Avoid the “Great Depression”

There is nothing more insulting to an agency partner than to have a CMO, who has a lifespan at a company equal to the gestation period of an elephant (22 months), to swag around and feel proud for reducing their agency’s fees so they can’t make a profit. It makes the CMO feel good when he can stand in front of his boss and proudly proclaim,”Look, I saved the company money. Please give me my cornucopia sticker on my next review”.

In the meantime, your professional agency, the one who is trying come up with new ideas for you to actually make revenue, is getting swatted during an economic downturn. Now that is what I call the Great Depression.

“Great news everybody, after six weeks of procurement Ping Pong and hundreds of man hours, we retained the client. C’mon boys, you can now pull up your pants, skip to the conference room and brainstorm ideas for our client to think about new markets, new products, new channels - just remember to use half your brain ‘cause that’s all they paid us for’”.

I venture to guess that, during a recession, some marketing executives relish in the fact they just got a “New Deal”. Maybe it is just their primal nature showing through. Maybe it is because, in their business model, consumers are a mouse click away from not buying their product; somehow that doesn’t translate equally to managing a professional service firm.

Ah yes, the professional agency relationship is just a mouse click away. Except in this case it’s a new Excel formula….

= Sum (Me Look Good - Agency Fees).

’Click’.

“Hmmm. Microsoft Office Excel found an error in the formula you entered. Do you want to accept the correction, ‘agency out of business’? Please check your formula again.”

“Guys, I am proud to report at the executive review committee that I, like other colleagues in the CMO’land, have negotiated our fees down so much -- using veiled threats of giving the business away-- that we are now getting more and paying less -- and creating even more day-to-day inefficiencies -- and we have effectively put our lead agency out of business.

Therefore, we have elected to conduct a major agency review process. It will take approximately two weeks, um… really three months, to find the right ‘fit’. In the meantime, our go-to-market strategy will be flawed or stalled. We will just have to make do with our internal staff that has no clue about customer wants and needs. Rather, they will effectively jump high every time we point at their screen telling them how to make a turd of an idea into a turd of different color. I lean on my compatriot, EVP of Worldwide Sales, to pick up the slack as I can’t deliver this quarter.”

How about we look at the issue from completely different tact?

“Mr. Agency President, my budget has been slashed and this puts strain on the department and potentially our relationship. Now, I am not going to ask you to do more work and get paid less. I only ask of you to fairly assess the situation in its entirety including the fact we need to mix it up. You know, come up with net, new ideas to try to accomplish realistic marketing and sales goals. Perhaps you and your team can think about what we have done over the past few years, and deliver creative and efficient ways to get the consumer to buy our product in a recession. We will have our eyes wide open. And if, in the end, we collectively decide we will have to re-prioritize some of the programs, we will make some hard adjustments. We will give you access to senior management across all divisions to think about the economic issues they face so you have a complete understanding of the challenges we all face. Plus, we will be transparent with our budgets. I would suspect at that point we are collectively agreeing to the expectations up front and planned outcome at the end.

“How does that sound?”

Sounds like "The Great Gratification".

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.

Top 10 Tips For An Agency Review Process

Ask yourself, why you are ultimately going to conduct an agency review. Now ask yourself, why you are really conducting an agency review. Conducting an agency review, no matter how well disciplined the process, is not an exact science. The only part you can guarantee is how much time and money it will cost your firm to fire your existing agency and to search, find and educate your new one. But once you make the decision to find an agency, the points below outline some best practices for choosing the right one:

1. Keep Your Eye On The Prize.

Be certain that the business and marketing outcome is clearly defined and agreed upon by your most senior management before committing to even a general search. Senior sponsorship avoids miscues along the way. Most agencies care about helping to build their client’s business. They commit to the business need at hand – after all, that is fundamentally why you would outsource an important decision. Be as specific and honest as possible about your goals. How much of an increase in revenue are you targeting? What is the percentage of market share that you are looking to secure from competitors? What are the target demographics for your new product launches? Having these specific goals outlined helps your team evaluate the agency’s capability to understand, draw upon experience and present ideas based on sound business issues.

2. Outline And Publish Your Decision Making Process.

Experienced agencies do not want to waste time educating you on how to choose them. All too often the reviewer (that would be you) is learning on the job and that can lead to frustration by the agency. It sends a signal that an inexperienced marketing review may mean an inexperienced client. Sometimes this is the reason why agency review consultants exist, because clients can’t do it themselves, and thus pay for outsourcing the process.

Some simple steps to outlining the process:
Create a calendar of the major milestones of the process, agreed to and secured by you and your upper management. This is a signal that you are serious.

Publish the names and titles of all decision makers and the function they will serve through the entire process. Agencies will most likely be turned off when they hear “I am the decision maker”. Unless you are a one person company, the opinions of others are always a factor when choosing an agency.

3. Identify a narrowly defined scope in the beginning of the process.

If you are really not sure about the tactics, and wish the agency to provide suggestions, your default scope would be “strategic counsel to help us identify the tactics to launch our product”. If you specify the deliverables you want, then agencies will want to know how you came to that conclusion. So give them the research and rationale on your decisions, otherwise expect a host of varying suggestions on how to accomplish the job. This can create some serious apples-to-orange finalists that could generate some dissention amongst your team.

4. Establish Your Selection Criteria Upfront.

Agencies loath when a prospect can’t articulate the top five pre-agreed-upon requirements of their new agency. Your reputation may be shared within agency circles leaving you a challenging time to invite them in for future assignments. Marketing Matchup allows you to search for basic criteria that all firms should consider upfront like size, location, industry experience, services provided, top executive bios, relevant case studies, demonstration of target audience experience and results. Don’t use fluffy words like “good fit”, “we can work together”, “relationship” and “really creative”. Those are qualitative, non-measurable factors that frankly neither side can address with 100% accuracy.

5. Decide And Rank Your Agency Criteria Upfront.

If you are willing to work with a firm 3,000 miles away because they are absolutely the best fit for needs, then don’t include location on the agency criteria list. Everybody on the review committee must agree to the criteria and rank before you start calling firms. PS – word to the wise: having a small, medium and large agency into the review is so old school. Think business needs and if agencies can deliver the ideas.

6. Do You Really Want A Relationship?

Clients say they want an agency relationship and all too often that sends a signal to an agency that you are willing to commit to a retainer. Are you just looking for a one time project? Telling agencies you want a relationship, when you don’t, is like bad dating. Besides, agencies and clients don’t have a relationship out of the gate. Agencies do the work because you pay them. And because you pay them, it gives you the opportunity to build trust. Sometimes the best relationships are the ones where both parties have to deliver value to each other every day, otherwise there is no commitment for success. That said, culture match is important, and that starts with compatibility between top executives. Having key executives meet and ask the right questions is probably a wise idea.

7. Disclose The Budget.

If you do not have one, don’t do a review. Bad clients lie. Good clients are truthful. Great agencies deliver ideas based on tons of variables; the budget can be one of them. When you start reviewing creative portfolios and you see an incredible web site, ad or brochure and say, “I want to do that too”, you might be surprised to find out that the photo shoot was your entire budget, and you may have to reset your expectations. Do not blame the agency if you can only afford stock photography and your competition comes out with the exact same photo 3 months later. Break out your agency budget between working capital, agency fees, production, etc. This helps you and the agency understand what you are truly paying for. Nothing discourages an agency more then you bundling everything together, including staff FTEs, only to fool them later.

Note: Marketing Matchup offers a simple way for you to answer the most commonly asked questions in a review process. You can find these questions by “Posting a Project”.

8. Is It An RFI Or An RFP?

Determine if you are issuing an RFI (request for information) first, then an RFP (request for a proposal) second. This is an important distinction because it adds a level of complexity, time and cost. If you use a tool like Marketing Matchup or the AAAA, you may find all the information you need for an RFI and then only ask for supplemental information that you may require. Agencies are used to filling out RFIs, but part of that reason is because the client really doesn’t know what they are looking for and put the burden on the vendor. According to Forrester Research, an RFP can cost upwards to $17,000 by each agency for an interactive response. Please only issue an RFP if you intend to award the assignment, otherwise the reputation issue arises in the future.

9. Speculative Work.

Speculative work should be required only in very selective instances. Set aside some budget to pay for the finalists (say two to three agencies) to present your ideas. You don’t have a problem paying your plumber or electrician for a house visit in the hope they will resolve an issue.

Agencies expect the same for providing spec work as part of a review. We would also be advocates of spec work if you are in absolute dire need such as time to market. This is a good way to hedge your bets that at least one idea from one agency will address your business need. But ask yourself, how can you be absolutely sure that a “creative idea” from an agency you never worked with can do what you need it to do?

10. Fee Discussions

After you have disclosed your budget, and before you choose your final firm, please get all the paperwork in order. This would include your MSA (Master Services Agreement), your SOW (Scope Of Work) document, and T&Cs (Legal Terms and Conditions). Have each agency review them, with ample time to negotiate. Choosing an agency only to later tell them that your payment terms are 60 days can be a real downer.

No one really likes to conduct an agency review. But if you are trying to develop best in class partnerships, then conducting a proper and well organized review can make the experience as enjoyable as possible given the circumstances.

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.

What Is The Right Size Agency For You?

Fee vs. billings vs. capitalized billings – A confusing model that can lead to the wrong match.

There has always been confusion over just how big an advertising agency is, as it pertains to actual annual revenues. The revenue size of an agency is an important criterion for clients as they try to determine how much of their budget is part of the overall cost of their potential new agency relationship. Typically, clients want their budgets to be large enough to have access to top-level talent and agency principals. Comparing agencies with flawed revenue metrics can mean the difference of being a top 5% or bottom 5% client. It is important to understand how ad agencies can creatively shift their actual revenues to mislead for the sake of telling the client what he or she wants to hear. It is important for a client to evaluate the importance of agency size, and if size is important, then a thorough understanding of agency accounting is needed.

Historical Background.

The American Association of Advertising Agencies, the leading trade organization for the advertising industry, changed the rules for agencies that declare their revenues. In the past, many ad agencies’ sole source of revenue was in commissions for buying and administrating (aka placing) media, such as TV and print ad assets. The commission structure was historically 15% for every media dollar placed. If a client hired an ad agency to place $1,000,000 of TV media, then the agency would receive a commission of 15% for its services. The resulting $150,000 (15% of the total media spend) would actually be the gross revenue for the agency to develop the creative idea, produce the ad, place the media and provide services. The 15% is actually 6.67 percent of the total revenue (dividing 100 by 15%). Later, as clients began placing their own media, agencies scrambled on how to price their services ( the strategy, the creative ideation, and general client services). The solution was for ad agencies to price their professional services on a fee basis. The transition to a fee-based revenue model also made it confusing for clients to judge how big an agency’s revenue truly was. Agencies that placed media could use the cost of media as part of their revenue and appear larger than they really were. Imagine that Agency A and Agency B both provide $15 million in services to a client, but Agency A also places $100 million of media. Both agencies receive the same amount of money ($15 million) but Agency A looks bigger because it adds the media spend into its total revenue (which actually is just a pass through cost).

In order to level the playing field, AAAA allowed agencies to take their fee income and multiply it by 6.67 to adjust their revenues vis-à-vis media placing agencies. Naturally, this adjustment helps some agencies but also ads confusion to what the actual revenue is. This confusion has led AAAA to publish a guideline to help agencies and clients understand how to publish and present revenue.

Some agencies see these guidelines as setting a precedent for allowing too much access into their revenue stream. Agencies are hired to provide big ideas that are far more valuable than the hourly rate. Just think of household slogans like Nike’s “Just Do It” of Apple’s “Think Different”. These ideas were probably more valuable than the copywriter’s hourly rate.

Negotiating Pros And Cons.

Agency review consultants often use the AAAA models to help negotiate fees, which can create strife before the relationship starts. This is a perfect storm waiting to happen. Clients want the most for their budget, but this can often get in the way of creative people providing their best ideas rather than managing their time sheets against a strained budget.

Clients need to ask themselves if they have ever negotiated with service partners that are critical to the success of the business, such as lawyers and accountants. One can only image what the response would be from a top law firm when asked to expose their profit or negotiate their hourly rate. It can be insulting at worst and demoralizing at best.

Do Your Homework.

Be mindful of how publications ask each agency to provide fee revenue, versus billings versus capitalized billings from sources such as Advertising Age, ADWEEK, Business to Business, and listing directories such as AAAA, Agency Finder and AdForum. All sources are extremely different, and can have a profound effect on how the agencies’ bottom lines are presented.

The Simple Answer.

For clients looking for a retainer-based relationship, an easy way to determine the right-sized agency is to simply inquire about employee-to-fees ratio. For every full- time employee (FTE) working on your account, the agency should generate about $150,000-$200,000 of total fees, thus as an example, an annual $500,000 client budget for an agency should be equal to approximately 3-4 FTEs.

For clients that want a project-based relationship, they should disclose the amount upfront and let the agency figure out how to develop the required solution against the scope.

Or, you can simply pay for a million-dollar idea.

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.

What Is The Value Of A Lead?

The differences between sales and marketing can seem vast, with each division having different goals, languages and motivations. Division between sales and marketing departments can cause strain to the organization, and necessitates better communication and cooperation for optimum results. Salespeople use various definitions for prospect qualification, such as qualified lead opportunity (QLO), qualified sales opportunity (QSO), inquiry, cold, warm, and hot leads. Sometimes there is a score card for measuring the value, sometimes not. Marketing is often judged on qualitative data, but web analytics has changed that. Measurement used to be centered on awareness, perception, desire, share of mind, top of mind, and other “intangibles”. However, CEOs today don’t like fluff. Companies like Sirius Decisions and SalesForce help cut through intangibles and deliver solid data that decision makers need.

Data Never Lies:

A common strategy to produce data is as follows:
Start with segmentation of consumer base. Once this is done cluster the data by customer, lifetime value of customer, key account strategy (b2b, direct sales model, etc).

Next hygiene your in-house list, to get the data to a point where mining it can lead to analytics and insight.

There are plenty of service providers for such services, including Acxiom, Market Models, Epsilon International, or you can review how Forrester Research segments their data.

Data Is A Snapshot:

Data is actually a point in time, an event that shows historical information and “what the consumer did” but not necessary “why they did it”. Your customer today may not be your consumer tomorrow. Your brand today may have to evolve due to competitive threats, economic conditions or internal issues. Having the insight to go beyond demographics, but with value such as ethnographic studies, helps build-in lifestyle and life stages. Can you imagine the fear watch companies are facing when the current 14-year-old grows up to become an affluent consumer, yet still uses his mobile device as a watch?

Solutions:

1) Create a universal common language that the sales people and marketing people agree upon. Apply best practices when collecting information, and distributing it across the organization’s sales/marketing system (i.e., SalesForce, Unica, Oracle, etc). This enables both parties to judge value of each customer touch point, and how to apply learning to the next one.

2) Convert data into insight so that all members of your team can evaluate, manage and propagate the data into actionable results.

3) Define best practices on how prospective customers are channeled through your system, with experience at the core. A multi-channel option (such as web, phone, blog, etc.) is great, but can cause frustration for customers if they are forced to go through each channel. Verizon is an excellent example of a company where a poor customer experience can ruin the brand experience.

4) Develop a lead scoring model that applies a mathematical point value to each prospect. This exercise helps marketing and sales identify, through data and experience, the ideal customer profile.

5) Work in teams, not in silos. Not every effort bears the fruit one desires. But the intent and commitment to improve each year will yield the results. It takes a team of people, including your advertising and direct marketing firm, to help decipher and best optimize the outcome. Each will add value and a point of view.

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.

Brand, Brand Or Brand?

Clients and agencies often use the term “brand” and it can mean different things to different parties. When seeking an agency to help with branding, please be very specific about your desired outcome before spending too much time during the evaluation period. Let’s explain the potential range of the word brand.

In some cases, clients use the term brand interchangeably with tactical media efforts (such as a logo, or corporate identity). The agency evaluates the expression of the company by nomenclature and visual dialogue. Some agencies call these visual assets “brand signals”, and not necessarily defining a brand as a company. Branding may also have a more strategic implication such as defining the promise of the company to its employees and customers via the company’s experiences, operations and product development. This requires a deft approach of identifying the past equity or desired promise, measured against consumer needs and wants.

Developing a logo can be most challenging, as many clients and internal influences have strong opinions when developing a new name and expressing it through colors and typography. Others recognize that this icon can be a game changer among their competitive set. Having an agency think and explore all options is the smartest way to get the best work – of course, the client needs to provide clear direction from all decision makers, to avoid any miscues during the creative process. Some of the best iconic brands, such as FED EX, took more than just a few weeks to develop its logo. Especially since 12 people from FED EX were part of the decision-making process. By the way, only the CEO, Mr. Fred Smith, saw the infamous hidden arrow when the logo was presented. You can read this article for the whole story.

It is a rigorous process designed to explore all options, and the client has to be bold enough to allow creativity to flourish. Think about this as you hire a firm to do your next identity assignment.

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.

Why Do A SWOT Analysis?

A SWOT (Strength, Weakness, Opportunity & Threats) is a useful analysis that helps companies develop effective strategic planning for both online and offline. This exercise takes into account not only your own business, but your competitors and the current business environment. Completing a SWOT analysis every 6 months can help identify ways to maximizing your strengths, minimize weaknesses/threats and uncover new opportunities.

To develop a comprehensive SWOT analysis, organize a brainstorming session with key executive members of your company. The agency facilitates the discussion based on the four categories outlined below.

STRENGTHS
What does your company do well?
What makes you stand out from your competitors?
What advantages do you have over other businesses?

WEAKNESSES
List the areas that are a struggle. What do your customers complain about?
What are the unmet needs of your sales force?

OPPORTUNITIES
Where are your strengths not being fully utilized? Are there emerging trends that fit with your company's strengths? Is there a product/service area that you could do well in but are not yet competing?

Take a closer look at the business environment. (E.G. a customer segment is becoming more predominant, but their specific needs are not being fully met by your competitors.) Often, opportunities arise as a result of a changing business environment.

THREATS
Look both inside and outside of your company for things that could damage your business. Internally, do you have financial, development, or other problems? Externally, are your competitors becoming stronger, are there emerging trends that amplify one of your weaknesses, or do you see other threats to your company's success?

Advanced SWOT
The agency can help conduct a more in-depth SWOT analysis to help clients understand their company's competitive situation. The agency can enhance a SWOT analysis through research surveys to learn more about perceptions of the client’s business, products and competitors.

Research areas can include:
1) Customer awareness, interest, trial, and usage levels
2) Brand, site, and/or company image
3) Importance of different site or product attributes to your customers
4) Product and/or site performance.

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.

Retainer Vs. Project-Based Compensation

Agencies tend to be far more flexible with their fee structures, especially in laggard economic cycles. They have an overhead of staff that needs to remain billable at a decent percentage. Usually that percentage is around 65-95% depending on the overhead fixed costs component. This gives the upper hand to a client in attracting the attention of a larger shop. However, this is a short term solution. As the marketing economy starts to improve, agencies will “trade–up” and look for more established, long-term, budgets to help manage their visibility. And who can blame them?

Clients like project-to-project relationships because it gives them leverage of budget control, and the option to end a relationship if performance is poor. The process of firing a retained agency is obsolete and messy. Agencies and clients should be frank about engaging under this model, as it is important to agree on the key performance indicators (or KPIs) before engaging in the project. Having a shared understanding of the KPIs helps remove subjectivity regarding the performance of the agency, or the outcome of the marketing effort.

Marketers often struggle to establish a process and methodology for managing communications. Working on a project basis with an agency or PR firm is not likely to solve this problem.

According to Forrester Research Project-to-project relationships can have an upside from an agency perspective. Besides covering off some COGS (agency cost of goods sold), they can actually grow into accounts while reducing overhead.

These relationships can typically result in:

- Shorter sales cycle
- Higher profit margins
- Speed to ideas in market
- Ability to prove their value, every day
- Permission to grow into the business
- Ability to enter into otherwise crowded markets
- Establish name brand accounts on roster

The issue for marketing agencies is their ability to find these projects. Project outsourcing will increase in a recession, but if the agency isn’t poised to get its foot in the door, it may find itself chasing “bad” projects – unprofitable, not focused in areas of its expertise, and working with brands that are not healthy, etc.

Please let’s not forget that getting paid is just the fiscal transaction between the two parties and shouldn’t be confused with a “relationship” between an agency and a client. That is earned over time by delivering the goods and great work.

Marketing Matchup can help you find the right marketing firm for your needs. You can search by agency size, location, industry experience, marketing services provided and past creative work. If you have a marketing project in mind, sign up for a free client membership and post your project to be automatically matched with the right agencies.

Already working on a marketing project or a campaign? We have compiled a set of marketing tools that can help both clients and agencies plan and execute your next marketing project or campaign.