As I've said before, procurement departments have only gone as far as we have allowed them to go. But if as an industry we continue to allow ourselves to be dictated to and buckle to unreasonable and ill-informed client procurement demands, it will lead to our own self-destruction.
Agencies and procurement departments seem to find huge challenges in communicating and reaching common understanding about the fair value of the services we provide. We both should have the same basic goal in mind: delivering return on investment and accountability business performance.
In this age of abundant data, research, tracking and measurement capabilities, clients shouldn't have the problem legendary retailer John Wanamaker famously fretted over; they shouldn't have to accept any degree of "waste" when it comes to their marketing budgets. As agencies continue to set the bar ever higher when it comes to marketing effectiveness, it's not unreasonable for our clients to do the same. Should we be fairly compensated for our work? Of course. Do our clients agree with that? The bulk of them do. They understand that if we get to a place where we are prohibited from making a fair profit, we will not be able to invest in the talent and technology that will answer their complex marketing challenges today.
Yet, we have made barely any progress toward being fairly rewarded. It's a curious thing that the agency community as a collective isn't bolder when it comes to addressing this subject, that we've allowed ourselves to be commoditized to the degree that we have. But while everyone's been talking about the treatment of agencies like office supplies, I think there's a more appropriate comparison.
When was the last time you negotiated with a top legal firm or management consultancy? The confidence in such companies' ability to defend the value they deliver and the price tag associated with their services is enviable. The key differential between them and us is not at all about understanding our value, but that these firms hold their ground. They are well aware of the reality of allowing their clients to drive pricing down to a place that risks their own and collective future growth.
New context for remuneration discussions have slowly been introduced in the advertising and media world, and CMOs are now beginning to quietly push back on their own procurement departments. Agencies are beginning to test new, relevant models to ensure all parties in the marketing equation are on the same page. Clients and agencies have begun a dialogue that will, if we stand our ground, embrace innovation, and along the way be prepared to take some risks, eventually get us to a place of mutual benefit. We must be active and work together with our peers and competitive set to extract us from this downward spiral that benefits neither our clients nor us, and take collective responsibility for our broad and commercial reinvention.
It is time for the rest of you to join in. Media owners, I am talking to you.
Everyone should be aggressively reinventing revenue models and taking a hard look at infrastructure and how to best streamline that structure. In our organization the discussion is less around direct staffing specifically, as it goes without saying that direct resource should align with workload. We are focused on automation, standardization and re-engineering of processes to drive an efficient and more effective underlying infrastructure. We have an obligation to be efficient and to drive both shareholder value as well as to pass a portion of that efficiency back to our clients.
The key is, of course, that our partners -- those owners of the media properties with whom we do business -- must do the same.
Too much of our overhead and non-revenue-generating cost base is linked directly to legacy processes and systems not within our direct control. Media owners feel our margin pressure (particularly if and when we try to pass it on) and face a similar challenge of ensuring they are lean, agile and efficient in their infrastructure. Change is slow here and we must urge more of a partnership approach in order to ignite the momentum. Let us collectively move from acknowledgment of our shared challenge to proactively executing against a technology-driven solution.
I am confident in the ability of media owners and agencies working collaboratively. We need to move this from a discussion to real action. In quoting an old African proverb, those who run alone may be able to run faster, but those who run together run further. We are ready when you are.
|ABOUT THE AUTHOR|
Tara Comonte is chief operating officer and chief financial officer at Interpublic Group of Cos.' Mediabrands.