Not to get too philosophical, but what is an ad agency these days? I ask because the 4A's -- the American Association of Advertising Agencies -- is said to be contemplating adding consultancies like Accenture and Deloitte Digital into its ranks.
Of course, there's a logical argument to why they should be members: consultancies are getting a lot of business that formerly went to ad agencies. Marketers will say this is thanks to the agencies themselves, who abused trust by padding their profits at their clients' expenses, but also to the abstruse nature of programmatic advertising.
It all started years ago, when clients' procurement departments began squeezing lower and lower costs from agencies. In turn, agencies had to either hire talent that wouldn't be up to the task of solving some of programmatic's greatest challenges, or create alternate revenue streams, whether or not marketers would approve of how these streams were created.
The situation quickly cycled out of control. The ANA's transparency report was the breaking point, as well as a convenient entry point for the consultants. It was a natural fit. Who is better to solve this issue than an industry known for both auditing financials and attracting some exceptionally bright talent? Some of the top consultancies now pay freshly minted MBAs $140,000, while entry-level advertising jobs pay around $45,000. To add fuel to the fire, the ANA just released another report that warns of a talent crisis.
How agencies can get their mojo back
Something's got to give. The lack of trust drove this wedge, but marketers might give ad agencies a second shot if some of that trust is won back. To accomplish this, I suggest that agencies create a client relationship charter that follows these points:
1) Payment: The agency should offer transparency into all the ways it makes a profit. This doesn't mean disclosing profit margins, but illumination into where it does and doesn't make a profit. In turn, the marketer should pay the agency competitively, fairly and in a timely manner (not 120 days!) If we all agree the payment is fair, then agencies should vow to no longer accept gifts from ad tech vendors that might influence their decision-making process.
2) Modeling: The agency will use sophisticated analytics and modeling to provide the most intelligent business insights and advice to help clients achieve their business goals, including improvements to EBITDA performance. This is a switch from when agencies just created ads and left the profit modeling to consultants. The days are gone when advertising existed in its own universe -- apart from marketing and business functions.
3) Best-in-class: The agency should be able to develop proprietary products or technology, and sell it to the client without disclosing the cost structures behind them. The agency agrees to negotiate a fair price with its clients that allows these products and technology to provably deliver more return to clients' businesses than the cost of purchasing them. The agency should ensure clients have access to the most advanced research, in-market knowledge and insights on the latest trends via timely summaries and reports.
These points address where the client-agency fault lines exist. Marketers shouldn't expect to keep cutting and cutting and get the same level of performance. Agencies shouldn't accept low fees and look to make up costs elsewhere, and they certainly shouldn't cede their business to consultancies.
And not to get too philosophical, but if you don't trust your ad agency, why are you working with them anyway?
The article How Agencies Can Turn the Tables on Consultants first appeared on Ad Age.