The good news for advertisers and agencies is that the economy has improved, relationships have improved, and sales and income are up, according to the annual Salz Survey of Advertiser-Agency Relations.
The bad news is that vast differences still exist between advertisers and agencies in how they view their relationship, how their business is improving and how they work together.
The Salz Survey, which has been conducted by Nancy L. Salz Consulting since 1986, was based on surveys with 68 senior executives at the top 200 advertising companies and top 100 ad agencies as defined by Advertising Age, which is published by BtoB's parent company, Crain Communications.
"It's better than last year," said Nancy Salz, president of Nancy L. Salz Consulting, pointing to economic conditions overall. "Last year was a pretty bad year in terms of the economy. We have moved ahead."
"Relationships are better," she added. "Advertisers feel advertising can do more for their business than they thought last year."
According to the survey, advertisers on average predicted a 23.7% increase in sales if agencies did their best work all the time, compared with an average 20.8% increase in sales predicted last year.
Missing the main message
However, Salz said, "In terms of advertisers and agencies working together, they are still not getting each other's main message."
The survey found that 55% of advertisers reported an increased focus on how they work with their agencies, but only 12% of agencies reported an increased focus on the way advertisers work with them. In addition, 15% of agencies said advertisers had less focus in working with agencies, compared with 3% of advertisers that reported less focus.
The survey found that 65% of agencies report an increased focus on their clients' needs, but only 30% of advertisers said agencies had an increased focus on advertiser needs. Also, 15% of advertisers said agencies had less focus on their needs, while none of the agencies said they had less focus.
Salz said one factor that may be driving the differences is the economic standing of agencies and advertisers. "Most advertisers and agencies felt their income was better than last year, but advertisers are doing so much better economically," Salz said.
Twenty percent of advertisers said their sales or income was greatly improved this year over last, while only 8% of agencies said their sales or income was greatly improved. Further, only 7% of advertisers said their sales or income was slightly worse this year over last year, while 19% of agencies said their sales or income was slightly worse this year. No respondents said they were doing a great deal worse this year.
"One of the reasons they're not getting things is they have a different perspective economically, which creates differences," Salz said.
Another big problem: "Communication is lacking between the marketers and the agencies, both in terms of quantity and quality," she said. "Why else aren't the agencies perceiving this increased focus the marketers say they're bringing?"
"There is a huge opportunity for the bottom line if marketers and agencies work better together," Salz added.
Bill Nicholson, founder and principal of Bill Nicholson Consulting and former executive VP at the American Association of Advertising Agencies, also said the differences in advertiser-agency relationships are tied to the economy.
shift from saving to selling
"Part of it is a reaction to the fact that we are coming out of a recession," Nicholson said. "Up until the last eight to 10 months, all the focus for advertisers was on saving money. Now, the focus has shifted to selling more product. Advertisers are realizing that real marketing has to come back into the fray."
Another important finding from the survey is that performance-based compensation has dropped considerably. Just 33% of advertisers reported they are using performance-based compensation this year, compared with 52% last year.
The survey did not ask what other types of compensation they were using, but Salz said it is most likely advertisers are using more fee-based compensation structures, such as retaining fees or hourly fees, instead of fees that are tied to performance.