Paying for Planning
04 May 2017
Who should pay for communications planning? Why are advertisers apparently so set against the idea of paying network agencies for a service most know full well is an essential part of any campaign?
Any network agency executive knows the speech. “Advertisers won’t pay for planning. Yes, they should but they won’t. So there it is, we have to accept it and make our money elsewhere.”
The obvious objective of this script is to place the focus for non-transparent behaviours on the client. Clients won’t pay, we have shareholders, why blame us for advertisers’ short-sightedness?
This is crazy logic. Surely it would make more sense to do a better job making the case as to why the networks’ planning is so good it’s worth paying for.
Nobody buys any service unless they are convinced of the benefits it brings them.
The large network agencies have over time not done a great job promoting their excellence in planning to a non-specialist audience. Of course, they enter and win awards judged by their peers; but ask most CEO’s or CFO’s and if they ever refer to these organisations at all it’s as ‘media buying agencies’.
This perception is only fuelled by the focus on the size of the deals these agencies make across their client spectrum. Headlines such as ABC agency strikes US$ XMillion deal with JKL media owner illustrate the point.
Internally, network agencies do little to promote planning objectivity. Rather, the common practice of having traders sign-off on plans in order to ensure that agency-wide or group-wide commitments are met does the exact opposite.
Why would anyone pay for a service provided by organisations that consider it to be so inconsequential (beyond window-dressing) that someone with next-to-zero knowledge of the client’s requirements can simply change certain component parts?
What happens within such a system to these agencies’ sudden public enthusiasm for the importance of context? The classic trader’s response to his planners: ‘You may win the pitch but I make the money that pays your wages so do as I say and convince your client’ comes to mind.
There are though some signs of progress away from the era of the trader. First, it may be my imagination but the number of headlines boasting of huge volume deals seem to have reduced. We are now hearing more from the agencies’ innovation specialists and planners than even a few months ago.
Secondly, and more significantly, whilst the Cog Blog has been on holiday, the UK independent agency Goodstuff, whose strength is unquestionably in its planning has bought itself out from Omnicom.
This is interesting as it always used to be assumed that smaller agencies needed some sort of relationship or affiliation with one of the big boys to ensure ‘the best prices’ (my quotes).
Yet the Goodstuff guys, like the most successful of the UK independent agencies, the7stars are clearly comfortable with their freedom from the worst excesses of the networks.
Clients are also it seems increasingly prepared to move away from the big boys. Nielsen data quoted by Goodstuff shows that UK independent media agencies grew their billings over the period 2012 – 2016 by 27% as against 12% for the networks.
These independent agencies have discovered that clients will indeed pay for objective and independent planning advice. I don’t have the data but it seems likely that their fees from clients are higher, and their income from media trades is approximately zero.
A different, more transparent model in other words.
The irony is that the networks, in handing certain planning decisions over to the whim of their traders have over-ridden the core principle of objectivity, and in so doing have helped the case for why they shouldn’t be paid for the service.
Brian. Great piece. the premise is spot-on. It comes from a time when a deal with the Devil was made by both advertisers and agencies: Planning for free and low cost fee threshold for handling the accounts against advertisers turning a blind eye to what was done with their money. This was made when there were few options and served both well. But today, the communication field is much more complicated which has prompted Advertisers to be concerned with the fact that recommendations may not be given with a true Neutral basis. This would explain the rise of local shops and Advertisers looking to Accenture for programmatic buying. The reality is that Advertisers will clutch their pearls regardless of their responsibility. Media Agencies will have to revise their Business Model without (and this is the hard part) looking back to more opaque times when margins were not tied into what the clients were willing to pay. Once more, and at the risk of sounding like a broken record, it’s all about the money (despite screams to the contrary from all involved)
Thanks Jacques.
It’s hard to generalise on what used to happen as practices by country varied so much. So – in most of Southern Europe there was indeed a pact with the devil, with both advertisers and agencies knowing full well what they were doing, and thus tacitly supporting these practices.
In Spain as one example it was something of a badge of honour to drive your agency down to c. 0.25% fee, all the time knowing full well that they were going to be fine given the rebate system. It was only when those pesky multi-nationals got involved and closed off the rebates, whilst keeping to the 0.25% that things went wrong.
In other places, notably the UK, these cross-agency deals were not spoken about.Some smart clients may have suspected something was up, some may even have known how the system worked but no-one spoke of these things.
It was just assumed that agencies worked for their clients and did the best by them.
As you say, life is now much more complicated. Traders are close to being out of control, their bosses turn a blind eye, planners get frustrated and quit, and advertisers smell a rat.
Not a good state of affairs.