Issue 113, 04/06/09

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Discover more about the only online survey system that allows you to evalu8 the relationships between up to eight groups of people, at evalu8ing.com

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Here we are in the middle of a ‘global economic crisis’, with marketing departments and advertising agencies doing more work with fewer people and financial resources. So in this edition of TrinityP3 e-news, we look at the ways both parties can align their respective business interests, so both can survive and prosper.

7 Steps to a Better Relationship

The agency relationship represents anywhere from 5-20% of a marketer’s budget, yet this relationship probably represents the single most important driver of ROI for an advertiser's marketing investment. Therefore, changing agencies without making a thorough attempt to find out what's wrong with both partners in the "relationship" is not only extremely disruptive, it's totally unnecessary.

We've come a long way

In the old days, agencies were paid a generous fixed commission of 10% of media spend and an additional service fee on top. With so much money, agencies would happily do whatever clients asked, at the very last minute or for the millionth time.

Then during the ‘90s, Procurement gained more control over marketing contracts and budgets, and marketers began to build quantitative financial efficiencies into their agency relationships. In other words, they were able to push total agency compensation costs down. However, they rarely looked at qualitative process efficiency on both sides of the table or linked compensation to how well the agency's output performed in the marketplace.

The reality -  Procurement and Marketing see things differently

Procurement are focused and incentivized with "getting it for less,". Marketers, understandably, are more concerned with agency effectiveness and efficiency, along with brand value.

There are often huge gaps and discontinuity in marketer/agency perceptions, understanding, cultures and communications. These gaps result in significant inefficiencies and ineffectiveness. However, filling these gaps is far less disruptive and time-consuming than searching for a new agency. Marketers are realising that the time and energy they would expend in a pitch is better spent on a process of listening and candor to fully unearth what is and isn't working in the current agency relationship.

Today, most marketers budget a fixed amount for agency fees. As a result, agencies allocate specific people and other resources to a given account (known as "labor" or "deliverables-based" compensation). And to protect their profit margin, agencies need to know exactly how many TV ads, print ads, etc., they will be asked to produce, and of what complexity, along with how much "rework" the marketer will require them to do.

Below are seven key steps in the effective management of agency relationships and marketing communications expenditures.

1. Assess the Scope of Work (SOW) in detail, so that agency staffing becomes directly linked and benchmarked for output effectiveness and efficiency.

2. Benchmark staffing of full-time employees for the SOW against industry standards.

3. Be honest and identify and correct inefficient client-agency processes that impair efficiency and effectiveness. In our 10 years experience, we've learned that most process and work practice inefficiencies are client-based, especially in briefing and approvals.

4. Benchmark agency contracts and compensation with industry standard methodology and metrics. Do an annual contract compliance review.

5. Implement a robust performance evaluation review that links agency compensation to incentive for continuous improvement. Give the agency a reward if it moves your business forward, and a nominal profit if performance is static.

6. Kick off a new agency relationship with a facilitated process to assure client-agency communications are understood for achieving strategy and execution objectives. Consider using external expertise.

7. Use TrinityP3 to facilitate these assessments, reviews and processes. If the relationship is worth saving, a bit of perspective is priceless. Contact Darren Woolley to discuss any one of these seven steps, darren@trinityp3.com or on 03 9682 6800

5 Ways to Avoid Going Insane

Interestingly, when faced with a crisis like the current GFC many people, including marketers and their agencies, fall back into practices that are tried, tested and familiar, even if they are not ideal.

It reminded me of Albert Einstein's quote, "Insanity is doing the same thing over and over again and expecting a different result." Or this brilliant clip from Blackadder.

If you want to avoid going insane in trying to manage your advertising agency remuneration, there are five things you could be doing to help you survive the GFC. Click here to read more at Darren Woolley's Blog

Making Decisions an Important Skill

Making decisions - however small they may be - and leading a productive and efficient team are imporant skills no matter how senior or junior a manager you are.

Delaying decisions keeps your staff in limbo. The longer it takes for you to make a decision, the more frustrated and angry they will become. Sometimes decisions are wrong. Many other times they are right. Either way, your staff will be glad they're not stuck in a quagmire of inertia.

Ann-Maree Moodie, The Age, April 25, 2009