Are Agencies Reaping What We've Sown?
Abuse of 'Value' Is Coming Back to Haunt Us
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| Jason Schlossberg | |
Increasingly the concept of value has come to mean "cheap," "bargain," "budget," "economical" or "discounted." It has become the opposite of the now passe concept of luxury.
But, in truth, value doesn't mean any of those things. Value means "worth the money." It means a fair and reasonable price for the product or service rendered. Value is timeless; not "the new green" Mark Penn describes in The Wall Street Journal. It exists in and out of a recession.
A $4,000 suit might actually be a good value if it was bespoke and made from the highest and rarest quality materials. While I can't say that a $4,000 suit is something that you'd be willing to spend your hard-earned money on, I can make the argument that the price tag is fair considering the work that went into making it and the cost of the materials to produce it. If you managed to find that very same suit for $600, I wouldn't say that was good value, I would say that was an incredible deal. I would also say that the store where you bought it will be going out of business very soon.
This doesn't mean that everything expensive is of value and everything cheap is not. Quite simply, an object or service is of value if it is worth the price you pay for it.
So who is to blame for this misunderstanding of the definition of value? Quite ironically, it is the marketing-industrial complex itself. It's ironic (notice the correct use here) because the very same minds responsible for misappropriating the term to help clients sell more products and services are now among those suffering the most from the very mind-set they helped to create.
Our clients are now looking for "value" (read: discounts) everywhere. They want lower budgets without reducing service. They are demanding "more for less" and "value-based" pricing. If we push back, they put the business out for bid in the hopes of either pressuring us to lower our fees or finding a lower cost agency. The result: demoralizing cuts in budget, resource draining re-pitches or, worse, participating in pitches for prospects that are only using you as leverage (or are just testing the waters without the real determination or commitment to make a change).
But our product is ideas and they cannot (and must not) be commoditized. Unlike other industries, it is hard for us to meaningfully reduce the cost of production without reducing our most precious asset -- people. By reducing people, we actually reduce our ability to deliver on what our clients expect and need: effective creative marketing solutions that help them achieve their branding or sales objectives.
Therefore, as agencies, we all need to do a much better job of educating our clients on the true meaning of value before it is too late. Here are two examples of brands outside of the agency world that have effectively conveyed value whilst the rest of their industry falters.
The Economist
If there is one seemingly bright spot in the faltering media world it is The Economist, whose ad pages and circulation are up -- even with a subscription cost of $127. According to Newsweek CEO Tom Ascheim, in an interview with Silicon Alley Insider, one of the reasons for The Economist's success is that it eschewed the traditional U.S. magazine discount subscription model. For the past 25 years, magazines have been steadily lowering subscription prices to maintain or grow circulation numbers so they can charge more for advertising. The result is that consumers devalued the cheaper magazines and have grown used to getting them for almost free. Now that advertising dollars have dried up, most of these magazines are failing because no one wants to pay for them -- they no longer see the value. But The Economist stayed true to its vision and held firm on pricing. The result is a magazine with a unique voice, a loyal following, a reputation for quality and a solid bottom line. That's value.
Hermès
This past holiday shopping season, when luxury department stores such as Saks Fifth Avenue and Barneys panicked and begin drastically cutting prices before Christmas, Hermès showed consumers that, in many cases, designer products were not really worth the money they were initially charging. When other retailers reduced prices by 80% in some cases, they showed the world that many of the luxury products they sold were, in fact, not a good value. The luxury industry has yet to recover. Following the holiday period, spring was dismal as consumers refused to pay full price and waited for more discounts. It remains to be seen what will become of holiday 2009/10 (if Fashion's Night Out is any indication --- then not good). But last year Hermès didn't seem to panic or go into hyper-reduction mode and, as a result, has done better than most. At Hermès there were no fire sales to be seen. Instead the French luxury retailer focused on promoting its classic leather goods, including its iconic belts and bags, the Birkin and Kelly. Hermès does not use assembly lines and only one craftsman may work on one handbag at a time, hand-stitching each individual piece that often consists of extremely rare materials. Even amidst an economic downturn, Hermès' leather goods were positioned as "investment pieces." As a result, Hermès has actually seen sales in these key categories rise. In the second quarter of this year the retailer experienced a 33.4% increase (to $310 million) for its leather goods.
So, taking these two examples as a model (in addition to numerous conversations on this subject with colleagues), I would like to offer the following four strategies for maintaining your agency's "Value Proposition" during the current recession:
- Identify exactly what makes your agency truly unique from the competition and make sure everyone knows about it. It is not enough to cite clichés such as you "offer senior level attention" or that you "work harder than everyone else." You need to articulate how and why your processes, approach and points of view are better than everyone else's and how these differences will ensure success.
- Never take a client in this recession that you wouldn't in good times. The same goes for re-pitching toxic business. Ill-fitting clients tend to create more problems than they actually solve. They can become dangerous distractions, taking valuable time and resources away from the clients that truly deserve your time and effort.
- Put your money where your mouth is and be willing to risk it all. When clients ask me how they can measure the success of our work, I tell them there is only one way we want to be judged: on the success of their business. If our programs and campaigns aren't driving the business success our clients need (regardless of how creatively successful or innovative they might be) then we should be fired. This only seems fair to me. As agencies, our work is only of value -- and therefore worth the fees -- if we provide real value to our clients' business. If you are unwilling to be held accountable for your work then you can't really expect the client to give it the value it deserves.
- Be prepared to walk away from a client that doesn't value your work. Once you start working below your value it is almost always impossible to recover.
| ABOUT THE AUTHOR | |
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Jason Schlossberg is president and co-founder of Kwittken & Company, an award winning public relations agency based in New York City. He can be found at jschlossberg@kwitco.com or you can follow him @Jschlossberg. |
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Just have one disagreement with point #3: Put your money where your mouth is and be willing to risk it all.
I do not agree with this point because many times you get clients who will micromanage the agency's work and will result in poor work, thus poor results. Unless the agency has full control of the work, they cannot be held completely responsible for results.
Besides, what you said ( ...GOOD value means worth the money .... POOR value means not worth the money.... ) is implied in "worth the money," it's just wordier.
So while philosophical speaking, you have a point. In the context of this article, not so much.
Anyway, I prefer contrarian's empirical argument, since most of us have the experience to make the same point. Agencies are commodities exactly because they can't differentiate themselves.
Love them or hate them, Crispin is one of only a handful that seems to be able do this. It's clearly evident in the constant stream of clients that simply hand their business over to Crispin without a revue. Crispin is clearly saying or doing something different than the vast majority of shops.
And to rmesquenazi, the poster above who argues that agencies can't be held responsible for results until clients stop micromanaging the work, you need to do one of two things:
1). Fire your account management team for not running interference between agency and client effectively
-or-
2). Re-read #4 in Jason's 4 strategies: this is precisely the type of client to give the heave-ho.
"Being accountable" for our work is one thing-- but being held accountable for client business decisions is another. Mr. Schlossberg must be blessed with clients who always make the right product/offer decisions if he is so willing to lay his fees on the line. While I like all of our clients, we occasionally find ourselves having to promote offers that simply aren't competitive enough to achieve the results clients want to see.
I would only agree with point #3 in situations where the agency has a mechanism to input to, or disagree with, the client's offer.
with the changing pace of the landscape, resource arbitrage (resulting in longer tail income distributions) and global flattening I don't wonder why everyone talks about value but is hard pressed to deliver it.
your readers might find supplementary value in this post.
The Six Forces of Brand Value
http://miroslodki.wordpress.com/2009/02/18/the-six-forces-of-brand-value/
cheers
Miro
I had an interesting meeting with a potential, very hot client - y'know the kind you kill to get so you can put them on your list.
She said, "Creative work is a dime a dozen, I can get media anywhere. What's impressive is you came in here and solved a business problem. That's what's hard to find."
I was stunned. I thought, "Why should that be rare?"
While we've all been stung by client actions outside of our control, we are in business to improve our client's businesses. Advertising is sales. That's it. That's why we exist. "Putting it all on the line" as Jason suggests, isn't a bold move - it's the only move.
Am I crazy? Let's see. We gave a tea brand a 96% jump in sales; raised enrollment for a college 25% year over year for 3 years; made a men's fragrance #1, beating the next competitor by 35,000 units...and by the way, I'm the creative director talking here.
We give maximum production value for the dollar, scrub the media hard, and get the message out without spending more than the client gets in return. That's what clients mean by 'value.'
You make a particularly strong point in strategy #1: "You need to articulate how and why your processes, approach and points of view are better than everyone else's and how these differences will ensure success." I would add that the best way to do this is to frame your differences in a truly tailored client-centric fashion. A successful account manager needs to proactively identify a key client issue, outage, or untapped opportunity and envision a way to turn it into a business-building idea for the client. Then, the account manager should demonstrate the agency's point-of-difference in the context of bringing this specific client idea to life in a truly unique way.
http://www.TellYourClientsWhereToGo.com
Shhhhhhhhhhhhhhhhhhush, you don't want to let that secret out!
Next thing you know, you will be credited with destroying the whole marketing credential and education degree business.
You don't want to be responsible for that, do you? :-)
If you discount your work, clients will discount the ideas even before they receive them. If ideas are free, it must not have been that hard to come up with them.
As you noted, the true litmus test of value is repeat. If I don't like my haircut or auto repair or doctor's bedside manner, I'm not asking for a discount. I'm moving on.
We recently launched an Agency called Agency:Wiz (www.AgencyWiz.ro), based on the concept that for traditional advertising campaigns (offline), we let the client establish the price based on the value they associate with our work. As we mostly target large and medium size marketers with lots of years under their belts in traditional advertising, we think this is only fair for our clients. They have a better control over how they slice and dice their budgets, while being in charge with translating Value into Pricing.
We all know that with great freedom comes great responsibility.
While most of the marketers we talked to got the idea, some had to be explained a little bit more thorough that Value-based-pricing does not mean cheap, but exactly what it reads: pricing based on associated, true value. If it's cheap (aka: less than what it's worth), it's not us, and if it's not us, they don't get to set the price based on associated value.
Anyway, long story short, I will quote you on my blog, for I find your article truly insightful and explanatory for our business model.
Cheers, Lorena.
The meaning of "value" is something very personal to me and I've spent a number of years focused singularly on understanding the very important, in fact, critical implications of genuinely understanding what it is and then how to make decisions based on this understanding. Two principal points that are important to keep at the ready when it comes to understanding value:
1. Value is subjective.
2. The reason value is subjective is because emotion is subjective and value (along with fear) is the basic building block of emotion.
Very simply, when it comes to a purchase, a "good" value is one that makes someone feel the way he/she wants to feel (i.e. - it satisfies his/her most personal values) and a "bad" value is one that doesn't (show's little promise of satisfying his/her personal values or, worse, satisfies a fear). The transaction of money is only the temporal means of measuring what is otherwise unquantifiable.
The most common misunderstanding, however, is that the emotional landscape is far too complex and personal to ever accurately understand how someone feels. ...not to mention it's subjective nature makes it darn hard to measure. However, with an elegant reframing of our rational view of the world, I suggest that this isn't the case at all. In fact, we are all born with the ability to understand others emotions very accurately but have trained ourselves out of it.
The key is to understand the true meaning of "value".
Stephen M. Hoye
www.thehoyemasterycenter.com
We've covered some of the same issues in a recent post here http://bit.ly/3o7a5y.
http://srcomblog.wordpress.com
Mark Stout
http://markstoutphotography.com