Opinion

Have we already reached the bottom of the well on price?

Eric FaulknerAmid debate around elements of the client agency relationship, Ebiquity’s Eric Faulkner asks if both clients and agencies have both unwittingly conspired to destroy each other.

Earlier this week Mumbrella’s Nic Christensen, writing as a ‘hypothetical’ CMO, wrote what many in the industry had long been thinking on the topic of agency pitches.

“For anyone wondering about the race to the bottom, in this market, I reckon you hit it about three years ago. Not that anyone seemed to notice,” his ‘hypothetical CMO’ wrote.

It’s rather like the climate argument — if you’re going to wait until we’re all under water, well, its a bit too late then, isn’t it.

Well, we have already passed that point. Our hypothetical CMO may have added that although their creative quality may be at an all time low, at least the media is cheap.

In fact this year’s media buy is 20 per cent cheaper than last year’s and that was 20 per cent cheaper than the year before.

So next year’s will be free. And the agency has dropped their fee to nothing already, so they’ll be paying us to handle the business next year.

Not that there’s much to handle, as the advertising has been so bad and all the ads have appeared at midnight, that no one knows our brands and certainly doesn’t buy our products any more. Which is just as well because the retailers take 110 per cent of what we earn anyway. I wonder what the surf’s like today?

Ok, so I am guilty as charged. It is my fault. 26 years ago I started an independent media consultancy that helped marketers lift their level of media competence and confidence. This was so that they could work more constructively and effectively with their advertising and media agencies. And then, five years later, one of our clients asked us to develop a way of independently evaluating their buying agencies. We did.

It wasn’t that sophisticated back then, but we did ensure that quality was always reviewed at the same time as cost. Soon, many jumped onto the bandwagon.

And I am not just referring to the consultancies that make up the numbers on the back of cigarette packets. I am thinking too about the client procurement people who may not have been thinking enough about the business ramifications of their media cost-reduction demands.

Media procurement has moved from a local function, to become regional and global. That’s real power. But is that power balanced with an equally lofty level of brand and business responsibility?

A managing director told me over coffee a while ago: I am responsible to my global boss for the success of this business, but I no longer have full control of our advertising spend – a key driver of our brand strength. That is increasingly controlled by procurement, based outside this country.

So, the CFO is delighted to see the million dollar “savings” that have been achieved (by procurement) and promptly docks the money from the marketing budget and plops it straight to the bottom line.

The marketing director is at first bemused, then confused and finally frustrated as they realise that their marketing effort has moved from Grand Prix race car efficiency and effectiveness to that of a family saloon. The good ones fight. But this is a tough fight to win.

But as Christensen has said in his thought-provoking articles about What your Media agency and What your client are not telling you that it is not just the clients and me who are guilty. The agencies have conspired to create The End too.

I was chatting to a senior media friend recently. He’s worked in agencies in three countries. Really smart guy. We were talking about transparency of agency media deals.

He said: “Look, what’s the problem here? As long as the client is getting you guys to do the benchmarking, then they know they’re providing competitive value and that the agency is focused on their business.

“Who cares if the agency is making a bit of extra money on the side from media owner kick-backs? After all, when I walk into Coles or Woolies, and I pick up a box of Kleenex or Sorbent, I don’t ask the store manager how much they paid Kimberly-Clark or SCA to buy it in the first place. I don’t ask them what their trading terms were. I just buy the one I want.”

Now that is a fairly convincing argument. And if media agencies want to position themselves in that way, fair enough. But that’s not the way marketers see it … yet at least.

Marketers look at media agencies and creative agencies as their trusted suppliers.

They share highly sensitive and confidential information; they seek advice, guidance, support, help and ideas from their agency. They are looking for a relationship based on trust, collaboration, insight and creativity. Maybe they are mistaken.

As fast as advertiser procurement teams screw lower fees and cheaper buying costs from agencies, the agencies find smarter ways to work around those restrictions and replace the lost income from other sources — usually ending up in a financially stronger position than where they were in the first place. That’s no longer news. Everyone knows that.

But what happened to the old fashioned concept of integrity? If your agency is acting like a broker, then say you are a broker. And if you are a procurement manager, don’t be naïve (or worse, pretend to be naïve) about how your supposed savings will be charged back to you … in poorer quality, creative accounting or less experienced resource.

I can almost hear the words “We don’t do value bank deals. We don’t have AVRs and AVBs. We don’t invoice clients for bonus spots. Maybe some of those things are done at group level — but not by us in this agency”. You can see the three little monkeys … with their hands covering their mouths, eyes and ears, saying hear no evil, see no evil, speak no evil.

Come on guys, let’s not follow that Jack Johnson song Cookie Jar where a never-ending trail of people refuse to accept responsibility for their actions … and no-one is willing to stand up and be counted. Let’s start being straight with each other.

Let’s stand up for our opinions … not just in darkened pubs, noisy restaurants and in anonymous blog comments … but in front of each others’ faces.

Eric Faulkner is CEO of Ebiquity’s Australian, NZ & SE Asian business.

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