Depending on how you read it, a recent piece of ISBA research among UK marketing departments seems to have found that either
(a) marketing agencies have been doing well to stay afloat and maintain profitability in the teeth of the recession, driving out cost and improving efficiency to try and cope with diminished advertising budgets from their clients
(b) marketing agencies’ profits have been ‘remarkably resilient’ (and this is a bad thing).
Chris Arnold has written a nicely scathing article about this. I’m not sure I agree with all of his comments, but I do dislike the way the ISBA report seems to suggest that profitable agencies are a bad thing, something to be mistrusted. It seems by implication to fall back on an adversarial model of relationships, in which agencies are trying to fleece their clients, and the clients are hell-bent on bleeding the agency dry.
Of course agencies have responded to the recession. If advertisers cut their budgets, this usually hits agencies either through reduced commission and/or reduced fees. Faced with falling revenue, the agency has to cut costs to maintain profitability. In 2009 many agencies did just that: pay freezes, redundancies, 4-day weeks were all reported across the industry, not least among the behemoth WPP group.
I don’t want to overplay the importance of marketing, but agencies employ people. If they’re not profitable, people suffer. Several friends of mine lost their jobs in 2009 through no real fault of their own. If a client has an agency that seems to cost “too much” or doesn’t deliver for their brands, their business will suffer, which may end up meaning their people suffer too.
The agency/client relationship should be a positive partnership. After all, the stakes are pretty high. Agency work can make or break a brand. Brand success (or failure) can make or break an agency. Ten years ago, when I worked on the Client side of the fence, we had a rule of thumb about the three main UK Grocery Retailers, and their attitudes towards their suppliers. This ‘rule’ went something like this:
Retailer X wants to make good margins, and they want their suppliers/brands to make good margins at the same time (positive partnership)
Retailer Y wants to make good margins, and they don’t really care how what margin their suppliers/brands make at the same time (disinterested)
Retailer Z wants to make great margins, and they actively DON’T want their suppliers/brands to make anything like that sort of margin at the same time (bordering on hostile)
I’ll leave it to you to fill in the blanks…
The agency/client relationship can be incredibly interdependent. It’s often said that ‘good’ agencies are ‘an extension of the marketing department’. In which case, why should there be hostility and resentment at (ahem) resilient profitability?
Just like any long-term relationship, both sides of the partnership need to care about the other, and to know that other cares about them. Both sides need to be motivated to work together for mutual benefit. Both need to be invested in the fortunes of the other.
If they’re not, are they working with the right people?