Deciding When to Conduct an Agency Search

Transcription

1 Deciding When to Conduct an Agency Search By Brian Goodall, General Manager, R3:JLB New York What s Inside? Overview: The Evolving World of Marketing Services What Precipitates an Agency Review? Think Twice Before Conducting an Agency Search Hiring a Search Consultant Beginning the Process: Organizing for the Search Conclusion: Look Before You Leap About the Author: Brian Goodall Overview: The Evolving World of Marketing Services A decade ago, when marketers spoke about agency search, the focus was usually on selecting an advertising agency. Traditional advertising was where most of the action was in the marketing services agency universe then, and there was much consensus around what defined an advertising agency and the services that an advertising agency provided. However, since that time, there has been a sea change in how we view advertising agencies and the broader marketing services agency world. Some of the trends that have led to this transition include: Advertising agencies once dominated the marketing services agency universe, consuming the vast majority of client marketing dollars. Now, agencies of all disciplinary stripes have earned prominent seats around the client s marketing table. While the lion s share of marketing dollars is still spent in traditional advertising, clients are also valuing other integrated marketing disciplines (PR, CRM, digital/interactive, social marketing, direct, etc.) and are diverting more of their marketing dollars away from traditional advertising. This phenomenon is largely the result of marketers seeking the perceived efficiencies that some of the newer one-on-one disciplines provide. Increasingly, they have made moves away from the apparent inefficiencies of the traditional mass media, which historically have been the bailiwick of traditional ad agencies. Related to this trend is the importance marketers now place on results and accountability when it comes to their agency partners. It s no longer sufficient to just produce an advertising campaign. Now, marketers expect their agency partners to produce a campaign that generates specific business results that can be measured and validated. The newer one-on-one digital communication disciplines are perceived as having a leg up on this count, which has put increasing pressure on traditional agencies to catch up. The distinctions between types of agencies are blurring as traditional agencies are acquiring integrated marketing capabilities and non-traditional agencies are becoming more sophisticated players by acquiring skills formerly found primarily in advertising agencies (strategic planning, creative execution, communications planning, etc.). Deciding When to Conduct an Agency Search

2 All of these trends are accelerated by the phenomenon of clients asking for more and more from their marketing agencies as a means of getting more and more bang for their marketing dollars. There are more non-traditional advertising agency searches being conducted than has historically been the norm. And, in fact, there are fewer and fewer purely traditional advertising agencies around. Last, but certainly not least, there has been an explosion in media agency reviews in the past five years or so as marketers are increasingly focused on maximizing the efficiency and effectiveness of their media dollars and as their learning curve steepens with the profusion of new media forms. Agency Discipline Incidence in 147 Consultant-Assisted Searches in 2010 Creative (only) 33% Media (only) 19% Creative and Media 32% Direct/CRM 7% Interactive/Digital 32% Other (PR, Branding, etc.) 33% Unspecified 3% Source: 4As, These trends have resulted in more marketers re-thinking the respective roles of their marketing agency partners and have caused many marketers to put their agency relationships into review as they search for new marketing partners that are better able to address their ever-more complex marketing needs. What Precipitates An Agency Review? There are host of reasons for a client to conduct a review of or search for a new marketing communications agency. Some of the main reasons include: Strategic disagreements between a client and its agency on fundamental business or brand issues. If the client and agency are at an impasse on a basic strategic direction, there may be no alternative to parting company. The agency is not able to meet the client s service requirements e.g., failure to correct unfavorable performance measures, inability to deliver an effective creative product, perceived lack of necessary skills sets or disciplines, etc. There is loss of confidence in the agency by critical constituencies such as client senior management, dealers, licensees, venture partners, or others. There has been poor stewardship of the client s marketing dollars. There are fundamental concerns with the agency team members and their lack of chemistry with the client i.e., it s a marriage that s just gone sour and is viewed to be irreparable. A new enterprise is formed or the client develops a new product or service that the current agency is ill-equipped to handle. 2 Deciding When to Conduct an Agency Search

3 A new marketing initiative is undertaken that requires capabilities not provided by the existing agency. For example, a marketer plans a new direct response program, but the incumbent agency does not have those capabilities. A marketer that has handled its advertising (or other marketing communications needs) in-house determines that it requires outside agency resources. An account conflict emerges based on a merger involving either the marketer or the agency. Or alternatively, the agency resigns the account. The company relocates its offices and desires an agency in closer geographic proximity to its new home. A new CMO wants his or her own agency and fires the incumbent. The current agency goes out of business. A start-up company or venture requires a start-up agency relationship. Think Twice Before Conducting an Agency Search Before undertaking a full-blown agency search, the marketer should be absolutely certain that one is warranted. Reviews are often unnecessary if there are problems in an existing agency relationship that can be realistically addressed. It is usually preferable to devote the time and effort required to fix a broken agency relationship than it is to commit to the undertaking of finding a new agency. An agency review can be potentially problematic for a variety of reasons: 1. Costs to the marketer. There are typically substantial out-of-pocket costs travel, research, search consultant fees, etc. required to conduct a thorough review process. There are also opportunity costs that are often overlooked and result from a search taking up a significant amount of client personnel time that potentially could be expended in more productive ways. (A typical agency search will eat up hundreds of hours and can take 12 to 16 weeks to complete.) 2. Disruption of marketing communications. Every hour your current agency spends defending its business is time siphoned away from thinking about your ongoing marketing issues. Also, a new agency may have timeconsuming growing pains as it gets up to speed on your business. 3. Masking of problems. If an agency search goes forward without a good-faith effort to determine the root causes that precipitated the review in the first place, the marketer may inadvertently bring the same problems into the new relationship. 4. Damaging signals can be sent. Conducting a review can send signals to internal and external constituencies that something is amiss in the client organization or in its relationships with its marketing partners. Be sure to think about all the unintended consequences that could result from an agency search: The search may create dissention within the client organization. The search could generate unfavorable coverage in the press. Other agency marketing partners may be demoralized or threatened. Competitors may pick up signals that they can use to their advantage. With all of the above in mind, a marketer would be wise not to jump into an agency review process until it (and the incumbent agency) has had a thorough airing of the respective expectations for each party in the relationship, and until the incumbent has been given a reasonable opportunity to correct any deficiencies relative to those expectations. If the marketer decides that the benefits of hiring a new agency outweigh the benefits of staying with an existing one, a thorough examination of why the incumbent relationship has deteriorated enough to warrant a review will prevent mistakes from being made in any future agency relationships. It s rarely the case that fault lies with one 3 Deciding When to Conduct an Agency Search

4 partner in a client/agency relationship. In order for a client to forge a successful new agency relationship, the client needs to be introspective and honest about its own role in the demise of the incumbent relationship. Industry Case Study A trade association reached out to R3:JLB to conduct an agency search. After initial discussions and interviews - with the marketing team and association members, it became clear that the trade association still had a valuable connection to their existing agency, and that the few problems they were having with that agency could potentially be solved without conducting a competitive review. An alternative approach was suggested that encouraged the trade association to establish a formal performance - evaluation process, along with developing an action plan, specific performance improvement goals, and deadlines for the incumbent agency. The cost-benefit trade-offs were assessed and the client decided to forego the review in favor of evaluating performance expectations with their incumbent agency. The result was a productive relationship that lasted an additional four years. Hiring a Search Consultant Once the marketer has decided to conduct an agency search, a fundamental decision needs to be made as to whether or not a professional search consultant should be hired to assist with the process. There are three typical reasons why a marketer hires a search consultant: 1. The client marketer does not have the internal resources to devote the time required to conduct a thorough, professional search process. Most marketers run a lean operation. Many just don t have resources for this purpose, and prefer to keep focused on critical ongoing client business activities. A professional search consultantwill have turnkey processes and tools in place that will likely need to be invented by a marketer; invention is a time-consuming endeavor. 2. The marketer doesn t have the expertise to conduct a professional search process, or the depth of knowledge of the marketing agency landscape to give confidence that they can conduct a professional process on their own. The latter is an increasing concern to some, as the marketing agency landscape has changed so rapidly in the wake of the emerging communication technologies. If a marketer doesn t have an up-to-date perspective on this evolving industry, it may be preferable to bring in a consultant that can provide it. 3. A search consultant is often viewed as an objective third party. Some marketers value this perceived objectivity if the agency search process is fraught with internal politics and conflicting internal agendas. An outside consultant may be a way to counter these issues. And a consultant may be viewed as a signal to competing agencies that this is an objective, professional search process. Of course, hiring a consultant comes with a price tag. Marketers will typically solicit search proposals from several consultants and do a cost-benefit analysis of the proposed services and fees. The consultant that offers the best value will usually be hired. And, as in an agency selection process, chemistry with the consultant will typically play an important role in the marketer s decision. 4 Deciding When to Conduct an Agency Search

5 2010 Consultant-Assisted Searches The 4As reported that of 642 agency searches observed in 2010, 147 (23%) used a search consultant. Of these, the most common client categories were: Automotive 10% Food and Beverage 11% Healthcare 15% Restaurants 8% Retail 11% Note: The remainder of the searches were dispersed among 29 other client categories. Source: 4As, Not only do search consultants compete regularly with other consultants for agency search assignments, but they also compete with client procurement departments for these assignments as well. More and more procurement groups have expanded their sourcing function to include marketing agency sourcing. This trend has become somewhat controversial with those who argue that client procurement personnel do not understand the marketing function and the agency world in particular. However, many client procurement groups have gone to school, and their skill sets have grown exponentially. Our decision to use a search consultant has been very beneficial. Although we have the agency experience to run a search on our own, we really needed someone who had the protocols and procedures in place to handle this process so that it didn t become an unmanageable incremental effort on our part. An expert consultant was extremely valuable not only at dealing with the considerable effort involved, but also giving wise counsel on process pitfalls to avoid and valuable advice on contract negotiations. Bruce Delahorne Senior Manager, National Advertising CDW Corporation Beginning the Process: Organizing for the Search Once the decision is made to conduct an agency search, there is a whole host of matters that must be sorted out before the search process can commence, including: 1. Identifying the search team (and defining their roles and responsibilities). Who are the individuals in the client organization who have the time, the experience, and an important stake in the new agency relationship? This is typically a group of as few as three or as many as seven or eight individuals who are charged with overseeing the full search process. Someone from this group will need to be designated as the point person for the process. This person will need to speak for the larger group, be the primary contact person for the agencies, and oversee the process. 2. Identifying the full agency selection team. The team of people who ultimately choose the winning agency at the end of the search process is usually the full search team plus a handful of other client executives who join the process in the final round of the competition. These additional team members typically come from the 5 Deciding When to Conduct an Agency Search

6 organization s senior management ranks. The full selection team should be identified at the outset of the search process so that everyone s input can be taken into account when designing the process. 3. Establishing the budget and the compensation methodology parameters. Early on there must be consensus in the client organization on the marketing budget that will define the size of the agency assignment and determine the revenue potential for the agency hired. In addition, there needs to be an understanding around the general parameters that will govern how the agency will be compensated for its services (fees, commissions, performance incentives, etc.). All of these matters will be critical determinants as to whether agencies opt in or out of the search process. 4. Formulating the scope of work. Some person or group of individuals in the client organization who will have day-to-day oversight of the agency relationship will need to develop a detailed, comprehensive description of what the new agency must do on the client s behalf during the first year or so of the new relationship. The scope of work will be critical for success, as it will help to qualify or disqualify agencies for consideration. It will also become the basis for compensation negotiations. 5. Establishing the search timetable. The timetable for the search process will be another critical determinant of who participates in the process, both internally and as an agency competitor. 6. Working out a communications strategy. A lot of different entities will have a keen interest in the search process e.g., the incumbent agency whose relationship with the client is on the line, agencies who will want to compete for the business, internal constituents who will be affected by the disruption in the incumbent agency s status, other marketing agency partners that may feel threatened, the trade press, etc. It must be decided early on how to communicate with all of these concerned entities. 7. Defining the agency screening criteria. Before there can be any outreach to potential agencies, there must be a very tight definition of the screening criteria that will be used to vet agencies for consideration, such as required disciplines and skill sets, agency ownership, agency geography, agency size, category experience, client conflict definition, etc. 8. Conducting the search prior to the search. If your organization decides it needs the services of a professional search consultant, the agency selection team will need to conduct a search for the right consultant before the agency search can commence. Conclusion: Look Before You Leap Some of the most successful client/agency relationships have been the longest, such as: Unilever and Lowe & Partners: 1899 present. Unilever and JWT: 1902 present. General Electric Co. and BBDO: 1920 present. Ford Motor Company and JWT: , 1943 present. Sunkist and DraftFCB: 1907 present. ExxonMobil and McCann Erickson: 1912 present. While almost all marketers aspire to build long-lasting relationships like these with their agency partners, most will be forced to re-think and re-tool their relationships periodically. When deciding whether or not to conduct a search for a new agency, it is important to remember that: The evolving marketing agency landscape and the increasing client demands on agencies are forcing accounts into review. Agencies are evolving to find their places and to carve out a protectable turf. This makes this agency landscape fluid and ever-changing, requiring much due diligence on the part of marketers. 6 Deciding When to Conduct an Agency Search

7 Marketers should use caution before entering into an agency search, as it is a time-consuming and potentially disruptive process. One of the critical decisions for a marketer to make is whether or not to use the services of a search consultant to manage the process. Once the decision is made to embark on the search for a new agency partner, the marketer is advised to be thorough and thoughtful in organizing for it. The search process will be as productive as the organization and planning that goes into it. About the Author: Brian Goodall R3:JLB is a client-agency relationship consultancy dedicated to helping marketers improve the value and performance of their agency relationships. The firm has 30 consultants located in Chicago, New York, Miami, Beijing, Singapore, and Delhi. Goodall joined R3:JLB in During his 30-year advertising agency career he served in various account management and senior management positions in prominent Chicago and New York City agencies. He has also served on the board of the American Association of Advertising Agencies and on the National Advertising Review Board. 7 Deciding When to Conduct an Agency Search