Decideware

One of the more significant changes under debate is whether traditional agencies could be displaced as the voice of the consumer.

Advertisers look to their agencies to understand and interpret consumers’ beliefs, needs, behaviors, perceptions, desires and perhaps most importantly – their purchasing decisions.

This has always been the coveted domain of agencies and marketers greatly value that service. 

However, the role may be under threat, (at least in the digital world) according to an Accenture report based on a survey of 70 industry leaders.

'‘The challenge agencies face stems from the rise of performance-based advertising and the technology tools needed to execute highly targeted campaigns, rather than mass-media pushes fueled by a singular "big idea," according to Charlie Symmons, senior manager in Accenture's media and entertainment practice.’ (AdWeek 14 Nov 07)

That is, with the shift to digital and the capacity for owners of digital channels to provide marketers with timely, detailed, personalized and/or aggregated consumer data, do opportunities arise for those channel owners to better represent the voice of the consumer to advertisers?

And in terms of client-agency relations, will marketers continue to expect agencies to be the singularly informative source of consumer knowledge needed to drive great advertising? 

Source: Shops Stand to Lose in Digital Revolution
Adweek, November 14, 2007
Brian Morrissey

Author: Viji Ratnam (Decideware)

With our thanks to Tim Williams from Ignition Consulting Group for this article

It surprises most agency professionals to learn that many advertisers are intensely interested in exploring a value-based compensation arrangement with their agencies.  A recent position paper from the Association of National Advertisers (ANA) states it clearly:  “Traditional metrics used in today’s cost-plus compensation agreements (usually based on time) have no relationship with the external value created for the client in today’s intellectual capital economy.  Therefore, pricing should instead be based on results and value created."

In our recent work with the ANA, Ignition has discovered that marketing, finance, and even procurement officials from client companies are actively engaged in internal discussions around value-based compensation.  Our view is that if the agency community isn’t more proactive in this area, clients will be the driving force behind a change in compensation practices.

Buying outcomes instead of hours

From a marketer’s perspective, the chief frustration with the traditional cost-based compensation system is that they’re not sure what they’re really buying.  Are they buying the agency’s time?  Dedicated staff? A set amount of work?  In the end, they don’t really want to buy any of these things; they want to buy results.

In a cost-based compensation arrangement, the marketer pays for efforts rather than results.  Agencies log and charge hours regardless of the outcomes the hours produce.  In a value-based arrangement, agencies and clients identify specific metrics of success and structure agency compensation around outputs instead of inputs.

Shared interests, shared risks and rewards

Value-based compensation works primarily for one major reason:  it aligns the interests of the agency and the client.  Both parties are working to achieve the same things.  They both have similar financial incentives.  Structured properly, value-based compensation agreements can also give both parties similar risks and rewards. 

Imagine how this could change the dynamics of an agency-client relationship.  Suddenly, the concept of “partnership” takes on real meaning.  Marketers start to view “risky” agency recommendations differently, because they know the agency has skin in the game.  A new level of trust and mutual respect emerges, because both parties have a stake in the outcome.

Value-based pricing is unquestionably where the marketing world is headed.  The question is, who will get there first: agencies or their clients?

Tim Williams is founder of Ignition (www.ignitiongroup.com), a consultancy devoted to helping agencies work in a value-based way with their clients.  He welcomes your comments at twilliams@ignitiongroup.com.

Professional services firms like advertising agencies, auditors and lawyers are quick to characterize their dealings with clients as “relationships”. Some go further and even describe their dealings as “partnerships”. But how many firms really know definitively what these terms mean? What specifically are the important component parts that add up to a relationship? What specifically is expected of the professional services firm in a partnership?

And commercially, what does an effective “relationship” and a strong “partnership” mean to the botton line?

The Business Lifecycle

There are 3 distinct phases in the business lifecycle of a professional services firm and its client – the initial pitch, the ongoing servicing of the business, and the termination. All the profit derives from the middle phase – the ongoing servicing of the client’s business. So the imperative in the business lifecycle is to prolong as long as possible the ongoing servicing phase of the relationship.

Defining & Measuring Success

Crucial to prolonging the relationship is surely some kind of ongoing evaluation of performance and satisfaction. Evaluation programs typically involve some kind of survey of participants in the relationship. Typically for professional services firms the assessment criteria are based on qualitative questions.

The basic discipline of an evaluation program has great value for the firm or agency because:-

• It compels the client to identify what’s important to them in the relationship, and where the priorities lie. Once the firm knows what’s important in the relationship they know where to allocate resources and time;
• Early warning! Regular evaluation of performance and satisfaction will reveal areas of weakness before they become problems.

Relationship Is Glue

All this should be viewed in the context that surveys of clients consistently indicate that the quality of the relationship with their professional services firms is a key reason why they remain with them. Professional services firms may win business because of their performance in some kind of pitch or tender, but clients stay the distance because of the quality of the relationship. The relationship itself becomes the differentiator and the glue.

Evaluation Programs

So management at professional services firms may want to rethink the role and value of performance evaluation programs. They should be viewed as an essential business tool which:-

• Helps define expectations and priorities in the relationship;
• Determines how well the firm is meeting these expectations (early warning!);
• Cements the glue in the relationship!

Does your professional services firm undertake regular performance evaluations?

Author: Derek Groom (Decideware)

I recently attended an excellent ANA course in San Francisco. The day's workshop, 'Optimizing the Client/Agency Relationship', focused on relationship management and was run by Joanne Davis, a leading light in this space.

Being a 'Great Client'

One of the key learnings I took from the day was how important it is to be a 'great client'!

It also got me thinking more on this aspect of the strategic relationship process, and relatively how little focus is applied to Client performance in many evaluation or SRM programs.

The good news is that we are seeing an increasing number of '360' relationship evaluations underway, i.e. where the performance of the client is measured and feedback is provided by the agency/supplier on strengths and areas for improvement.

However, the measurement of the client it is certainly of secondary importance in the program and I know I often fall into this trap, paying less attention to this process.

Get their attention

So why it is so important to be a great client in strategic relationships. Could I suggest that FOCUS could be the driving reason, that is you want the agency/supplier to concentrate as much of their attention on your business as possible.

Like it or not you are in competition with other companies for your agency/supplier's attention, just as they compete for yours.

Joanne had a great phrase she used to illustrate why this is so important... "get the 'A' team on your business"

• In the marketing domain the key reason to get the 'A' team is so you get the best creative, enhanced strategic insights, better production, smooth project/workflow management etc
• In other spend categories it may be to ensure continuity of supply (i.e. when things get tough you are the client your supplier calls first), innovations brought to your attention by the supplier, focus on cost reduction, better process management etc.

Recent survey results

In the marketing space the ANA and AAAA conducted a recent survey and asked what are the top 7 things an agency would like from a client.

If you work in the marketing space how does your organization stack up against these criteria?

1. Giving the agency the necessary time and resources to do its best work.
2. Working with the agency in a collaborative manner that puts a premium on mutual respect.
3. Identifying and articulating the outcomes the agency's work is expected to produce.
4. Providing clear complete direction to the agency.
5. Providing constructive timely feedback to the agency.
6. Understanding the problems and opportunities facing the brand and identifying the brand's key
   success drivers.
7. Ensuring that all relevant information and necessary personnel are made available to the agency.

I wonder if in your categories of spend there are similar common charateristics that suppliers would like from their clients.

As a suggestion, next time you meet them, how about asking and making sure that you have them included in your formal evaluation process.

Author: Richard Benyon (Decideware)