Opinion

What your client might not be telling you

WhatYourClient_ornge2Take the hypothetical chief marketing officer of an even more hypothetical major brand. What does he or she really think of the agencies and people they work with? What are their challenges and frustrations? And what don’t those agencies know? Based on in-depth, off-the-record conversations with a string of senior marketers, Nic Christensen puts himself in the client’s shoes.

I’m going to begin with a confession: there’s a lot that I don’t tell my agencies. Indeed, there’s a lot we can’t tell them, but if I was to sum up the problem in most agency/client relationships it’s that we don’t actually trust each other.

And if there’s one thing that irritates me, more than any other as a marketing boss, it’s when our agencies come in and tell us how they want to be “partners” in our business.

I’m the newly installed CMO of a major FMCG company and let’s get one thing clear from the outset. Our agencies will never be partners in my business. Never. No matter how good they are. No matter how outstanding their work, their people or agency.

A “partnership” means we share the pain. But an agency, by nature of being just that – an agent – (be it media, creative, digital, PR or random (content marketing/ experiential/social/data/fad of the month agency) doesn’t share the pain.

It doesn’t suffer when the CEO is angry at me and my department because an ad in’t working, it doesn’t have to worry about how we are going to cut into the marketing budget when the production costs on a TV ad are a third over budget, nor do they have to worry about sales and the rest of company looking at them when the market slows and suddenly everyone in the C-Suite suddenly becomes an expert on what sort of marketing will magically solve the problem.

No, in most cases, they get paid regardless of my business results. So if you really want to know the one thing most marketers aren’t telling you it’s that we don’t, and frankly can’t, trust you.

How does that play out? Well, I will hide secrets from you at times. I won’t tell you when we’re acquiring another company. There are plenty of internal things that I can’t tell you (like when I’m at war with the chief financial officer) and while I may ask your advice, I won’t always give you the whole picture.

“Partners” share the loss risk but for agencies that risk isn’t there and under the current, arguably flawed, remuneration model it leads to a less than ideal situation. With the result that there are a number of agencies minimising their risk by diverting resources, and in effect deliberately under servicing clients.

For most agencies their only risk is to lose some billings – and maybe a couple of staff.

In the current business environment, where the agencies are in a race to the bottom on billings, most have made themselves mere suppliers. Many agencies have now moved into a space where they just provide a commodity, and are therefore totally replaceable.

Most agencies don’t know how to move beyond this.

Welcome to the world of the chief marketer where the games are many and varied and where all is not quite as it seems.

The challenges of the modern marketer

It’s not easy being a top level marketer in the current business environment. There’s quite a bit to deal with.

Right now, I’m in my mid 30s, and six months into the role of CMO of FMCG brand ZXY.

I don’t have much time and am always racing against the clock. The average CMO is lucky to last three to five years and if they haven’t achieved what they need to in three years, they can forget about being there in five.

How did I get here? I spent five years working in account management for a couple of different agencies before trading in the ridiculously long hours a decade ago (and taking the payrise) to work client side as a senior brand manager. For the last decade I’ve been working my way up.

The benefit of having worked agency side is that I know things, like how a “value bank” works, and the myriad other tricks media agencies use to squeeze dollars out of their clients (for more on that you can ask my friend at Agency ZYX). In the end, I’ve played the game from both sides.

So let me start by explaining something that my agencies, and even my staff of mostly 20-something brand managers, sometimes don’t get: much of my role increasingly doesn’t revolve around marketing.

Sure you get into this world thinking marketing is about well… marketing, and that’s certainly one of the most interesting parts of business. But today’s CMO spends much of his or her time reporting up the line to sales, to the chief financial officer, to the CEO, or to the parent company half a world away trying to question me on how I run my department.

That’s a lot of reporting and that’s before we get to the internal politics that comes with work at the top level of a major company, the need for me to spend time with the sales side of things to understand why X or Y isn’t selling and tangling with the chief information officer about who ordered and controls the new internal data analytics system.

And that’s before the expected stuff like did we just screw up packaging on X new product, or do we have a retail/distribution problem with one of our main retailers?

My day often gets consumed with retail issues, distribution challenges, sales meetings, human resources and of course the usual CEO/CFO/CIO meetings, and that’s before we even get to the challenge of keeping my own marketing staff in their seats long enough to ensure that my department turnover doesn’t suddenly get too high and then I’m back with HR having to explain if there’s a problem in the marketing team.

I have a problem: as CMO I’m tied up in meetings all day and I rarely actually spend any time focused on marketing.

But you’ll note that nowhere in there did I mention the agencies – be they media, creative, PR, digital or what have you. Sometimes I wonder whether the media agency, or more likely the creative agency, thinks I spend my day waiting expectantly on the amazing idea, strategy or creative they are putting together. I don’t – I expect good work but it’s also what I pay you for.

I’d be surprised if I spent more than five per cent of my time worrying about what the agencies are doing. Why only five per cent? Because the agencies are part of a broader mix and I have a staff of brand managers who are paid to deal with them (note to agencies: you circumvent the team at your own peril).

Sure my time ratio changes if there is an agency review and a pitch, but mostly the only time I hear about them is if something has gone wrong and a deadline has been missed or we are suddenly over budget.

And you can be sure I’ll make sure I hear about that. Not only that, but I’ll be the one screaming about it.

Internal politics and the war with procurement

Why am I freaking out about a cost overrun on my beautiful new ad campaign? Because I have a CFO who is out to get me, or at the very least my department and my budget.

For most businesses, marketing is a top-three expense. In my case it’s the number one and that puts my budget and how I use it firmly in the sights of the finance department. The CFO, who fancies herself as the next CEO, is looking to get control of how I spend my money via a key tool: procurement.

Agencies are always whining about how procurement is driving down margins and how they’re a nightmare to deal with and how they’re ruining their lives.

Welcome to the club.

The thing is there are ways to handle procurement. In the end they are a reality of modern business and they play a role but equally I’m also not going to let somebody who buys telephones or tea bags one day to suddenly tell me what I need to spend on television or radio the next.

In recent times there has been a lot of talk about how increasingly the marketing world is in a race to the bottom as procurement takes over and tightens the marketing budget. However, to my mind this ignores the complicity of the agencies who always seem to be able to squeeze out a bigger discount or rate cut, or our role as marketers who just accept the cheaper price, while failing to recognise that if we pay less then that often means we get less.

Like many chief marketers during their first year in the job, I reviewed and pitched some of my agencies and we changed one or two and got a small reduction in fees in the process, but that was my peace offering to finance. What I didn’t do is let them run the process and made it clear from outset that if it impacts any of the sales numbers, even a little, then it’s on them. That will hopefully keep them out of my hair.

In years gone by I’ve seen it the other way, where a CMO lets procurement in and they want to just rip the guts out, cut costs and go with the cheapest agency. This perspective ignores a reality that marketing isn’t just a cost; it’s about the creation of value and that’s hard to put a price on.

Often when a marketer allows procurement in, it is forced on them by the CFO and a recognition that if they don’t keep them and finance happy then their job is at risk.

But the problem is once you let them in they monitor the contract to ensure the agencies are keeping their promises, in a lot of cases it stops us from building a relationship with the agency because procurement won’t even let you talk to them without them being in the room.

This combined with the fact that I know that procurement is itself a profit centre and has to justify its own cost through savings – not just wishy washy savings, but hard savings – is why I will always engage with them, but I never let them run my process and feel for the marketers who do.

How did “bean counters” come to have such power? Well the irony is that’s the fault of marketers who have always struggled to explain the value they and their departments create.

In the modern era, the company works from financial statements and as CMO I have to be able to read those and speak the language of numbers.

My job as CMO is to create value, while the CFO’s job is to record and account for that value but if I’m to survive in this role I have to help her do that.

Often this means I must give the CEO and CFO what they want in terms of numbers or metrics, but invariably those numbers make less sense to my marketing team who will also want to talk about softer metrics such as brand health and consumer attitudes.

The agencies and the marketing department

If there is one thing that agencies don’t understand it’s that I’m not here to solve your problems. Rather you’re on the roster to solve mine, and my department’s.

Some of the agencies on our roster get this, but most simply don’t. Agency ZYX, for example, doesn’t play well with the other agencies, misses deadlines and is always concerned about his own business. Agency YZX, on the other hand, is concerned about my business and realises that if she worries about my business then her business will take care of itself. Who would you give the briefs to?

But that’s far from the only mistake the agencies make. In case you haven’t noticed most CMOs don’t have a long life span in the role. In the end, I will be replaced and my staff, while they turn over too, will notice if you run roughshod over them.

This is what happened when I took this job. The last CMO just let the agency have a direct line to him, which meant that they ignored the brand managers. I arrive and of course ask my team what they think of the agency and surprise, surprise, they hate them! Six months later there are no prizes for guessing which agency is no longer on the roster…

What else do the CMO and his department hate you ask? Well let’s start with the ‘Big A-ha!’.

I often worry too many creative, and media agency, people have watched one too many episodes of the TV show Mad Men and suddenly think they are the 2014 equivalent of Don Draper.

Australian agencies don’t need more Drapers – they need more Pete Campbells, the character who worked in account management and spent most of his time managing the expectations of clients.

Too often agencies forget to take the client with them on the journey and instead become obsessed with the destination. Don’t get me wrong, results matter and so the destination is important, and I recognise that as a client we often fail in clearly explaining what it is we want (it’s because often we don’t know), but that only makes the ‘Big A-ha!’ even riskier.

So what is the ‘Big A-ha’? Well it’s that moment that I swear some executive creative directors, in their cool T-shirts, live for… Where they sit the client down, present them with the storyboards and show the grand idea, which hopefully will win them a raft of awards next year.

The problem is, nine times out of ten it will engender a ‘what the fuck’ moment, even if idea is good. In most cases we would rather a collaborative approach, where you draw on our knowledge and expertise with tissue sessions (and yes I know agencies hate tissue sessions) and regular catch ups rather than a big reveal. Tissue sessions, for those who don’t know, are named after the pre-computer process involving tracing paper.

Tissue sessions say a week and half into a schedules allows the agency to present three broad directions and to check if the brand manager (note: I’m not in the room for this, as I have already explained I have other places to be) is uncomfortable with any of these ideas.

Agencies never look at it from the perspective of the 25-year-old senior brand manager. My team know what I like and when they are in those sessions they aren’t thinking “do I like this?”. No they are thinking “will my boss the CMO like this?” and “will their boss the CEO like this?”  Feedback during the process is important because it gives the agency the chance to refine the direction and make sure you don’t wonder wildly off brief.

When you do the ‘Big A-ha!’ my staff are left thinking: “I’m too scared to tell my boss I like this campaign because if I tell him I like it and he doesn’t like it he is going to think I’m an idiot.” Meanwhile I’m left wondering why no one from the agency (again, this is where having some account managers who actually know how to manage expectations might help) told me about the “new direction”, let alone any of my staff who were either in dark or now clearly pretending to be… in an act of outright self preservation.

It’s usually at this point that it’s left to me to tell everyone in the room that they’ve wasted three weeks out of five on something we’re not going to buy and now we only have two weeks to get something on air. Essentially you’ve burned three weeks for nothing. 

Now I know, creative agencies don’t want to give clients too many opportunities to kill an idea but too often when agencies fail to take the client on the journey, they find out too late that the destination is completely wrong.

The result is often that the client feels disrespected.

Pitching

Eventually some relationships break down and that brings us to the subject of pitching.

You would like to think that pitching is something that we only do as a last resort, right? The relationship breaks down and things get so bad that as CMO I’m forced to pitch the account.

Not true. Many clients pitch for a variety of reasons, they might need to please HQ over in the US or Europe, or there may be internal politics driving the pitch.

But as a general rule, as the incumbent on a pitch, you’ve got a 20-25 per cent chance of winning. Max.

Sure we’ll bring you along on the pitch process, often right till the end but for most of us that’s driven more by the fear that you might drop the ball on the current work. Frankly it’s easier to slit your throat at the end when we have a new agency ready to go than it is to have the conversation upfront. 

Why is pitching happening more and more? I’d argue that it is because calling a pitch is what the agencies have trained us as their clients to do.

Don’t believe me? Take a look many of the big CMO appointments and you’ll find a large number of them pitched their account, usually within six to 12 months after taking over the gig. 

As a newly installed marketing boss, one of the first things you do upon taking on the role of chief marketer is to review the agencies and then call a pitch.

That’s certainly what I did. Sure the agencies were doing okay work and things might have be going smoothly but performance was not the issue here.

But why not pitch? In my first six months, I needed to show my bosses a win.

It was an easy way to get a reduction in agency rates, as the agencies all dropped their pants, and it also reminded everyone I’m now in charge.

(Meanwhile 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.)

As a client I often struggle to figure out how you make ends meet. If you look at media agencies, their margins are often as low as two or three per cent of spend yet somehow you pay for your shiny offices, your staff salaries and then presumably still ship money to your parent company, usually overseas.

It’s this uncertainty about how you make your money that helps fuel much of this distrust between clients and agencies. We are now long since past the era of 17.5 per cent retainers for media agency and full service agencies are largely a thing of the past.

Today agencies are increasingly moving towards beings specialists but oddly they are doing this across a gamut of additional services. So much so, I can’t help but wonder are they simply a way to make up the profit on the unsustainable margin they are being paid on the main account? 

It’s this upselling add-ons, which sees my agency constantly trying to load me up with mobile, video, data, content marketing, social, experiential, you-name-it-we’ve got products that frankly I never understand – nor can I explain their value to the sales department, CFO, CEO, or heaven forbid, the board.

The remuneration model, trust and moving up the value chain

Because I don’t understand all these areas I’m often left saying no, even when I know that in the modern marketing landscape I need to innovate.

But the big issue here is the degradation of trust. Look back even ten years and there was implicit trust between the agency and their client – especially the media agency entrusted with millions of dollars.

However, today much of that trust is gone. Instead of having the experienced people who were promised to me in the pitch, it’s often the juniors who are in the room with my (often equally junior staff) the result is that we often have 25 year old media agency people advising a 25 year old brand manager, and there’s maybe $5 million or even $10 million of my money at stake.

Is it any wonder that screw-ups happen? Airtime doesn’t get booked at a crucial time of year for our brands or budgets go over, or any of the other cock ups, mess ups and fuck ups that arrive on my desk on a monthly, if not weekly, basis and require me to pick up the phone to the agency in a desperate attempt to find an adult. 

Why does this happen? Part of the problem is we don’t pay our agencies enough.

The problem is also driven by the sometimes insane remuneration scheme we as clients impose on our agencies. Often these deals offer the 80 per cent payment with the additional 20 per cent paid when they reach their Key Performance Indicators.

Now let me ask you would work for 80 per cent of your salary with your boss dangling the other 20 per cent over you? No, you’d do what most agencies do, which resource the account at 80 per cent of staff – it’s an act of self preservation.

Again it’s not rocket science, if you want an incentive based scheme then it should be a reward for good work not a balancing of the books for what is owed. The other one that amuses me is when clients offer a five per cent additional bonus but might demand the agency put 20 per cent at risk. Ask yourself where’s the incentive? It’s not in hitting the KPI, it’s ensuring that we don’t lose the 20 per cent, and that typically means understaffing.

As a CMO I pay my agency the rate we agree and I expect to be serviced to the level we agreed. There are then bonuses on top if they exceed the KPIs.

All of this comes back to trust and the recognition that while agencies can never be “partners” but they can be trusted advisors.

This is the role they used to hold but it begins with the agency understanding the business and the needs of the client. It also requires the client be fair to the agency, to pay them for the work, to ensure that procurement is not controlling the relationship and that they are being clear in how they communicate their needs. 

That’s where a real difference can be made.

Note: The practices discussed in this article are hypothetical. This piece represents our attempt to continue a discussion around transparency and some of the more dubious potential practices in the client and agency landscape. It follows last year’s article on What your media agency might not be telling you.

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