Client/Agency Relationship Sustainability
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Client/Agency Relationship Sustainability: A look at industry trends and relationship behaviors
Relationships permeate every aspect of our lives – both personal and professional. There are good relations, which we look forward to, and poor ones, which we tolerate. The advertising business is essentially a people business. In a world that revolves around things as abstract as brands, perceptions and ideas, and where judgments are largely subjective, relationships are bound to be highly volatile and emotionally charged.
A client’s relationship with its communications firm is one of the most complex in the business environment and requires a substantial level of collaboration from both parties to make it effective and sustainable, especially in these trying times where patience is thinner, loyalty is weaker and understanding is more shallow.
This paper provides some insights into industry trends and behavior patterns that affect agency relationships and seeks to outline best practices to build successful business partnerships that are based on trust, confidence, understanding and open communication.
The State of Business Partnerships Today
Despite promise, many business partnerships fail to meet their expectations. According to a study, 30% of all business alliances essentially fail, 17% eventually wind down as priorities and people change, 9% are bought out by a partner, 5% are spun off as independent and only 39% manage to achieve or exceed initial expectations.
These are difficult times for client-agency affairs. With economy still sluggish and consumer-spend in decline, cracks are appearing in an already complex relationship. The good old days when clients were happy to see increases in brand awareness metrics are gone. Now the agencies are increasingly judged not by their creative output but on the ROI they deliver.
A clear trend in client-agency relationships is to terminate those that under-perform. In 1984, the average client-agency relationship tenure was 7.2 years. By 1997 (13 years later), that number declined by 25% to 5.3 years. Today the average client-agency tenure is thought to be less than three years.
The Changing Dynamics of Agency Relationships
The marketing environment has become vast and complex. Few agencies offer the entire spectrum of marketing services in a way that is satisfactory and acceptable to their clients. The need for greater specialization is forcing clients to hire multiple agencies but is making it difficult to bring these fragmented agencies under one integrated marketing communications umbrella. With the increasing use of social media, there is also greater blurring of functions such as advertising, PR and digital strategies. These are all converging in a way not seen before.
The volatile economy is forcing both agencies and clients to do business with smaller teams than they had in the past. This leaves both the partners with young but less experienced personnel and contributes to a general increase in stress and distrust as they are asked to do more with fewer resources.
Agencies complain of having to deal with more decision-makers on the client-side. These increased points of contact slow down the decision-making process and increase frustration. Agency executives also complain of being treated as commodities with overemphasis on the bottom-line.
Both agencies and marketers have largely failed to find a meaningful way to measure, judge and compensate creative ideas. There is a lack of consensus on how advertising effectiveness needs to be reviewed. Solutions that are transparent, cost-effective and, at the same time, motivational enough to sustain the relationship further in a productive way are hard to find and agree upon.
Why Clients Terminate Agency Relationships
Clients continue to cite the same reasons for terminating their relationship with their agency. Most of the time, these issues might have been resolved if they were acknowledged and addressed earlier.
- Turnover – new management on one or both sides
- Lack of interest/understanding of client’s business
- Strategy and creative linkage unhinged
- “Outgrown” the agency
- Understaffing and inexperienced personnel on the agency team
- Research scores consistently below norms
- Creative intransigence and arrogance
- Mandated consolidation
- Loose attention to budgets
Avoiding the Pitfall of Failed Relationships
Smart agencies and clients understand that a strong partnership will produce the best work that leads to better business results. They also understand that, to build such a strong relationship, all lines of communication must be open and honest. They seek iterative feedback to ensure that an honest effort is being made to meet the expectations of all the parties involved.
Making information accessible and sharing it freely is essential in building trust between the agency and the client. The expectations need to be transparent and both sides must have a clear idea of what the other party expects from them. When there is no consistency in expectations, trust will erode and blame games begin.
To create sustainable long term relationships, both parties must have a mutually agreed upon definition of what success means to each. To increase accountability of the results, necessary metrics should be developed to evaluate the performance of the campaigns. A fair remuneration system must be built that aligns the agency’s aims with the client’s needs and priorities.
How to Get the Most Out of the Relationship – A Client Perspective
Obviously, sustaining a successful relationship is a two-way street. Neither just the client nor the agency can exert all the effort. On the client-side, there are a number of simple attitudes and behaviors that foster communication and create a long-term, successful agency relationship.
- Instill a spirit of partnership in the relationship. The best advertising can only be created in absence of fear. Lack of respect for agency’s expertise, threats of canceling the contract and other undercurrents of intimidation will only create an atmosphere of mutual distrust and aversion.
- Establish clear expectations. Define your goals unambiguously and let the agency people know what you want to accomplish with the campaign. Provide all the relevant information they need to soak in your product, people and corporate culture and formulate a satisfying strategy that best achieves the intended results.
- Provide a well-written and effective brief. An agency is more effective if clients are clear about what is needed, provide the critical information necessary to complete the task in an agreeable manner and motivate the people to do their best. In the advertising world the end product is less tangible and failure to define the precise purpose of advertising dooms the creative process from the very beginning.
- Treat the agency people well. You are in for a very complex and inter-connected relationship and you need to do everything possible to make your agency see that they are working with you, not for you. Approaching your agency as just another vendor hinders the collaboration and disrupts the synergy. Create an environment of friendship and teamwork to get the best out of them.
- Keep the approval process simple. Limit the points of contact when it comes to approving or rejecting the campaigns. Be honest. If you don’t like something, say so. Be specific. Don’t ask for a new execution simply because this one “doesn’t work”. Great clients state precisely why they disagree, then challenge the agency to find a solution both parties can agree upon. Be kind. Think of the commentary as if you are evaluating the person.
- Establish clear paths for integration. Set clear expectations on scope and responsibility and give them the authority they need to succeed. Be sure they have an open and productive working relationship with partners from other disciplines if they exist. Be collaborative and share responsibility for the end result.
- Regularly schedule assessments and evaluate the progress. Having a formal agency assessment process is a great way to make course corrections. Develop metrics to increase accountability and put in place the means to gather the necessary and relevant data to analyze and evaluate the effectiveness of the advertising programs.
- Make sure the agency makes a fair profit. At the end of the day, both the advertisers and the marketers look for the same thing – profitable growth in their businesses. Have wide-ranging discussions to align the client’s needs and agency interests and priorities. Have a mutually agreed upon remuneration contract and a well-defined State of Work both of which are easy to understand, simple to administer and flexible enough to accommodate possible changes in the future.
The Bedford Group is a marketing and management-consulting firm that has served senior marketing and management executives of Fortune 250 Companies for over 25 years. TBG provides end to end solutions for challenges facing today’s Marketing Management teams, from marketing strategy to department organization. Following are two of our specialized areas of practice:
TBG can help you assess relationships with any number of marketing partners including Advertising Firms, Branding & Identity Consultants, Direct Marketing Agencies, Public Relations Agencies, Interactive Agencies, Sponsorship Firms and more. Our difference lies in our ability to read between the lines and diagnose real issues that could be hurting productivity.
Relationships can encounter rough terrain due to poor leadership & strategic advice, diminished creative quality, missteps, bottlenecks, organizational restructuring, and more. TBG helps determine the root causes in a strained partnership. As an objective third party, we address both the agency and client perspectives without bias. We help you determine where the stress resides in your partnership and use this knowledge to help you repair the relationship before it is permanently damaged.
We evaluate and improve client-agency relationships through:
- Performance Audits
- Scope of Work Diagnostics
- Monitoring and Coaching
- 360° Relationship Assessments
TBG has assisted dozens of enterprises set, correct, and negotiate new compensation arrangements with their agencies as strategic marketing needs evolve over time. We also assist in settling cost and payment disputes between corporation and their marketing partners. By enlisting TBG’s expertise in these areas, you can minimize the potentially damaging emotional response associated with these issues.
Services to help you improve your compensation strategy may include:
- Compensation Assessment
- Compensation & Staff Design
We’d appreciate the opportunity to talk with you about how you can accelerate effectiveness through strong partnerships. Please click here to submit an inquiry or contact Jane Bedford at email@example.com.
- Annual CMO Study, The Bedford Group
- Dispelling the Myths of Alliances Study, Accenture
- Survey of Client-Agency Relationship Tenure, 4A’s
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.