the first place, and the input that we have and the impact that we have on their top line and bottom line, as well as how we run our own businesses. I just don’t think we’re particularly astute at it.

Our preference is always the creative side, which is building something and developing something for the sake of it, to a large extent, as opposed to the impact in terms of making hard bottom-line cash.

Darren:

Part of this is also because the agency business itself has changed a lot in the last 20 or 30 years. I mean, you’d have to be the biggest idiot in the world not to be able to make a profit on the old media commission’s service fees, wouldn’t you?

Andrew:

Yeah, I think that’s a really good observation and starting point. I think that’s what happened throughout the years. There was so much money awash back in the day that we took our eye off the ball in terms of how we managed that and looked after it and how we grew it – as we moved from the commission system, where the industry was making 25%, 30% more easily and still having a nice lunch on the back of it, to a system where that level of profitability and how we manage it have changed.

Darren:

Well, talking to Michael Farmer, he says that even back in those days, although the businesses were incredibly profitable, there were incredibly lazy businesspeople. You talked about a 25%, 30% margin. He was saying that in some cases the actual profits were tiny because they weren’t managing the cost of the business, because it just seemed like this flood of money coming in from media commissions.

Andrew:

Yeah, I think back then the flood of money obviously trained the businesses to become lazy and that certainly was an issue at the time. There was always enough money despite how relaxed they were about controlling the costs. Effectively they didn’t.

What happened after that is we developed a new model, which was the resource-based model, which made it probably even easier because effectively the money came in as long as you had the people in business. I can’t think of a better business model. If you bring in people and you sell them with a profit, then the more people you bring in, the more money you can make. So it was a very safe period then.

The limitations of, and problems with, the cost-recovery
agency model

Darren:

But it’s a cost-recovery model, isn’t it? Basically, you have a base cost and you have the overheads and then everything on the top of that should be profit, right?

Andrew:

Right. And that was the labour-based pricing model at that time.

Darren:

But isn’t that also lazy? How many other businesses, and especially other professional services businesses, would work on a 2.4 or a 2.5 multiple on cost? And even in the earliest days of moving from commission to resource fees, those were the sorts of multiples. Law and accounting firms, still, some of them are working on four or five times.

Andrew:

Yeah, it’s an incredibly easy model for being able to make money. You’ve just got to make sure that you’re able to provide the right level of people at the right time and you’re guaranteed cost recovery and a profit margin.

Darren:

But the other thing about this market, the advertising category, isn’t it oversupplied?

Andrew:

I think coming from the resource-based model, you think about the dynamics of an advertising agency, you think about the pricing model in the first place, but you also think about the set-up of an advertising agency. I don’t think it ever did take much to set up an advertising agency: you needed an office to work out of, you needed a telephone to contact your people, and that was just about it. You needed the right people around you and so the barriers to entry were very very low.

Darren:

Almost any idiot could set up an advertising agency … and they do.

Andrew:

Absolutely. And that obviously spurred an entire industry of independent hot-shot creatives in particular that would go off and try and create something. I think the motivation there was that it was easy to set up. If you got it right, there were lots of riches to be had. You would create one or two client profiles and at some stage you would be able to sell your wares to a network provider and make a lot of money.

Darren:

But isn’t that counter to what the industry actually sells its clients, which is strategy and creative ideas, which they’re basically selling on an hourly basis? Isn’t that a bit like selling a book by the pound or the kilo? How much does the book weigh, therefore if it’s a much bigger book I’ll charge you more for it?

Andrew:

Irrespective of the content that’s in there.

Darren:

If one more person tells me the Pablo Picasso story about him being asked by a woman to draw a picture and he did it and said, ‘That’ll be $10,000’, and the woman said, ‘But that only took you 10 minutes’, and he replied, ‘But it took me 30 years to learn how to do it’.

Great, but you charge by the hour. A client can come into any agency and go, ‘What do you charge an hour? I’ll buy 30 minutes of that’.

Andrew:

I look at where we are today in terms of an industry and that whole model has screwed us. It’s screwed the advertising agency – clients aren’t happy, people aren’t happy, agencies aren’t happy, and the parent companies aren’t happy either.

When you’re going through a lazy pricing structure and it’s easy to recover your costs and it’s easy to make a profit, then the ability and the creativity you have in terms of your own business go through the floor. So innovation goes through the floor. The attitude towards your client’s business is completely irrelevant. You’re getting paid by the hour – it doesn’t matter whether you’re good or bad, you get paid a benchmark rate. You’re making as much money as the guy who’s absolutely the Picasso of his industry compared with somebody who is just starting out. So I think that has all come around to a certain extent.

I think in the last five, 10 years the pressure has been on the agencies, quite rightly, to be able to deliver. We’ve been under pressure in terms of resource-based pricing for a long time, we haven’t been able to figure it out. But clients know who’s good and who is not good. Clients know whether or not it’s worth their while to spend money with one agency versus another agency.

 

Footnotes