5 Problems with Project Based Agency Relationships and How to Solve Them
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Is your marketing organization ready to move to project based agency relationships?
In a recent study, 52 percent of marketers surveyed anticipate working mostly with smaller, specialized agencies for their creative needs in the next five years.1
This comes as no surprise to agencies who have watched in horror as clients have gradually shifted away from retainer based relationships in favor of project work for creative development over the last few years. There are various reasons why clients are having trouble committing to long term contracts– the rise of social media and the subsequent need for constant content development, increased pressure from procurement and sourcing on agency fees and increased emphasis on “testing before investing” have all played a part.
This shift has left the agency world spinning-causing them to invest more than ever in new business pitches and trying to bridge the monetary gap that AOR relationships once filled. On the client side, there is a serious struggle to maintain steady performance and results without a consistent partner at their side. While the newly available marketing dollars appear large to everyone including procurement, working project- by- project could cost more than the amount saved by a trimmed retainer.
First, there is a labor expense associated with training and re-training new teams. Immersion in the brand’s DNA, business objectives and challenges, competitive landscape and target audience takes time and expertise. To those who know the drill, project fees tend to be inflated, on average, by about 20% to allow for the time it takes to get an agency team up to speed enough to “surprise and delight”. Even if you are lucky enough (and, let’s face it, worth enough in potential fees) to have a roster of agencies on standby, agency leaders (hopefully!)will go through the expensive task of re-briefing their teams if they aren’t on demand and actively involved in the daily business. Ensuring relevance and expertise is a “need to have” on each and every new project and ad hoc team assignments is not the way to guarantee you will have the right people on your business when you need then.
Of course, this brings up another issue, team turnover. Retainers are there for a good reason – to RETAIN good talent on your team. When you move to a project based relationship, it’s very likely that your favorite creative team may simply not be available the next time you decide to start a project. Agency talent is finite and the cream of the crop typically gets to work on the accounts that are considered plums – the ones that treat them like real partners and ensure they are involved in solving every challenge.
Removing dedicated and routinely assigned teams also means some sacrifice in proactivity and innovative thought from a team of creative thinkers who know and love your brand. On the one hand, they may be more motivated to bring you recommendations in order to capture more project revenue. On the other hand, these recommendations may be more motivated by agency revenue goals than your business challenge.
Finally, probably the biggest problem with project-based agency relationships, is maintaining an integrated and collaborative culture. Agencies will often, justifiably, become less collaborative within your portfolio of agencies and with your internal marketing team when they feel like they need to protect their “turf”. When there are several agencies working on the same brand, the AOR or lead agency is often asked to play the role of integrator. When the AOR designation goes away, someone on the client team must be tasked with playing this role themselves. And, as the media landscape continues to fragment, this role has never been more important or time consuming. You must decide, do you give the role of Integrator to one of your agencies, assign within your own team or co-lead the Integration role? Each option has impactful pros and cons to be considered and there is no “one size fits all” solution.
But for all intents and purposes, if you have decided to go with a project based relationship model, one solution to several of these challenges is to make your portfolio “semi” project based. Develop a small group of important team-members at one or two preferred agencies and ask them to dedicate a small percentage of their time each month to keeping up with your business and taking on new projects. We call this the “Low Hum” retainer and it has two real benefits – 1) it helps ensure that your team won’t leave for greener pastures at the end of a project; 2) it reduces the time required for continual re-briefing and immersion. They can also become a semi Think Tank for new innovative ideas and smart recommendations that benefit your business as much as their own. You may specify that a certain amount of time is spent specifically for this purpose to keep the wheels turning.
But the most important thing to consider before you shift to a project based roster of firms is your own organizational readiness. Much like being a General Contractor, this approach is organizationally harder and more stressful than being part of a cooperative. We have found that the internal demands on brand teams’ time and management skills call for a unique skill set. Here are five questions you should be able to answer in the affirmative before making the shift:
- Do you have someone on your internal team now who can be a contact for the agencies and oversee all project work to ensure integration and cohesive strategy?
- Will your existing brief template be sufficient for educating new partners as they are brought on board with new projects?
- Are you confident that your team will have the time and expertise to select the right agency for each project without bias? How will you assess their performance and that of your team?
- Do you have internal assets for workflow management and document sharing to ensure smooth and streamlined execution on each project?
- Who is responsible for managing each agency relationship and how well are those responsibilities and expectations defined?
As attractive as it may seem to dump your big agency retainer in favor of a less committed short term relationship, it can easily backfire, both financially and in terms of tension in your relationships and stress on the internal team. Often, significant change must occur internally before an organization can effectively benefit from the shift. A better path may be to identify gaps that may be causing a perception of lesser value from your existing partner and solutions for better alignment. There are always ways to restructure a relationship so that both sides see a benefit in continuing to develop great work together.
The Bedford Group has over 25 years of experience helping clients and agencies develop productive relationships through relationship assessment, agency search and selection and marketing team organizational design. If you are considering moving to a project based agency engagement model, we can help. Contact Natalie Cerone at 404.237.4565 for more information.
About The Bedford Group
The Bedford Group is an Atlanta based Marketing Management Consulting firm that has been in operation since 1986. It has built its reputation on marketing organization support, agency search and relationship management and strategic marketing consulting. Unlike traditional advertising consultants, The Bedford Group looks beyond traditional marketing disciplines to solve complex, enterprise-wide issues for efficient resource management and improving marketing ROI.