Can behavioural economics help improve agency relationships?

As the issue of agency collaboration becomes more pronounced Simon Lawson asks if the industry can use the lessons of behavioural economics to improve it.

According to one study, 40-45% of us will make a New Year’s resolution this year.  The most popular are to do with our personal lives: Lose weight; quit smoking; save money. Isn’t it time we resolved to make changes to our work life as well?

It seems to me that an excellent work resolution for the New Year would be to try and work more collaboratively with our agency partners.  Specifically, I think we should make 2014 a better year for media and creative agency relationships.

Simon Lawson


There appears ample room for improvement.  In a recent online survey* of account managers from media and creative agencies, 63% of respondents scored the quality of collaboration with their agency partners as 6 or below out of 10.

At the same time as media and creative agency client teams work towards better and more fluid collaboration, the science of behavioural economics is becoming a powerful influence in the development of the work we all produce.  It got me thinking:

Could behavioural economics help improve agency relationships?

For the uninitiated, behavioural economics looks at how the decisions of individuals and organisations are affected by social, cognitive and emotional factors.  One of its key insights is that people don’t always make rational decisions, instead behavioural economics embraces the idea that decision making is often irrational and biased by forces like anchoring, social proof and framing.

In my experience, the advertising industry began to look en masse to the lessons of behavioural economics with the publication of books like Nudge by Thaler & Sunstein (2008), Dan Ariely’s Predictably Irrational (2008) and Daniel Kahneman’s Thinking, Fast and Slow (2011) amongst others.

So, what might be causing some of our agency relationship challenges?

Two systematic biases that may be contributing to the challenges faced by media and creative agency client teams are The Endowment Effect and Loss Aversion.

The Endowment Effect shows us we typically over-value the things we own.  A good example of the endowment effect is a study by Kahneman, Knetsch & Thaler (1990) where participants were each given a mug and offered the chance to trade it for an item of equal value.  In this instance, a pen.  In the study, participants were reluctant to trade their mugs for the pens on the basis that ownership of the mugs had caused them to feel the mugs were more valuable than the pens.

Think about the media/creative agency dynamic for a moment:  What do we own that might be subject to the endowment effect?  Sharing ideas and thinking in the days leading up to a client presentation, is it possible we value the ideas we’re sharing over the ideas shared by our agency partners because of the endowment effect?  Could it be that we also value our agency’s planning tools over our agency partners’ for the same reason? Asked about the quality of their agency’s planning system and processes compared to agency partners’, 61% of respondents to the online survey indicated theirs was “better”.

Loss Aversion is a cognitive bias that tells us people feel the pain of losing something more acutely than the joy of gaining something.  In one study, people were only happy to gamble $100 if they had the potential of winning an incremental $200.  Participants effectively required the possibility of a 300% return to risk losing their original $100.

Loss aversion shows us that agency teams are likely to respond strongly to the idea of losing something they feel they own without the corresponding chance to win something far more valuable.  In recent years, we’ve seen media agencies attempt to play a significant part in the development of campaign ideas while at the same time creative agencies seek to become more instrumental in the development of channel plans.

In the online survey, 63% of creative agency respondents indicated the principal responsibility for the development of campaign ideas rests with them, while the other 37% said it’s a shared responsibility.  This contrasted with media agency respondents; of whom only 10% said creative agencies are principally responsible for the development of campaign ideas, with the overwhelming majority (83%) labelling it a shared responsibility.  Gaps like this are likely the cause of some friction between agencies.

On this analysis, behavioural economics has helped to diagnose some of the biases that might be contributing to the challenge of establishing fluid and functional relationships between media and creative agency client teams.  The solution to solving these complex challenges shouldn’t be left up to behavioural economics alone, but there are some areas where it could help: Three cognitive biases that could be used to improve things are framing, priming and social proof.

Framing deals with how the decisions we make are often contingent upon the context in which we view them.  The book Nudge illustrates the power of framing with a medical example and asks you to suppose you’re suffering from a heart condition.  Faced with a critical operation, imagine a doctor tells you that 90% of patients who undergo this operation are alive after 5 years?  How likely would you be to have the operation?  Consider the question framed another way, “Out of every 100 patients who have the operation, 10 are dead after 5 years”.  Your response would likely change depending on how the question is framed.

What is a typical frame for the relationships between media and creative agency client teams?  Sadly, I think the frame is too often one of winning, and shared projects can sometimes feel more like a competition than a collaboration. How could we use framing bias to improve things?

A wise man once told me the biggest cost in agencyland is that of redoing our work:  Spending longer and longer trying to crack the idea, prevented from moving on to the next milestone.  What if we re-framed the task from one of winning to one of greater productivity and fewer wasted hours?  Reduce the time taken to agree on the strategy and the idea, and leave everyone with more time to execute.  Couldn’t re-framing things like this lead to more fluid collaboration?

Next up, the priming effect. Dan Ariely demonstrates the priming effect in Predictably Irrational with an example that uses the Ten Commandments as the primer.  Three groups of UCLA students were asked to perform a simple maths test, with two of the groups given the opportunity to mark their own tests, i.e. the opportunity to cheat.  Of the two groups given the opportunity to cheat, one group was asked to write down the names of ten books they had read at high school before taking the test, while the other was asked to write down as many of the Ten Commandments as they could recall.  While the results of the “school books” group suggested cheating had taken place, surprisingly the “Ten Commandments” group didn’t cheat at all.  Evidently, the act of recalling The Ten Commandments had primed honesty.

How could we use the priming effect to improve media and creative agency client team relationships?  Predictably Irrational suggests that a professional oath might be a good way to change behaviour, much like the way society hopes swearing an oath in court will increase truthfulness.  As silly as it sounds, perhaps it makes sense for creative and media agency client teams to affirm their commitment to fluid and functional collaboration at the start of every project.

My final suggested improvement is based on social proof. Social proof describes how people sometimes take mental short cuts in their decision-making based on seeing what others like them are doing.  Imagine you’re in a foreign city trying to choose a restaurant for dinner. You come across two restaurants side by side; one’s quite full and the other’s empty.  If you’re like most people, you choose the full one, because it’s full: That’s social proof.

Ian Perrin wrote an article last year lamenting the industry’s current obsession with award shows.  I like his suggestion of an uber awards night and I’d like to recommend a new category to provide greater social proof that media and creative agency client groups can become high-performance teams; let’s call it Best Media/Creative Agency Client Team.

I think most people would agree relationships between creative and media agency client teams are often complex.  It’s difficult to get them working effectively, and sometimes structural problems, like clients failing to clearly define the roles for each of their agency partners, make things challenging to say the least. With that said, our industry’s recent interest in the science of behavioural economics should make us all more aware of our own biases, and could help to improve media and creative agency relationships in three simple steps:

  1. Re-frame the relationship from one of winning to one of mutual productivity
  2. Publicly affirm each other’s commitment to collaboration prior to every project
  3. Celebrate high-performance media & creative agency client teams

Let’s make 2014 a good year for collaboration!

*Respondents to the survey undertaken in late December were sourced via my social media networks, with the invitation to participate subsequently shared far beyond my direct connections.  There were 40 respondents. I don’t know which agencies the respondents work for.  I appreciate it’s a small sample and I’d love more people to complete the 2 minute questionnaire; you can take part by clicking on this link: https://www.surveymonkey.com/s/CX2JSM9

Simon Lawson is a business director and communications strategist at PHD Melbourne. Twitter: @simonislawson


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