Agency of the Year 2007: How to manage your relationship

agencies and clients have made it. But if they haven't, does it mean you
are working with a rubbish agency? Of course not.

There are thousands of agencies out there doing outstanding, effective
work - from creative and PR to direct and media - that have not had a
look-in. What sets the winners apart is usually the consistency with
which they have been creating strong communications across a wide range
of disparate advertisers, categories and target audiences.

If you know that your chosen agencies are delivering to your objectives,
building your business, working cost-effectively and efficiently as true
partners, then give them, and yourself, your own award. You all deserve
it, because the industry trends are making such achievements ever
tougher. But what are those trends, and what impact are they having?

More fluid relationships with more agencies

Multiple agencies are needed to answer clients' 360 degs communication
demands. The integrated one-stop shop is still the exception, not the
rule. Marketing teams have to manage more agencies, with the same or
decreasing resources, both in terms of budgets and personnel. So they
have a more extensive roster and can assign projects across a wider
pool, which means that agencies have a smaller slice of the total budget
and feel less secure.

This has led to the death of the creative agency's divine right to lead.
The disparate teams are meant to collaborate, but without strong
leadership in place they will jostle for supremacy. Yes, there is more
competition and innovation, but there is also less in-depth brand and
business knowledge within the agencies, which leads to more tactical
solutions. Marketing teams start to wonder, rather in the manner of a
paranoid king, who among their advisers really has their interests at
heart. Who exactly can they trust?

The rise and rise of communications planning

Answering this need for media-neutral, non-implementation-biased advice
is communications planning. This is usually housed within the media
agencies, although it is also found within dedicated specialist
companies including Naked, or being brought back into ad agencies such
as Lowe. We have data illustrating that strategic planning within media
relationships is now about 50% more important to advertisers than it was
seven years ago.

Are more and more media agencies offering a valuable and well-priced
service compared to the ad networks? Are they the true global networks
of the future? It is beginning to look that way as the global brands
continue to recognise that it is far more important to have a single
worldwide media agency than one worldwide advertising shop.

More frequent use of bonus schemes

Bonuses have become a command-and-control tactic, a means of rewarding
excellence or penalising below-par performance. According to ISBA data,
more than 50% of UK contracts have some type of bonus criteria. It can
be a thorny topic, leading to a reduced, rather than enhanced, spirit of
business partnership. Agencies see them as a poorly disguised attempt to
drive down fees, while advertisers refuse to pay 15% plus margin for
average work and service.

There is little common ground as to what constitutes risk and reward,
although some general terms and criteria have become established.
Acceptance will happen when there are more robust, consistent and
industry-wide ways of measuring return on communication spend. There
also needs to be a willingness to take a longer-term view about the
effectiveness of communications, meaning that bonuses may be paid over
more than a single financial year. Both advertisers and agencies need to
demonstrate that bonuses can be discussed and agreed in a spirit of
professional respect and trust.

Procurement power

In many companies, procurement has the right to interrogate the
financial competence of marketing. It continues to challenge both
marketing teams and their agencies, upsetting previously accepted ways
of working. Procurement can be criticised for ignoring the importance of
chemistry, not understanding the difference between cost and value, and
for coming between marketing and agency teams. But it is now a fact of
life, and has revolutionised fee and compensation negotiations within
the industry. Procurement has forced both teams to be more financially
aware and disciplined, which has to be a good thing. But is it still
somewhat biased toward a 'never mind the quality, feel the width'
view?

Separating strategy and implementation

Strategy is ever more centralised and controlled in client/agency hubs,
be it globally, regionally or at a national level, depending on the
scale and geography of the brand and business. These hubs are
multi-disciplined, strategic and creative powerhouses, often highly
valued. But the implementation of their output becomes a debate about
efficiency, consistency and cost-effectiveness, so advertisers are
choosing to source this separately. Nokia appointed Wieden & Kennedy as
its lead strategic force in the summer, with JWT as its worldwide
network. An increasingly popular choice is a digital asset management
company such as Tag, which has harnessed technology to distribute ad
material around the world. Alternatively, the media network may be the
multinational glue.

Be good, be green, be seen

There is a need for ethical and transparent business practices. It is no
longer enough to do a good job; both marketers and their agencies are
learning the language and behaviour of ethical business. This manifests
itself in myriad ways, having a clear impact on what is being said in
external communications, but also affecting the nature of the internal
day-to-day business relationship. From the impact of the Sarbanes-Oxley
Act to the stated application of the best principles of supplier
relationship management, less is now left to chance and individual
style.

These trends are definitely influencing the way in which marketing
evaluates its agencies. There will always be a marked difference in the
way that awards such as these are judged, or how a pitch is conducted -
you are on the outside looking in - compared to how advertisers measure
the worth of their incumbent agencies. As we all know from our personal
relationships, the traits that are initially attractive, such as
exuberant, quirky creativity, may become an irritant quicker than you
can say 'AAR'.

In response to these trends, agency-advertiser evaluations are becoming
more frequent and formal, with more focus being placed on financial and
operational measures and metrics. But these reviews do not necessarily
lead to improved performance, despite the assessment often being linked
to a bonus. The findings can fall victim to a variety of issues: they
might not be trusted; they will not address any client performance
issues; and those involved might fail to shape findings into a simple
action plan. It is even possible that these findings are never
communicated to the wider team.

In our experience, despite the tough environment in which they are
operating, agencies all over the world continue to be optimistic,
assessing their own performance usually much higher than do their
clients (see graphs, right). Marketing teams appear to be more burdened
by the reality and complexity of managing their brands and agencies, so
they are relatively tough when rating their own performance as clients.
And, just maybe, the agencies are also diplomatically kind to their
clients/paymasters, so there are smaller perception gaps.

Sadly, in the UK, our scores are a little lower than those in other
countries. We either have high standards or we are miserable - your
opinion will depend on whether you are from an agency or are an
advertiser. But metrics such as these are, of course, only an indication
of performance, and cannot replace the open and frequent exchange of
views.

If you do not have an award-winning agency don't rush to draw up your
pitch list. Every marketing team can make its agencies better (see
checklist, page 5). Relationships requires communication, respect and a
little effort. Advertisers are from Mars - often over-rational and prone
to hiding in their sheds. Agencies are from Venus - rather emotional,
but very receptive to compliments and a metaphorical bouquet of
flowers.

CHECKLIST

Assessing your agency

- Does it deliver what it says, and is this in line with what was
agreed? Absolute quality of delivery and impact in the market is still
key, but it is now much more rigorously assessed against prior
definitions. On pre-agreed criteria, does the agency achieve against
these objectives? Does it create communication activity that
demonstrably builds the business? Does it keep within specified
timelines, and is it hitting the agreed fee and budget parameters?

- Does the agency have accepted practices that ensures it works
productively? Can your agency prove that it actively manages itself and
the business relationship in a stable and professional way? Has it
adopted technology that will help to drive down costs? Are there tools
to aid both marketing teams and the agency itself? Is the agency
transparent financially?

- Does the agency have the right attitude as well as ability? Does it
push boundaries when appropriate? Working collaboratively with other
roster agencies could be key - is this formally assessed? Is the agency
flexible and open-minded, working with ideas from other sources and
venturing outside its narrow remit? Does it contribute to fresh thinking
in its sector?

- Have we done all we can to get the best results? Are your agencies
paid and incentivised appropriately? Ensure that you are sharing
objectives and giving sales updates. Are the briefs clear and approval
processes efficient? Be realistic and consistent about timelines and
what budgets can achieve. Is the effect of communication monitored so
that everyone can learn together? Are you open and honest, giving and
taking regular feedback?

OPINION

Marc Lawn, head of marketing services, Britvic

Clients outsource non-core competencies - they are looking for the
agency to be a thought leader. However, the landscape is changing.
Procurement has a greater say in marketing spend and TUPE is changing
employee rights. Agency/advertiser relationships must become true
partnerships, so formal planning and evaluation of both parties is
key.

Advertisers demonstrating this commitment to agencies will have more
engaged partners that are prepared to challenge the status quo and
create the work that makes this industry great. Marriages made in heaven
need working on. Embracing that challenge drives sustainability and is
ethically the right thing to do. It is all about balance.

BRIAN JACOBS - founder, Brian Jacobs and Associates

I have worked in media agencies for more than 30 years, and the
relationship with clients has changed. The media department used to be
subservient. Clients were not interested, and we overcomplicated the
concept so it wasn't easy for advertisers to get involved. Then media
independents came along offering to do it for less money, with
value-added services.

In the past 15 years media agencies have taken centre-stage, reinforced
by media fragmentation that has made planning and buying media
complex.

Evaluation has led to softer service measures. At Carat we encouraged
advertisers to assess us, but the smart ones, such as Coca-Cola and
Procter & Gamble, have been doing it for years.

ANDREW CARTER, global brand director, Bombay Sapphire

I don't think the fundamentals have changed in terms of what advertisers
are looking for. What has changed is the 360 degs planning
communications mindset. A lot of client/agency relationships are global
now, with a local component, and while you can have a strong
relationship at a global contact level, you are reliant upon local
networks to make sure they can deliver to the market. You have to work
harder at the relationships and must rely on the media agency to bring
it all together.

On the evaluation side, I would look to do it every six months, against
a set of criteria and deliverables that are made much clearer up front
in the contract with the client.

TINA FEGENT, independent procurement consultant

Procurement used to be a dirty word, but agencies now understand the
need for it, and those involved in purchasing are bothering to
understand what they are buying. The one stumbling block is the
marketing function. It is easy for it to be absolved of total
responsibility for purchasing, but it has to be involved. This should be
a three-way relationship.

It is a similar story with agency evaluation. Good purchasing people
want to invest in it, not just in terms of getting the right fee up
front but also investing in the ongoing relationship, with regular
audits. It should be a 360 degs approach, where the agency appraises the
client too, because clients are not always perfect.