The Ten Ways Agencies Misunderstand their Deteriorating Client Relationships

"The good old days are gone, and the bad days are here. We're bullied by our clients, paid less each year, and treated like commodity suppliers. Relationships last only 2-3 years. We spend all of our time competing for new business, which is increasingly won on a 'lowest price basis.' We pitch for projects! What happened? How did this most glamorous of businesses turn into this?"

There is unanimity about one thing -- things are bad and are getting worse. Apart from this, the "definition" of the underlying problem is a grab-bag of theories. Here are ten of the most common things I hear from agencies about what has gone wrong:

  1. We're insufficiently digital. We'd like to be more digital, and we know that we need to be more digital, but we have too few digital people, and no particular digital reputation. As a result, we have little digital work from clients and insufficient financial resources to invest in digital capabilities.
  2. We give away our work. We pitch for free and give away our best ideas. We have too much unpaid work. We're paid for some of our hours, but not all of our hours, and the rate that we're paid is a commodity rate. We should be paid for the ideas we create and sell them at a price that reflects the value of what they're worth.
  3. Our principal problem is procurement. We're great partners with marketing, but our clients have been hijacked by procurement. Procurement buys agency services in the same way that they buy paper and pens, at the lowest price possible. We'd be fine if it weren't for procurement.
  4. There's no pricing discipline in the industry. Our fellow agencies undercut one another to get new business. When we pitch, we're unlikely to get a fair price; there's always an agency that will price lower. It's very difficult to win new business at a fair price.
  5. Our own organization negotiates poor contracts. We're stuck with client contracts with low fees negotiated by the holding company or one of our senior executives. We can't make money on many of our contracts.
  6. Our creativity seems lackluster. Something is missing -- our creativity is off the mark. We're not winning new business. We're losing long-term clients. We need to shake up our creativity with new leadership and new energy, and we need to look at the creative resources we currently have. Maybe they're simply not up to the mark. We need to reinvest to become more creative.
  7. We lack project management skills. Our operations are chaotic, and that's costing us money. We need to invest in project management people and systems to get our operations and costs under control.
  8. We're not as analytical as we need to be. The marketplace requires us to build mass brands in a personalized and fragmented world. We have to develop better analytics to put the focus on delivering improved brand results while not squandering brand equity.
  9. We're not attracting the right talent. Companies like Google, Facebook and Twitter attract millennials by offering strong creative cultures, competitive compensation, and the opportunity to make a difference. We're less relevant on these dimensions, especially on salary, and we're losing the battle to hire and retain the best talent.
  10. We're not investing enough in our culture. Ideas are the agency's livelihood and lifeblood. They need to inspire. We need to continue to invest in having the best ideas for our clients and brands. We need to be brave enough to challenge the legacy models of how things have been done to ensure we continue to set the standard for creativity. This requires a conscious investment to maintain and strengthen our culture. We need to get back to the basics of Bill Bernbach, David Ogilvy and Leo Burnett.

In truth, these "theories" are grumbles about an industry that seems to be going in the wrong direction -- rather than starting points for corrective action. The complaints can be summarized like this: "We know what our problems are, but solving them either requires more money, which we do not have, or a change in attitude by procurement or our fellow agencies, which is not likely to happen. Consequently, although we're smart enough to know how we would like things to be, or how they need to be, we have no practical way to get there. We'll just have to soldier on with things the way they are, do the best we can under the circumstances and hope for the best. We'll focus on improving our creativity and winning new business."
 
This is why there is no real change in ad agencies -- the senior executives are soldiering on rather than shaking things up. Poor industry pricing results from agency passivity and a failure to track and measure workloads so that fees can be negotiated in a more balanced way. Poor relationships result from insecure Account Managers, who will do anything to keep an account, and who are operating without any management accountability for getting better fees for defined workloads. Agencies are not delivering results, which is what clients really want, and instead they focus inordinately on "creativity" as an end in itself. Sadly, but understandably, clients are unwilling to pay for pure creativity.
 
The real agency problem resides in the C-suite of ad agencies, and it is to the C-suite that one must turn to find leadership for the required changes. The ten theories, described above, are excuses for inaction.
 
What a pity! There is so much that can be done!
 

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