While the Marketing Agencies Association claims the relentless screwing down of agency fees will ‘kill the sector’ if continued unchecked, some marketers believe shops should just ‘get over it’
Fair pay for agencies is one of adland’s hoariest old chestnuts, a subject that has been chewed over so many times over the years that the flavour has long left it. So maybe it’s no surprise that the Marketing Agencies Association should be attempting to put some spice back into such tedious fare by claiming that the relentless screwing down of agency fees will “kill the sector” if allowed to continue unchecked.
Hyperbole or not, the fact remains that examples of what seems to be excessive parsimony by clients keep surfacing. The latest is highlighted by a seemingly curious decision by WPP to withdraw from the contest for the McDonald’s consolidated creative account in the US.
WPP has not explained its decision, although industry sources link it to the onerous conditions reported to have been imposed by the fast-food giant. One is said to be that the winning agency should operate at cost, essentially breaking even.
On the face of it, this would seem to bolster the MAA’s contention that agency fees are in a race to the bottom. And according to the MAA, this is the result of procurement being allowed to rule the company roost and that agencies will not be properly valued again until marketing departments wrest control back from the finance and procurement specialists.
Ad industry leaders believe what has happened is a consequence of the 2008 economic crisis, which allowed procurement specialists to thrive in the new austerity. Agencies abhorred what they saw as procurement’s blunt-instrument approach, which, they claimed, drew no distinction between advertising and other supplier services.
A lot of clients, however, argue that agencies have not woken up to the new realities and deplore what one describes as their ‘woe is us’ attitude.
For Sasan Saeidi, managing director, FP7 McCann – UAE Group, agencies have themselves to blame as much as anything else and can only remedy the current situation by working together.
“The only way we can regain this momentum and put the worth back into our profession, so we turn our model from selling by the kilo to selling by the hour, is standing together ‘as a nation’ of creative thinkers and strategists, and putting forth a new declaration of fair business conduct, based on transparency and results,” says Saeidi. “One that is rewarding and motivating.
“This may sound a bit too macro, but we need to quickly start here and hold the line if we want to see changes. If the holding groups that control the power don’t stand united and set the standards today, what will be the norm that we work by tomorrow and the day after? Today, the norm of ‘underselling’ and not getting the right worth for ideas that build campaigns – sell millions, build reputations, change cultures, make heroes and make causes famous overnight – is killing the essence of our creative industry.
“We need to continuously bring in artistic talent, inventors, creative scientists, analysts and long-term advocates of brand building. We need to intensify the inspiration, and lessen the perspiration coming from the unnecessary pressures being placed on the ideas economy every day by short-term thinking and amateur marketing.
“Let’s come together as an industry – global, regional, market level – and create a real referendum that can produce real and immediate impact. The word referendum should not be mistaken with the death-defying decision of the UK leaving the EU. Our referendum needs to be logical, informed, balanced and wise.”
CREATIVE AGENCY
Kamal Dimachkie, executive regional managing director, Leo Burnett
“Continuous agency fee erosion, and growing complexity, which – in turn – is exerting considerable pressure on margins, are poisoning the communication industry and bringing about a very slow demise. Like carbon monoxide inhalation; it is slow, progressive and seemingly innocuous but in reality deadly.
“Creativity as a product and an offering cannot be killed, the fee and profitability erosion will certainly cause a fundamental denaturing of our industry, which will ultimately lead it to irreversibly change beyond recognition.
Clients’ desire for increased efficiency and transparency are legitimate, their continuous erosion of agency profitability is alarming, but the heightened comfort with which agencies are progressively being stripped of all profit to operate at breakeven levels is dangerous, not only for creativity and the talent that produce it, but for client organisations themselves.”
MANAGING DIRECTOR
Sasan Saeidi, managing director, FP7 McCann – UAE Group
“You bet. And it’s not about ‘will it kill the sector’; it’s already impacted the foundations of our industry. And it started many years back.
“Today for the most part we have become an industry that is selling commodities. We’re not acting as an industry that is selling consultation services. We don’t charge by the hour, we don’t respect our time, and have no intellectual property rights over our opinions and suggestions. Our contracts are to a large degree one sided and not reciprocal, and year-on-year we have remodelled our agency structures to charge less money for our ideas.
“It’s the unity that we have failed to embrace as an industry that has caused this. Yes, financial global catastrophes have allowed for a frugal approach to negotiations and promoted a mindset that ideas need to be negotiated till their death, but we have also gone with the flow.”
AGENCY HEAD
Eric Hanna, chief executive, Grey Group MENA
“Working from the premise that higher fees is the only way to stimulate the industry, then the answer is an outright yes.
“The reality is different. Many advertisers, collaborating closely with their agency partners, have historically found new and improved ways to derive better value from their evolving relationships. In this context, all those who have revisited fees focusing on what’s best for the brand – as opposed to generic attempts from either side to get more for less or less for more – have reached mutually beneficial agreements. Whilst the outcome might have been lower fees, the effectiveness and efficiencies generated have enabled both parties to reinvest more time and money behind new resources or different areas of the marketing mix. Such an approach has helped further grow brands and as a result, businesses… and the industry.”
MARKETER
David Wheldon, chief marketing officer, Royal Bank of Scotland; president, World Federation of Advertisers
“Whingeing about procurement has become endemic in the advertising business and it helps nobody. Marketers need to understand the needs of procurement but it’s also up to agencies to protect themselves. Bartle Bogle Hegarty has always been excellent at defending itself and not working for clients that refuse to pay a fair price.
“Agencies have traditionally not been good at managing themselves financially. I don’t recall them complaining in the 1980s in the days of full commission and when life was easy.
“There’s no need for a big debate. Agencies just have to get over it and get on with it.”