Most marketers (59%) said agencies should target 10% to 15% for a profit margin, with 22% saying a profit of 16% to 20% is fair. Fourteen percent said less than 10% is an acceptable profit margin, and 5% believe an agency can target a profit margin that is greater than 20%. Ballester, a New York-based management and marketing firm, conducted the survey of 273 major domestic companies.
The study showed marketers are not impressed by so-called seamlessly integrated marketing services that agencies have been working toward.
"I go to a specialist; I don't go to the same doctor for everything," said one respondent. Only 43% said it was "very important" to have a single agency offer fully integrated services. Those who do not want a single agency believe they would miss out on cutting-edge ideas, and cited the difficulty in managing integration, and potential for damaging creative.
Speaking to 450 advertising executives and industry consultants, a record for a 4A's New York event, Andre Cappon, Ballester president, revealed the findings last week. Respondents, mostly senior managers, were interviewed between December 2002 and April 2003. No agencies were interviewed.
His study showed client-agency relationships shortening, from 13.1 years in 1984 to 7.6 years in 2001. Marketers said they called reviews, in part, because they had outgrown their agencies and because of general dissatisfaction with the shop. Only 20% of incumbents who participated in a review were selected, and those largely stemmed from mandated reviews or agency and client consolidation.
Of those surveyed, 44% compensate their agencies with performance bonuses. Thirty-five percent of marketers calculate incentives based on sales or revenue targets only; 27% by the marketer's own evaluation; 11% use an ad-performance/research-based target only. The remaining 17% use a mix.
Fifty-one percent said they expected budgets to rise in the next two years; 6% expect a drop. They said advertising gets about 58% of marketing budgets. About 60% said they expected that figure to remain static. Those who expect non-traditional means to increase said interactive would benefit most, followed by direct, public relations then sales promotions. (Read more at: AdAge.com QwikFIND aao74y)